Success of Neobanks now hinge on AI-powered banking model- Report
By Zion Rufus
Enabled by increase in consumer demand, Neobanks have successfully reset the paradigm for the traditional banking industry through product innovation, ease of access, pricing, and user friendliness.
A McKinsey study on how firms can build a successful Neobank reveals that the last decade has seen around 400 launches of licensed neobanks, an overarching category that includes digital-only banks, virtual banks, and challenger banks. Incumbent banks, i.e nonbank challenger banks such as fintech players, stand-alone digital attackers, and large consumer and payments platforms have all launched neobanks in recent years, making the competitive pool increasingly vast and diverse.
Some Neobanks in Nigeria include Vbank, Kuda, Opay, World Remit, and TransferGo, Wise(Transferwise).
However, to maintain competitive advantage in today’s uncertain environment, players in the neobanking segment must now embed data and AI capabilities extensively across all aspects of their operations to capture a higher share of consumers’ wallet, deepen customer relationships, and continuously generate material profits. Neobanks also must ensure that these AI capabilities work to their advantage and deliver actual business value.
According to the McKinsey report, Neobanks can achieve scale or profitability by leveraging AI to design intelligent value propositions that solve unmet needs, harness big data to deliver hyper-personalized services and enhanced cross-selling, and to improve financial performance by maximizing customer lifetime value, dramatically lowering the cost to serve through automation, and adopting superior data-driven risk management practices.
Additionally, Neobanks must prioritize and excel at customer engagement, ensure customer delight by rapidly launching and reworking new products and propositions, adapting to evolving customer needs, as well as attract, engage, and monetize various customer segments.
Neobanking is one of the new technologies that have made financial services and processes easier, and more efficient, reduced errors, improved communication, and changed how consumers access their funds. Led by Vbank, Kuda, and Opay, Nigeria’s Neobanking segment hit US$1,658m in 2022.
In 2021, the global Neobanking market was valued at approximately USD 30.77 billion and was anticipated to grow with a healthy growth rate of more than 54.00% over the forecast period 2022-2028.
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