Neobanking Business Models
Neobanks operate with a different business model to traditional, legacy banks due to the exclusively online nature of Neobanks. Neobanks typically charge customers a monthly fee rather than interest on loaned money, meaning the cost of borrowing is lower. Neobanks are unable to offer many traditional banking services such as loans and overdrafts due to the online nature of their business. Instead, Neobanks provide a range of online banking services such as savings accounts or loans for goods or property. Online lenders have also been called digital payday lenders which have developed due to government policies that make it difficult for Neobanks to lend money. In the UK, there are several Neobanks that are listed on the FCA’s ‘register of authorized deposit takers’ as “online-only banks”. These include Binance, Society One, and NetBank. In the USA, online-only banks include EZ Money, OnDeck Capital, and Digital Ripples.
Types of Neobanking Business Models
Neobanking has different business models that are usually followed, and dictate how the fintech company organizes, creates, captures, and delivers value in the financial banking sector. The following are some examples of Neobanking business models that are relevant to fintech start-ups that are joining the industry of Neobanking:
Ecosystem-led Business Model
This type of business model is implemented when a Fintech company uses its own hardware, software, and networks to create the ecosystem of the financial banking business.
Platform-led Business Model
The second type of Neobanking business model is Platform-led. This type of business model is implemented when a Fintech company provides a platform that other financial banks can use to build new services or offer their own services. This would include APIs and development tools like SDKs, so other banks can create their own services on the platform.
Peer-to-peer Business Model
Another type of Neobanking business model is Peer-to-peer, which involves one business providing services to another. This could be between any type of business, but in the case of the fintech industry, it would typically be between a FinTech company and a traditional bank partner. This would include new financial products or services that are developed through cooperation with a bank partner.
Asset-led Business Model
Asset-led business model refers to a business model in which the company’s primary asset is its people, who are incentivized to use their talents, skills, and expertise to support the company’s operations. For example, Airbnb uses its collaborative platform with hosts and guests as an asset.
Commoditization Business Model
The commoditization business model usually involves a product that has been commoditized or genericized due to repeated production over time. The business generates revenue by selling the product in low volume or at a high price. A business produces an item with a limited life span, such as cars or computers, and sells it in large volume. The business can reap revenue by repeating the production of the product over time.
In conclusion, there are many types of Neobanking business models that a fintech joining the industry may wish to take. These business models usually differ from traditional and legacy banks, as Neobanks are restricted to providing exclusively online banking services.
