More and more neo banks and neo finance companies are coming to market with lending being the primary revenue driver and focus. As neobanks continue to disrupt traditional banks, the new vertical of neo lending is providing compelling solutions that serve the needs of their customers and enable a strong revenue foundation to grow from. Neo Lending will support new waves of innovation, particularly in the lending space.
As the neobank market has matured, there has been segmentation within the neobanking space to focus on specific verticals to drive revenue growth. It’s no secret that traditional legacy banks make the majority of their incomes via lending and its fees. They gain access to capital and then lend it out to borrowers at more than the cost of the initial capital. Many of the first neo banks have pivoted into lending as their main source of revenue after launching their own digital banking experience and many more have suggested that they’d started lending to their clients soon.
Neo Credit Cards
The real point of differentiation for many neobanks comes in how users interact with them. Neobanks typically tie their products to apps that provide detailed tracking of their savings and spending. The apps can also categorise spending so users know where their money is going. This will help give customers a clear overview of their finances. Many utilise AI to help build savings and budgeting goals for customers, and some tout their apps’ seamless payment systems.
It’s long been clear that the traditional model of retail banking is broken but, as the rapid rise of neobanks has shown, millions of consumers around the world now want change. These mobile-only banks and businesses have lower overheads than traditional banks as they do not have to splash out as much on property or people.
But there’s a further step that some of them are making, to jettison unprofitable services and focus on delivering a smaller range of services more effectively and profitably for customers and themselves without cutting corners. Now ‘neolenders’ have started to offer a neolending or Peer to peer lending as first proposition which is supported with other digital banking capabilities like accounts and payments.
For most of traditional banks, SME lending forms the core of their business. Despite this, the SME lending sector suffers owing to the untimely and complex credit-seeking process. For banks too, credit underwriting and identifying SMEs with reliable credit history is a time-consuming process, which in turn has led to a situation where the relationship between banks and SMEs have started dwindling.
This huge gap in the market has given birth to a new breed of fintech firms who specialise in Neo SME lending by providing a structure to their credit flows, enabling them to seek credit faster.
With venture capital flooding in, the world’s biggest neobanks are more confident than ever. These Neobanks still face serious questions about their long-term profitability but regulators are certainly paying them more attention. Amid the upheaval of Covid-19, freedom from legacy infrastructure has proved even more important than ever.
The customer base of traditional banks’ retail divisions (usually described as ‘high street banks’) are individuals and small business, and their core activities usually comprise deposit-taking, lending and providing payment services.
Neolender 86 400 has reported that it has settled $40 million in loans since launching its digital mortgage offering in November last year. Having a mortgage that could be written digitally by brokers (removing the need for in-person meetings or collection of physical paperwork) had been a particular beneficial. When social distancing rules were brought into place due to COVID-19.Neobanks have reportedly seen a surge in borrowers looking to refinance during COVID-19, particularly customers from larger banks.
The Australian mortgage market now has multiple neobanks offering home loans with competitive interest rates and flexible, digital-first lending services. Neobanks are the newest lenders in Australia, bringing a mix of technology, speed and an online-only attitude to Australian home loans.
View the list of top Neobanks around the world and look at some the Neo lending services they offer.