When most people think of a bank, they imagine a building with tellers, account managers, and safe deposit boxes. However, even brick-and-mortar banks realize the need for online services. New generations want the convenience of digital access to their accounts.
Neobanks represent the next generation of financial services. They follow a digital-first development model, and many of these companies plan to stay digital-only. Instead of a building, customers access their finances through a neobank app on their smartphones.
1. A Neobank is Not an Online Bank
The lack of a traditional banking structure is what sets neobanks apart. Many traditional banks offer online banking options, where customers can perform transactions and view their accounts on the bank webpage or dedicated phone app. At their core, these online services are offshoots of the larger organization. In most cases, customers can still find a branch for an in-person visit to handle loan services or other needs.
Neobanks recognize that many people do not require a large financial organization to meet their basic banking needs. Financial tech companies that develop neobank apps provide a simplified service with minimal overhead costs.
2. Neobanks Take a Streamlined Approach to Finances
A streamlined approach to financial services is part of the basic neobank definition. This pared-down model can be both a pro and a con. On the positive side, operating as a digital platform lowers the cost of banking; it is expensive to maintain buildings and pay support staff. Neobanks can pass these savings onto their customers as higher account interest rates and lower transaction fees. x
On the other hand, a limited size may result in more specialized services. Neobanks may not offer all of the amenities of a larger bank. As their financial situations change, customers may find they want an account at a brick-and-mortar bank for wire transfers or other advanced needs.
3. Neobanks Are a Growing Solution for Underbanked Areas
One of the major benefits of a digital-only model is the ability to bring financial services to places that are underserved by traditional banks. As long as customers have access to a cellular or Wi-Fi signal, they can make payments and deposits. This model also gives a simple banking option for people who do not have a permanent address or travel frequently.
Paydownhero and the Neobank Movement
At Paydownhero, we are a financial technology company that uses select features of a neobank to address people’s rising debt, helping people pay down their car loans faster. We’re introducing our “Paydown Rewards” Mastercard to give more cashback to users. Paydown Rewards uses a Mastercard debit card that rewards users to pay down debt and gives cash back for gas and many everyday brands. Paydown Hero is on a mission to support our customers to decrease debt and increase savings.
Once you connect your bank account and car loan through our app, we start rounding up the cost of your daily purchases to the nearest dollar. Your spare change roundups become extra payments that reduce your auto debt.
Although it may not seem like much at first, taking a small chunk out of the principal each month can save you thousands in interest over the course of your loan. We also provide tools to help you track your progress and make additional payments. If Paydown Hero sounds like a good fit for addressing your current automobile loan, you can start the process by downloading our app.