How to explain neobanking at a BBQ

Julian, Volt Bank, 10th April

You know how it is. You’re standing in a mate’s backyard, having a craft beer while you wait for the sausages, when a friend who has just come back from Europe starts talking about how everything is so much better overseas. This time, the list seems to include banks, too – ‘neobanks’.

Finder.com reveals 1 in every 4 UK consumers will have a neobank account within the next five years, but they’re a new phenomenon over here, leaving Australians to play catch-up to our European cousins. So next time you fire up the Weber, how do you explain to your mates what a neobank is?

So, what is a neobank?
(For the TL;DR version, skip to the bottom)

The short answer is that there is no official definition of a neobank. This makes perfect sense given most neobanks in the world have:

  • Begun life as a start-up
  • Started with a blank slate when it comes to both the tech and the thinking powering the business
  • Had to decide for itself exactly how it was going to do things differently when it comes to offering financial services

Just to be clear, a neobank is a deposit-taking financial institution – and has no connection to sci-fi movies starring Keanu Reeves. But if this description makes you think Dollarmites and Royal Commissions, think again.

However, neobanks everywhere share some critical traits:

  • Every neobank is 100% digital, with no bricks and mortar branches
  • The tech stack powering the business is built from scratch, with the aim of being fresh, nimble, responsive and can provide an open platform that other systems can plug into – such as third-party systems
  • The thinking powering the business and its model is often radically different from the legacy thinking that drives a typical bank

In a nutshell, neobanks are disrupters in the banking industry, completely changing up how things are done and creating some exciting alternatives for consumers.

Right, but what’s so good about disruption?

Disruption has been a business buzzword for the last number of years. Far from being just a cliché though, it has delivered tangible benefits for consumers and helped build hugely successful businesses.
Remember the last time you requested an Uber instead of calling a cab? Or that time you booked an Airbnb instead of a hotel room? What about last week when you decided to order sushi off Menulog instead of ringing for a pizza from your local? Disruption has changed the way we shop, travel, eat and even holiday. Disruption means we’re still enjoying the same services – such as getting a car to take us from A to B or having a place to sleep for the night – but we’re accessing these services in radically different ways and having radically different customer experiences.

It’s the same with banking. The truth is that disruption in banking is already here, and it’s only going to change how consumers experience banks.

Why is banking suddenly changing after 4,000 years?

Firstly, recent changes in Australian government regulation have allowed digital start-up banks, like Volt, to be founded. The change in regulation has made starting a bank more accessible to new entrants while ensuring these banks still have all the safety features of traditional banks.

Secondly, just like consumer technologies such as smartphones and laptops, the tech needed to run a bank has become much more sophisticated, powerful and affordable for businesses looking to get into banking. This means the barriers to entry for start-up neobanks are being lowered, increasing competition in the industry.

And finally, more and more of us are re-thinking what we have traditionally received from our banks and have decided that we’re looking for something more. Something more aligned with how we are living our lives in the 21st century.

Leaving behind legacy tech and legacy thinking

To be honest, we aren’t that fond of labels and, if you asked us how best to describe who we are, we would say we are a tech company with a banking licence. But whatever you want to call us, banks like Volt sit in a category that aims to take the evolution in tech and customer experience that we are seeing everywhere else – such as in transport, accommodation and food – and bring that to financial services.

From a tech perspective, this new wave of banks build their backend tech stack and processes from scratch, incorporating the ability to scale quickly. It means that we can deliver services to customers in a seamless, simple and secure way.

When it comes to the thinking driving neobanks, imagine them as banks that have been turned upside down from a business model perspective. Traditional banks – even those with digital fronts – are product-driven.

Because neobanks work to do things in the opposite direction, where they put customer problems first and are driven to build services that better fit what you need.

Too long; didn’t read

As a tech company with a banking licence, we’re leaving behind legacy thinking and untethering from legacy tech. Help us write the new rules of banking by joining us on Volt Labs.

neobank
1. a tech company with a banking licence
2. a 100% digital bank unrestricted by legacy tech and legacy thinking