While banks have only been around in their modern form for a relatively short while, the idea of banks can be dated back to the most ancient civilizations. Since the advent of currency, we’ve needed somewhere to store it safely, and to be able to access it when we need to make purchases.
While this original purpose hasn’t changed, the way that banks operate has changed dramatically since ancient times, especially in the last century.
Much like how the invention of telecommunications revolutionized banking systems, the more recent invention of smartphones is driving another shift in our banks. The traditional banks around today still utilize the same centralized system which was put in place a century ago to safeguard economies.
Although as trust is beginning to fall for these traditional banks, a new player has entered the ring and doesn’t rely on the same legacy systems which are holding back their traditional counterparts.
Here’s a look at the main differences between neobank and traditional banks, and what you might gain from switching to a Neobank.
The Main Functions of a Bank
The main purpose of a bank is arguably split into a few sections: storing money, allowing stored money to be spent conveniently, and granting loans. For the sake of this article we will be focusing more on the storing and spending aspects of a bank.
Storing Money
When currency was all tangible, banks relied upon security personnel and huge safes to store their customers accounts all in one place, utilizing records to identify whose money was whose. Although money has changed a lot since then, and nowadays there is more digital money in circulation than can be physically accounted for.
This is managed by the reserve bank who ensure the monetary policy of a country and determine how much traditional banks can lend our compared with how much they have stored.
Nowadays is seeing an even further shift from cash, with purely digital currencies like crypto assets becoming increasingly popular. In fact, the market cap hit $3 billion dollars in November last year before coming back down to a more comfortable $1.7 billion that it currently sits at.
Traditional banks have been left behind by the crypto world who are opting for digital solutions which fit within the Web 3.0 they’re working towards.
Spending Money
Once upon a time a withdrawal required waiting in line to speak with a teller, then along came Automated Transfer Machines (ATMs) making the process much faster. After that came Electronic Funds Transfer Point of Sale (EFTPOS) cards which were directly linked to your bank account and could be used at the counter of a store via a payment terminal.
From there we’ve reduced contact with the payment terminal with debit and credit cards and their contactless pay function, and finally the contactless payment made its way into our phones via Google and Apple pay.
Nowadays contactless payment is completely normalized, and both traditional and neobanks have integrated it into their systems.
How Neobanks Offer More
Considering the above, it may seem that the choice between traditional and neobanks can fall down to personal preference. Although if you have any amount of crypto assets, then you’ll want to be able to incorporate that with your other bank accounts. That’s where neobanks shine.
Storing Cryptocurrencies
Acting like a more volatile stock exchange, the markets where people buy crypto assets are flooded with day traders making money on the ebbs and flows of the speculative market. While these platforms do offer a place to store crypto, they tend to go down, so finding a safer place for your wallet is a must.
That’s where neobanks come in, offering the ability to store your crypto assets alongside your bank accounts. They can even go beyond this by offering the option to buy or sell coins in-app.
Spending Cryptocurrencies
This has been one of the biggest difficulties that crypto traders have faced since they started trading in these currencies. At first one had to try and find someone who was willing to buy the crypto off you, then along came trading platforms which simplified this but still required you to transfer in and out of their system.
Then along came modern neobanks offering the ability to spend cryptocurrency directly, handling the exchange internally and at a fraction of the cost.
If You Haven’t Already, Try a Neobank
As you can see from what we’ve considered, the main difference in using a neobank comes from having and wanting to use cryptocurrencies. This makes them a great option for those who trade in crypto assets already, or those simply interested.
Although be sure to stay connected with your traditional bank if you want to be able to loan, as many neobanks don’t offer this service, going as far to offer overdraft protection.