Although having been around for quite some time, the term “neobank” may still sound unfamiliar. While online financial services vary from company to company, you should choose a neobank because of these key factors: low fees, digital convenience, and overall higher interest rates on checking and savings services. With these competitive edges, it is no wonder the fintech industry is growing so fast.
What exactly is a neobank
In short, a neobank is a financial technology company (fintech) that offers financial services to an online market only. Unlike traditional banks, neobanks don’t have physical branches where transactions can take place nor do they hold a federal or state charter to insure funds. Although many physical banks also offer online banking portals and apps for their customers’ convenience, a neobank’s app and online access is their product.
Let’s explore what services are often offered and why these are so enticing:
What services do neobanks offer?
Compared to traditional banks that all provide essentially the same services with their own company’s twist (i.e., checking, savings, credit, loans, mortgages, etc.), neobanks are far more diverse from one another. Where one company will provide checking and savings options, others provide stock investment plans.
Other services from fintech companies include overdraft protection, traveler rewards, high-interest savings, cash-back rewards, etc. However, neobanks don’t provide credit, loans, or mortgages – mainly due to not having a charter. If fintechs offer some of these services, like a credit card, it is because they are partnered with chartered financial institutions such as Visa, Discover, Master, etc.
Overall, the sky’s the limit. Neobanks can be broad in scope or more niche. Here’s why else you should consider a neobank:
What Makes Neobanks So Beneficial?
Accessibility and convenience
Neobanks at large are providing an alternative to traditional banking services. Consumers often find great value in having easy access to their funds and the simplicity of transactions between individuals. Think about it: Having your payment method connected to your Uber account is easier than having to pull out the cash for the taxi. Further, paying back your friend from lunch through something like Venmo is much more convenient.
When looking at it from another angle, neobanking also takes out the effort for consumers in practicing healthy financial management. Companies like Chime automatically help you save money. Acorn helps you consistently invest spare change. Paydown Hero is helping consumers take charge of their debts by giving users cash rewards to support debt reduction, making it even easier to pay down their auto loans. All of these neobanks are molding their services around access and convenience.
Easy to start
Getting started with a neobank is generally easy and takes only a couple of minutes to do. In part because of the ease of access, many fintech companies have streamlined their onboarding process for customers, making it just a few clicks. In addition, most neobanks will easily connect to your traditional bank accounts, allowing smooth flow between channels. At Paydown Hero, we have made it particularly easy by developing a simple three-step process that lets you start saving sooner.
Beyond the hurdle of starting with a new financial institution is the wall cost. Most brick-and-mortar banks are known for numerous fees. Because neobanks cut out the expensive overhead of physical location, they often have little to no cost. In fact, a large percentage of a neobank’s revenue comes from merchants rather than customers. This saves you! Paydown Hero neobanking takes your roundups, adds extra cash rewards, and sends a bigger payment to your car loan.
In other words, you save even more by reducing principal and interest expenses with your supercharged roundup payments.
Having a lower overhead and costs will also benefit the consumers. Neobanks are known for providing higher interest rates on checking and savings accounts, which means your money makes more money. Similarly, some fintech companies provide travel benefits, perks, debt savings, and rewards, providing even more benefits to customers.
A rising neobank that’s helping consumers pay off auto loans
Paydown Hero is a rising fintech company that is taking the concept of neobanking into the loan payoff realm. We take the amount from rounding up each of your debit transactions and save it for the end of the month to help pay down the principal owed on your auto loan. Effortlessly, you are not only saving money by putting it into your assets and paying off debt, but you are also avoiding being charged more on interest by the bank on your loan. Double the savings. It doesn’t get better than that!