Distribution of banks’ functions: financial bigwigs vs. mobile newcomers
The need to do financial transactions with minimal contact with bank offices has become a daily reality. Neobanks solve not only this problem but also a number of other problems related to the slow technological development of traditional structures. Ukraine is no exception in terms of the banking sector’s progress, although it is too early to compare it with European or American colleagues. Still, the development of the domestic market is under the influence of political instability, economic turbulence, and threats from the outside.
We are all already familiar with such a phenomenon as neobank, a financial institution without physical offices, which operates on the basis of innovation. The Ukrainian market is full of projects on the cooperation of neobanks with traditional players. Such a system is used to simplify the fulfillment of the regulator’s conditions, among other things. Cooperation allows solving standard banking issues, such as issuing physical cards to clients.
Does this mean that more progressive banking will supplant classic banks? The answer is hidden in the statistics. There were 75 million bank cards in Ukraine as of mid-2021. This means that on average, there were more than 1.8 cards for every Ukrainian. Even with minors, these statistics tell us that customers prefer both ways of storing money. Users have more than one bank account in order to get better services, try out different approaches, and test products. However, that doesn’t mean they’re willing to choose just one.
Neobanks are convenient in:
- everyday shopping, because they often offer cashback and bonuses;
- paying for utilities, they do not charge additional fees for services;
- small loans due to favorable terms;
- foreign currency exchange due to flexible exchange rates;
- fast service at any time.
It is worth noting the dependence of the development of neobanking on the interchange. Thanks to commissions from terminals, such fintech companies can provide bonuses for customers. The recent decision to lower them may reduce the attractiveness of online banking for customers.
But it should not be forgotten that the more fundamental services remain in the sphere of influence of classical banking institutions:
- mortgages and other long-term loans;
- corporate banking;
- services for populations without access to digital technology.
Classic banks are also adopting technology to attract customers, reducing the gap every year. Soon it will become a universal banking standard. On the other hand, Internet banks, with their greater mobility, are providing more and more services to customers. For example, the launch of an application for trading stocks of foreign companies. Even though there are neobanks in Ukraine that have shown their reliability, there is still an unfilled market share. For this reason, foreign fintech companies come to us. The competition conditions have changed, now financial institutions have to compete with each other and with neobanks at the same time. To do this, it will have to follow the demand and actively offer new services to clients.