Crisis - Threat or Opportunity for Banks?
Both, neobanks and incumbents, handled the COVID crisis rather well, as Jeroen notes. Neobanks were better positioned to deal with crisis, such as COVID since they are digital bank that are highly agile, with teams working remotely. Their challenge was that of funding nature and the COVID crisis only brought the question of funding into light.
Incumbents were not well positioned to deal with such crisis but they adapted fairly quickly to the new ways of working and servicing their customers. Some digital transformation projects were started out of necessity but the questions of digitalization did not happen overnight and had been posed long before crisis.
Neobanks in Different Markets
Even though there are noticeable difference in neobanks in Germany, UK, France… generally, their approach was always based on offering new, innovative products and services at low cost or for free while also keeping the operating costs at a low level. This freemium model is banking on acquiring customers first and then trusting that monetization will come at a later stage. These aggressive strategies were used to “steal” customers from incumbents but most neobanks are still looking for appropriate business model. That is why some of them branched out into other segments, such as lending.
On the other hand, the most profitable neobanks are in Asia. Even though there are huge differences between neobanks in, for example, Vietnam and South Korea, they generally differed themselves from incumbents from day 1. They opened new markets by addressing the needs of the unbanked population. Superapp model helped neobanks in Asia differentiate their business models and diversify their product portfolios.
In Latin America, neobanks first and foremost tackled financial inclusion. Nuubank, for example, offered credit cards to those who had not been able to get them from incumbents. Interest rates have been halved and neobanks are still making high profits.
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