Every year or two, we see two or more new neo banks pop up in Africa. In 2018, the global neo bank market was worth USD 18.6 billion and it keeps rising every day.
Moving on, you are probably wondering what a neo bank is and what they do?
A neo bank is a virtual, digital bank or a financial technology firm that operates fully online. They offer various financial services digitally like savings, money transfer, loans for individuals and businesses, payment of money.
Neo banks have either no, partial, or full banking licenses. They partner up with banks and do all things concerned with sourcing and management while the banking transactions are processed by banks.
They are different from the normal banks or traditional banks we use because they provide services that are suited mainly for mobile devices and are not chartered with any state or federal regulators as banks.
However, some banks like Kuda obtained a regular banking license. Neo banks attract customers through the user-friendly and personalized services they offer to their customers.
We have several neo banks in Africa, Kuda and Sparkles in Nigeria, Chippercash in Uganda, and SOL wallet in South Africa.
The rise of neo banks in Africa started when they discovered that traditional banks do not offer services that most local people and entrepreneurs need. Neo banks in Africa provide multiple services that traditional banks won’t or cannot provide due to legacy systems and high customer acquisition costs and they also embrace P2P lending to natural persons and businesses.
Particularly in Nigeria, as the value of Naira is dropping against the US dollar and traditional banks are paying low interest on money, people have been looking for other ways to save money and invest.
Beyond offering other personalized services, Neo banks are suitable for the upcoming generation as they take financial services mainstream by not only providing savings options but also various investment options to generate more profit for youths who decide to invest.
Even though we have many neo banks in Africa, less than 20% of neo banks of the world are from Africa. We hope to see the rise of neo banks that are tailored to offer financial services to people and small businesses and make life easy for the average African person.