“Good, pretty and cheap”. With this slogan, neobanks have burst into the lives of Spanish consumers. The banking and technology sectors have agreed to save customers the inconvenience of paperwork, document signatures and visits to offices. Thanks to smartphones, this will no longer be necessary, since most procedures and transactions will be carried out with a couple of taps on the screen.
Despite their name , neobanks are not banks, as they do not have a banking licence. They are companies that offer banking products to their customers in a digital environment. These services include a mobile app, an online account and a debit or prepaid card. Some offer third-party services like loans within their platforms. In addition, there are tools to help customers manage their money. For example, through virtual money boxes.
If they are not banks, how do they allow these transactions to happen? Neobanks operate as, or in collaboration with, electronic money institutions (EMIs). An EMI is an entity whose business is focused on the issuance of means of payment in the form of electronic money (the monetary value represented by an enforceable claim on its issuer). A clear example of an EMI is Paypal. In Spain, this type of company is regulated by the Bank of Spain.
In recent years, neobanks have been gaining importance in the market, thanks to their numerous advantages. The first of these is the reduction of costs, as their products do not usually have maintenance fees associated with them. They are also more transparent than traditional banks, and no hidden charges are associated with them. Customers also use neobanks because they have much simpler processes, which saves them valuable time.
The appearance of neobanks is also great news for travellers, as most of them eliminate currency exchange fees. For those with a longer stay abroad, some neobanks offer a quota of cash withdrawals from any ATM, as well as international transfers. Once again, technology is at the service of globalisation.
Bnext, the leading Spanish neobank
Bnext is the most popular neobank in Spain, with almost one million users.. The main functionalities this neobank offers are:
- Send, receive and request money.
- Prepaid card.
- Fixed-term deposits and remunerated accounts.
- Travel, car, health and life insurance.
- Currency exchange.
- Flight claim service.
- Option of contracting electricity, as well as cheap energy.
- Online loans and quick credits.
In addition, the company is developing a new feature that will allow users to pay with their mobile phone, using it as a card. This functionality is already allowed by some banks. In this way, smartphones are set to replace wallets, as it is likely that in the near future all payments will be made with a smartphone.
Young people at the centre
In addition to Bnext, there are other neobanks that operate in Spain even though they originated in other countries. This is the case of the German fintech N26 or the British Revolut. All these institutions share a common need: to place young people at the centre of their offer. Traditional private banks face a threat: if their clients die, they will too. 49% of people who inherit wealth move it to a new bank. Faced with this problem, neobanks have decided to focus on a younger sector of the population: the “millennials”. Not surprisingly, they are the most likely to use a smartphone to manage their money.
This leads to a democratisation of banking, allowing young people to access the traditional functionalities of a bank regardless of their level of wealth, and, moreover, in a much simpler, cheaper and more transparent way. This new panorama will surely favour the entrepreneurial sector in Spain, where the average entrepreneur is 34 years old and many young people decide to create their own project. Consequently, it seems certain that neobanks are here to stay.