Not gonna lie, I only heard the term "neobank" a couple of months ago but a quick Google search reveals that they have been around for years. Here in the Philippines, we're seeing a shift to digital transactions, which to be honest, is just a much safer option now with the pandemic. But even before COVID-19, people have been learning about this type of banking, so let's break it down.
What is a neobank?
A neobank is a type of digital bank without any branches. You won't find them at any specific location—just online. But they offer the same services as traditional banks. According to a report by UnaFinancial, an international financial group, neobanks will serve more than 50 million people in the Philippines by 2025.
What are the perks of a neobank?
Because they don't have to cover overhead costs (like an actual workforce in physical banks, for example), they can offer higher savings rates and low-interest loans fees. They also have little to no subscription fees because they have minimal expenses. Let's take Tonik, Southeast Asia's first digital-only bank: It launched in the Philippines in March 2021, and one of the things that got people talking is the fact that the bank has deposit interest rates of up to 6 percent per annum.
Another perk, and I know this from personal experience, is how easy it is to create an account. Having gone through the PAIN of opening a bank account at a traditional bank, where you feel the need to bring a life's worth of documents, Tonik only requires the following: the app, an ID (yes, only one), and a selfie.
CEO Greg Krasnov said, "We started Tonik because we were fed up with how traditional banks mistreat their customers. The fact that 70 percent of the Filipinos remain unbanked shows that the tedious onboarding process of traditional banks and their ridiculously low interest rates do nothing to satisfy the needs of the consumers. We believe that banking should be easy, fun, and—like most services these days—right there, in the palm of your hand. We are using world-class technology to dramatically cut operating costs, which allows us to offer game-changing interest rates and not to charge unfair fees to our customers."
Don't worry: The Bangko Sentral recognizes other digital-only banks like ING, CIMB, KOMO, Hello Money, and Maybank.
Are there disadvantages?
With no physical branch, some people might feel uncomfortable with the fact that they can't go directly to a person when they have a bank-related concern. Rapport can be difficult to establish without face-to-face interactions, though many neobanks have really responsive customer service.
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