5 advantages of neobanks you should know about
Neobanks gained a competitive edge by embracing digital-first principles, streamlined operations, and a customer-centric approach.
For traditional banks, the following strengths offer valuable insights.
1. Cost efficiency and operational agility
Neobanks cut out a major cost that traditional banks still carry: physical branches.
By operating entirely online, they avoid expenses tied to real estate, staffing, and in-person infrastructure.
That efficiency translates directly into customer benefits.
Many neobanks offer accounts with no monthly fees, no minimum balance requirements, and interest rates that surpass those of most brick-and-mortar banks.
Just as important, their pricing is usually straightforward.
Thus, customers can see exactly what they’re paying for:
For cost-conscious consumers, especially younger users and freelancers, this level of transparency and affordability is a clear advantage.
How can you compete with this?
Partner with digital banking solutions to modernise your architecture, offer innovative products, and expand your digital capabilities.
This approach enables you to accelerate innovation, target niche markets, and enhance customer engagement while upholding regulatory compliance and effective risk management.
How can Meniga help?
Meniga offers flexible and scalable solutions that integrate seamlessly with existing systems, elevating and modernising the digital environment regardless of the underlying architecture.
Through digital transformation, you can reduce speed-to-market for new features and lower infrastructure and maintenance expenses.
Furthermore, our modular architecture allows you to release new features incrementally and manage them more efficiently, avoiding costly large-scale upgrades and integrations.
2. Digital-first customer experience
At the heart of neobanks is their mobile-first approach.
Available on iOS and Android, neobank apps are designed to be intuitive from the start.
Opening an account takes just a few minutes, with identity verification and setup done entirely through the app.
In other words, there’s no paperwork or branch visits.
Once onboard, customers can manage everything, deposits, transfers, bill payments, and budgeting directly from their phone.
What sets neobanks apart is their seamless integration of smart features.
For example,
-
AI-driven insights can break down your spending habits.
-
Budgeting tools can help you stay on track.
-
You can even set savings goals or get nudges to adjust spending without needing to leave the app.
How can you compete with this?
Redesign the mobile experience around user needs. We recommend focusing on speed, simplicity, and ease of navigation, meaning:
-
Fewer taps,
-
Clearer menus, and
-
Real-time feedback.
How can Meniga help?
One of our clients, Crédito Agrícola, one of Portugal’s leading banking groups with over 1 million clients, faced increasing competition from agile challenger banks like Revolut and N26.
To retain and grow their customer base, they partnered with us to launch moey!, a fully digital bank designed to deliver an immersive and interactive mobile banking experience.
Through our collaboration moey! started offering intelligent personal finance features including:
-
Automatic transaction categorization,
-
Personalised activity feeds,
-
Flexible spending reports,
-
Automated budgeting, and
-
Savings goal tracking with alerts and incentives — all designed to help users manage money more effectively.
The results?
-
More than 80% of transactions are categorised automatically.
-
90% of transactions are now made through the app or by card.
-
130,000 app installs in the first 6 months.
3. Rapid innovation and product rollouts
Neobanks are built on agile fintech infrastructure, which gives them a major speed advantage over traditional banks.
Instead of relying on legacy systems that take months to update, they use modern platforms and open APIs that let them build and launch new products fast.
It’s this flexibility that enables them to roll out features like:
-
Direct deposit advances,
-
Early paycheck access,
-
AI-Powered Digital Assistants,
-
Credit-building tools, and
-
High-yield savings accounts ahead of the curve.
Their tech-first mindset means they’re not just reacting to customer needs but also anticipating them.
If users want faster transfers, better savings rates, or tools to manage debt, neobanks can design and deploy those solutions quickly, sometimes in weeks, not quarters.
As a result, this responsiveness enables them to stay aligned with what customers actually want, even as those needs shift in real time.
For traditional banks, this highlights a growing gap, not just in technology, but in the ability to move at the speed of customer expectations.
How can you compete with this?
Legacy systems and siloed development processes often slow innovation. However, there are clear ways to overcome these barriers.
1. Adopt modular architecture and APIs — By shifting to a modular, API-driven architecture, you can develop and deploy new features faster, integrate 3rd-party services more easily, and avoid the delays that come with monolithic core systems.
2. Partner with digital banking solution providers or fintechs and, rather than building from scratch, co-develop, license, or white-label solutions to bring new offerings to market quickly.
How can Meniga help?
We help you modernise your digital systems by providing flexible, modular solutions that integrate seamlessly with existing infrastructure, whether legacy, cloud-native, or hybrid.
Meniga helps you achieve:
-
Portability — Move software and data effortlessly between environments, from on-premises to cloud.
-
Accessibility — Enable real-time data flow to empower proactive decisions and enhance customer engagement.
-
Observability — Continuous system monitoring lets banks prevent issues before they impact users.
-
Microservices fluency — Modular services ensure faster deployment of new features, responding quickly to evolving market needs.
Thus, you can cut IT and licensing costs, reduce future upgrade expenses, and accelerate time-to-market by up to 30%.
4. Personalisation through AI and data analytics
Neobanks use AI and data to process transactions, as well as to understand their customers.
Every time you spend, save, or transfer money, that data feeds into systems to tailor your experience.
This way, you get budgeting tools that are relevant to your lifestyle and reflect your actual habits, alerting you to potential issues, such as unusual spending or upcoming bills.
For example, if the system notices you're paying interest on a balance each month, it might suggest a lower-cost credit product.
Alternatively, if your income is irregular, the system can recommend cash flow tools or savings goals that align with your income patterns and payment frequency. It’s smart, timely, and specific.
Another aspect that is streamlined is the onboarding process.
AI-driven verification and identity checks make the signup process fast and secure. Instead of asking every customer the same set of questions, neobanks use what they already know to streamline setup and suggest the right services from day one.
AI and analytics let neobanks offer banking that feels custom-built because, in many ways, it is.
How can you compete with this?
You should leverage existing customer data to personalise offers, advice, and communications. For example, send proactive, personalised messages, such as ‘Your subscription spending is up 15% this month—want to review?’.
Also, implement AI-driven tools for spend analysis, savings goals, and proactive nudges, as well as machine learning for smarter fraud detection and customer segmentation.
How can Meniga help?
Meniga’s AI-powered Hyper-Personalisation Platform enables you to segment customers based on their:
-
Unique spending habits,
-
Cash flow status, and
-
Financial goals.
This way, you can cater to individual needs and create highly tailored solutions and products.
You can also prompt the platform to trigger insights by a certain event, such as a transaction entering the system or a user login.
Or, if you prefer it, you can create your own custom events from intuitive conditions and dynamic values.
5. Serving niche and underserved markets
Many neobanks focus on customers that traditional banks have often underserved, such as freelancers, gig workers, small business owners, and people with limited access to financial services.
These groups don’t always fit neatly into the standard banking model.
For example, freelancers may have inconsistent income, gig workers might not have traditional pay stubs, and small businesses often struggle with high fees and complex account requirements.
Neobanks recognise these gaps and build products specifically designed to meet those needs.
-
For gig workers, that might mean faster access to earnings through early direct deposit or instant payouts.
-
For freelancers and small businesses, it could be easy-to-use invoicing tools, integrated tax calculators, or business accounts with no hidden fees.
-
For underbanked individuals, neobanks offer basic accounts with no credit checks, low minimums, and clear fee structures, making it easier to enter and stay in the financial system.
By tailoring services to these previously overlooked segments, neobanks help expand financial inclusion.
They’re meeting people where they are, with tools that reflect how they actually earn, spend, and manage money.
And that’s something traditional banks can learn from, especially as customer expectations continue to evolve.
How can you compete with this?
Team up with digital banking solution providers to develop solutions that include tools like invoicing, expense tracking, tax estimators, and automatic savings options.
You can also consider simplifying account opening processes for individuals without traditional documentation and enable mobile-first account setup.
We also recommend creating educational tools and in-app content tailored to different user groups.
You can offer these resources in various formats, including video, gamified modules, or one-on-one financial coaching.
4 disadvantages of neobanks to watch out for
Like all solutions, neobanks come with their own set of strategic and operational challenges.
Understanding these vulnerabilities enables you to identify opportunities to differentiate yourself or outperform your competitors.
1. Lack of physical branches
One of the biggest trade-offs with neobanks is the absence of physical locations.
While digital convenience works well for most day-to-day needs, some customers still value or even rely on in-person service.
Whether it’s opening a joint account, resolving a dispute, or discussing a loan in detail, there are situations where face-to-face interaction is preferred.
This is especially important for older customers, people less comfortable with technology, or anyone dealing with more complex financial matters.
For them, the fully digital model can feel limiting or impersonal.
What does this mean for banks?
You must strike a balance between investing in digital channels and maintaining physical branches or hybrid service models to cater to diverse customer preferences.
By blending digital convenience with branch-based expertise, you can offer a hybrid experience that neobanks simply can’t match.
How can Meniga help?
We help banks create a personalised, human-like experience by using life-event triggers, such as starting a family or planning for retirement, to deliver tailored advice and relevant offers.
Thus, you can engage customers meaningfully, even without direct human interaction.
2. Limited product range
Neobanks tend to focus on core offerings, checking and savings accounts, debit cards, and basic payment tools.
But they often fall short when it comes to full-service banking.
Mortgages, auto loans, retirement accounts, investment platforms, or bundled insurance products are either missing or underdeveloped.
That means customers looking to build a long-term, all-in-one banking relationship may eventually outgrow what a neobank can offer.
Traditional banks still hold the upper hand in terms of the breadth and depth of financial products.
What does this mean for banks?
By improving digital access to your broader product suite, especially higher-margin services like wealth management or lending, you can deepen customer relationships in ways neobanks can’t replicate.
3. Security and regulatory concerns
While many neobanks partner with licensed institutions to hold customer deposits, not all operate under the same level of regulatory scrutiny as traditional banks.
Consequently, this creates some grey areas, particularly when it comes to deposit insurance, data security, and how funds are safeguarded in the event of financial stress.
Some customers may not realise that a neobank isn’t directly covered by FDIC or equivalent protections, depending on the jurisdiction or partnership model.
That can be a risky blind spot if there’s a platform failure or wider economic disruption.
What does this mean for banks?
Despite neobanks’ appeal, traditional banks retain advantages in regulatory compliance and deposit insurance.
Thus, you should emphasise your:
Clear communication around FDIC or equivalent protections can reassure customers and differentiate traditional institutions as the safer, more dependable option, especially in volatile economic times.
You can leverage these strengths by integrating digital services with your established brand trust and full-service offerings, creating hybrid models that combine convenience with comprehensive financial solutions.
4. Trust and brand perception
Neobanks are still building their reputations. While some have gained strong followings, others have struggled with service consistency and long-term customer satisfaction. High-growth startups often pivot their strategies, change pricing models, or face technical issues, and these shifts can hurt trust.
For example, outages, sudden fee changes, or the discontinuation of features can frustrate users who expect stability from their bank.
What does this mean for banks?
Traditional banks, despite their slower pace, often benefit from decades of built-in trust and familiarity, an advantage that neobanks are still working to earn.
You can lean into their reputation for reliability, stability, and long-term relationships.
However, they must pair that trust with digital innovation.
Otherwise, younger customers may still drift toward neobanks. The opportunity lies in modernising without sacrificing credibility.
How can Meniga help?
We make it easy to upgrade your digital experience without overhauling existing systems.
Our cloud-native, modular, and event-driven architecture integrates seamlessly with your existing systems, regardless of the underlying architecture, so you can modernise faster and more efficiently.
Key benefits of our platform include:
-
Cost reduction — Use free, open-source databases and improve resource management to lower IT expenses.
-
Cost avoidance — Minimise future upgrade and integration costs through better release management and a modular platform approach.
-
Speed to market — Accelerate the development and deployment of new features thanks to a modular architecture, allowing banks to innovate quickly and stay ahead of the competition.
