For years now, ‘neobanks versus traditional banks’ has been a heavily contended topic. Traditional banks have been consistently shrouded in some controversy since 2008, eroding customer confidence and trust in basic commercial and retail banking. Neobanks or as some may refer to as ‘challenger’ banks (as they ‘challenge’ legacy infrastructure and outdated practices and processes at traditional banks) have stepped up to fill a banking void around customer satisfaction and customer’s best interest. Many express a desire to revamp ‘greedy, money mongering, doesn’t care about the customer’ image of banks.
Whether that impression is rightfully deserved or not,
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Financial market turbulence compounded by flailing of micro- small-medium businesses has been harsh on most economies. Central banks have the onerous task of outlining new set of rules and measures to counter these upsets. Thus far, most central banks across different countries have responded with agility and transparency. However, actual disbursement of funds to businesses as well as to individuals is administered by retail and commercial banks. They serve as conduits by enforcing central bank’s policies and relay their impact to masses (consumers and businesses) via revised lending and underwriting practices.
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Unbanked and underbanked never found refuge at traditional banks as they never met any of their qualifying criteria. Traditional banks also didn’t seem too keen to explore innovative viable business models that would include unbanked and underbanked. Part of this could be attributed to lack of cutting edge solutions such as artificial intelligence, advanced cloud computing capabilities, which are now fairly omnipresent.
They are increasingly being used to gather and process novel insights from structured and unstructured data.
And, remainder of this negligence could be attributed to lack of desire to find specialized ingenuous solutions for this demographic but instead to conveniently write them off.
It wasn’t until Vodafone’s M-Pesa found it’s footing in Kenya, that innovators and policy makers started acknowledging mobile banking as a great enabler for financial inclusion. Through further ingenuity and exploration, innovators with tie-ups with local private enterprises and with the help of government bodies, nurtured these sparks of insights into profitable and sustainable business models. Not many have been able to cross the chasm, so to speak, but there have been significant leaps in recent years due to commercialization of cloud computing and maturing of digital banking and payments landscape.
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As most financial institutions acknowledge the need to ‘digitize’ (embrace technology to automate financial functions and reduce dependency on paper based documentation), they eagerly embrace new jargon, labels and generalizations (read: stereotypes) to showcase their commitment to technological advancement and sometimes, simply from fear of missing out. Yet, it’s these very labels, jargons and generalizations that can severely impact, both perception of the organization and deter acceptance of digital initiatives by customers.
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In old days, a kingdom would showcase it’s might to a feuding kingdom or a perceived threat by parading it’s battalion of men, herd of elephants, stable of horses and gladiators. Today, countries parade their aircrafts, submarines, tankers, drones, fighter jets, and other arsenal on their national day, to display their might. Same intent: to clearly convey to their hostile neighbors, that they shouldn’t even entertain the thought of any sort of transgression.
Similarly, in the world of banking, investment in cutting edge technology has become the new firepower.
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Alipay, since it’s inception in 2004, has drastically upended payments world through it’s platform’s seamless integration across various third party services. It was initially launched for e-
commerce, but now it’s the preferred mode of payment, operating across
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