Blog | 3 min read
Copy linkToday, the growing global banking solutions market is like an ocean replete with diverse products and players. As financial firms across the globe strive to capture a major share of this market, the words of the Japanese writer, Ryunosuke Satoro, spring to mind:
“Individually, we are one drop. Together, we are an ocean.”
This single statement encapsulates why neobanks, the new-age players, and conventional payment providers should join hands to provide global banking solutions and facilitate cross-border payments that are seamless, secure, and instant.
Neobanks: What works and what doesn’t
Most of you may be aware that as digital-only entities, neobanks offer banking and financial services without being burdened by traditional technologies or the need to maintain expensive physical branches. This is possible because neobanks provide their services online, either through desktops or a mobile app.
Broadly, neobanks operate in two categories. First, as a full-stack neobank operating independently like a standalone bank because it has its own license. Second, as a front-end neobank that works in partnership with a legacy bank to deliver its services since it does not have a banking license.
The rapid rise of neobanks is not completely surprising given that they have been successfully reaching and empowering people who were previously underserved or unbanked and not just the conventional cohorts. Unlike legacy banks, neobanks provide products with innovative and people-friendly features such as faster processes for opening an account, instant payments, free debit cards, lower costs, Person-to-Person payments, mobile deposits, user-friendly interfaces, and more.
Going by this situation, any suggestion of a partnership between neobanks and conventional payment providers may not seem inviting for the former. However, that couldn’t be further from the truth. While neobanks possess the latest digital resources and acumen, they lack the financial wherewithal or the broad customer base to supplant legacy bankers and payment service providers.
This is a steeper mountain to climb than that of traditional service providers who lack digital prowess but can develop it in due course by hiring top tech-savvy talent and investing in setting up a robust technological infrastructure.
Why partnerships matter
The truth is that neobanks and conventional financial institutions need each other. For traditional financial service providers, digital transformation means reinventing the wheel – a process that requires time, effort, and funds. A partnership proves to be a more cost-effective alternative that will be a winning proposition for both new-age and legacy players.
Let’s not forget that a binary approach in financial services, based on pure competitiveness, in the already-crowded market would only increase the costs for both sides. Conversely, collaborations not only benefit both sides but also provide customers with the best of both worlds – the agility of digital entities and the strength and assurance of traditional players. What’s more, the era of open banking regulations is most conducive to collaborations between neobanks and banks as well as payment service providers.
While legacy players enjoy tremendous consumer trust due to strong finances, neobanks provide simpler experiences and greater customer satisfaction by offering instant banking/financial services. Both elements are crucial in capturing higher market share and fostering customer loyalty. In essence, such partnerships would provide neobanks access to deep financial resources while offering legacy players a captive consumer base of digitally savvy, young cohorts that they couldn’t access earlier.
Facilitating cross-border payments
As a business-to-business company powering cross-border payments across the globe, TerraPay can help bridge the gap between the two worlds. Collaboration and co-creation are part of TerraPay’s DNA. This means we can facilitate a seamless transition from a Business-to-Business entity to a Business-to-Business-to-Consumer entity with innovative products and solutions to enable both new-age and conventional stakeholders to offer better services to their existing and potential customers.
The advantage of this collaborative approach is that it will enable unbanked or underserved consumers to become a part of the mainstream financial firmament. For instance, consider TerraPay’s Request-to-Pay. Earlier, neobanks in Africa remained restricted to a specific set of merchants. With interoperability, however, they can now use the same financial instruments for more use cases outside their geographic areas. This can be done because TerraPay provides ubiquity and interoperability, thereby creating mass acceptance seamlessly. In today’s uncertain environment, where one bad experience can lead to a person isolating themselves from digital payments altogether, TerraPay has ensured the appropriate safety nets and solid necessary checks to help build trust in these transactions.
In the era of digital payments, young consumers expect faster and simpler experiences, particularly with cross-border remittances. Given the current hyper-competitive environment across the globe, partnerships between neobanks and traditional payment providers are the best way to promote inclusion as well as greater customer satisfaction.
