Millennials Take Center Stage as Traditional Institutions Rely On Fintech To Compete with Neobanks

Millennials Take Center Stage as Traditional Institutions Rely On Fintech To Compete with Neobanks

Often billed as the next evolutionary step in banking, neobanks—small digital banks offering online-only service—are gaining popularity worldwide. One of Europe’s first neobanks, N26, is now reporting that it has more than 3.5 million users in 24 countries, while its UK-based competitor, Monzo, reported 3 million active users with deposits totaling over 468 million pounds.

 

Neobanks are run by small, highly specialized tech teams that produce huge results. In the case of N26, the system handles over 400 transactions per minute with a staff of 1300 people, making it one of the most efficient banks in the world, and the disruption these tech leaders are introducing to the banking and financial spheres seems to be in no danger of slowing.

 

One of the largest neobanks, Nubank, now boasts over 10 million users in Latin America alone and has set a valuation goal of $8-$10 billion, betting on a strategy which includes offering free digital accounts and credit cards to a market frequently subjected to excessive price gouging by traditional banks. With low overhead costs and cheaper licensing and start-up fees, digital banks like Nubank can offer better value and greater rewards to the clients they serve.

In addition to the financial benefits, neobanks focus on convenience and user experience. Revolut offers fully integrated financial services to its business clients, with its website stating:

 

Revolut for Business is a business account platform for domestic and international payments, designed to save you time and money … Our Open API allows you to seamlessly integrate your Revolut business account into your workflow. Use it to automate cross-border business payments, send payouts to clients or employees and monitor transactions according to your business’ needs.

 

This client-centric focus has helped Revolut acquire over 6 million users and earn an estimated value of 1.5 billion. The platform is particularly appealing to the huge market of late-Millenial customers who are drawn to glossy new tech and extreme convenience. These are the consumers who can’t stand long waits, on-hold music, inefficient systems, or banking hour businesses.

 

These are the clients that traditional banks and financial institutions will lose without significant investment in state-of-the-art Fintech. While most traditional banks have created apps for banking services and investment products, the attention to convenience and the user journey are less sophisticated than that of their challenger rivals, with many ignoring the need for robust KPIs and metrics to gauge user engagement and satisfaction.

 

One notable exception is RBC, which has embraced the human element across their online platforms with client-friendly and value-based content. RBC is also investing in AI tech to support research into their client experience. By including such insight into their strategy moving forward, RBC has ensured that it will not be left behind in the battle for Millenial business.

 

Would you like to know more about how we can help your organization modernize, compete and achieve its goals through secure and savvy fintech solutions? We’ve built integrated applications for banking, booking, payment and e-commerce purposes, working with some of the world’s leading companies.

Our development approach incorporates the principals of EndPoint Modeling, allowing us to contractually guarantee 100% design criteria satisfaction and on-budget product delivery for our clients. If you would like to discuss a design challenge, an effective strategy, or a new vision for your business, we would love to discuss the details with you during a free consultation.

 

Update: On February 12, 2020, N26 announced that it will be pulling out of the UK market due to Brexit. The company will be focusing on the Eurozone and the US. Since entering the US market five months ago, it has acquired over 250,000 clients and continues to see significant potential in its investments there.

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