Neobanks enhanced financial inclusion in the last 10 years

If you do not call them Neo banks, you can call them digital-only banks. The popularity of Neo banks continue to increase especially in developing economies. These digital-only banks often do not have physical branches and banking halls where customers can visit in person. Instead, they deliver services through the internet. Customers could access the services using their computers or mobile phones.

Neobanks in the last 10 years

Traditional banking has been around for decades now. Neo banks on the hand just arrived due to the growth of internet usage and digital devices. As more people access the internet, the value that Neo banks could deliver becomes so obvious.

How have neo banks contributed to financial inclusion in the last 10 years? Well, data from the World bank shows that they have made some serious and enormous contribution, helping more of the worlds unbanked to have access to financial services. Check out this data below:

Over the last decade, 1.2 billion previously unbanked adults gained access to financial services, and the unbanked population fell by 35%, primarily boosted by the increase in mobile money accounts. source

One cannot simply ignore the enormous contribution of Neo banks in the fintech sector. There are now more people that own and operate online-only accounts than before. With so many attractive packages that accompany their services, Neo banks have delivered the very things that customers demand of traditional financial service firms.

In developing economies, neo banks have brought bank some banking features that traditional banks blatantly took away. For example, many traditional banks offer savings accounts but do not pay interests when customers save money with them. But today, popular neo banks pay customer's interest on daily basis and they could access them immediately. These and many other add-ons make customers to like the neo banks.

How Neo banks are achieving financial inclusion

Neo banks have not only used technology to deliver financial services to their customers, but they have eliminated many operational bureaucracies that are too often seen in traditional banking. Check out how Neo banks have made it possible for more people to access financial products. Check out these two features:

• Instant access: Modern traditional banks often have wall-and-brick buildings where customers must come to access any services. Physical presence is often required to do even basic banking services like to open an account or make a deposit. Neo banks changed that.

Bank hosting banking services completely on digital platforms, neo banks make them accessible to everyone no matter where they are. Thus, the huge population that was formerly cut off from accessing banking services due to location are now accessing them comfortably from their location.

Digital banking broke down the barriers of physical presence, national borders and other location-based limitations. For example, there are few or no bank branches in remote locations such as rural areas. But with a good internet access and mobile device, people in these areas are enjoying digital banking big thanks to Neo banks.

• Nearly free banking: One huge problem of traditional banking today is the network charges. Each transaction attracts some fees that are deducted from the customers account. The high network fees discourage many people from accessing financial products. Neo banks also transformed that with fzero-fees for their transaction.

Users are able to do transactions without paying huge fees. Most neo banks do not charge customers for making deposits, transfers or withdrawals. There are no card maintenance fees and other charges that are all too common in traditional banking. Users are able to complete transactions securely without attracting added costs to the account.

Thus, many low income earners and a large population of poor people are now able to enjoy financial products and services at minimal or no cost. This is huge thanks to Neo banks.

The future is bright amid challenges

Neo banks also have operational challenges, but the gains outweigh the limitations. Sometimes, network downtime make it difficult to access financial services offered by Neo banks. Also for people in bad economies, inability to buy mobile devices like phones or computers prevent them from enjoying digital banking. But the future is bright for neo banks.

As technology improves and people have more opportunities to earn income, the challenges of Neo banks will reduce. And for financial inclusion, more people will have access to banking products delivered through digital platforms.

note: Thumbnail from Pixabay

Posted Using InLeo Alpha