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Home Challanger banks Unlocking Profitability and Expansion: Neobanks' Path to Success through Financial Trading Services

Unlocking Profitability and Expansion: Neobanks’ Path to Success through Financial Trading Services

Neobanks have suddenly appeared on the scene in the last ten years. With tens of millions of clients attracted by their clever digital solutions, they have shaken up the banking sector by focusing on rapid expansion, market penetration, and new customers.

They are the future of banking since they offer a much more effective, secure, and rapid service than traditional banks. The opportunity to offer a variety of innovative services that will significantly enhance the customer’s banking experience is growing along with technology.

The issue is that many neobanks have expanded too quickly and far, dispersing themselves unevenly among the regions they serve. Without giving it a second thought, some people have simply sought to open as many new accounts as they can. Others have failed because they failed to take into account potential consequences of rising trends when they created their initial product.

The bulk of neobanks have, in general, had difficulty making a profit. Indeed, according to a survey by Simon-Kucher & Partners, less than 5% of businesses have achieved financial stability.

Trade-related platforms

What must they do, then, in order to turn a profit and escape the red? Trading in financial services offers the solution.

Neobanks have amassed enormous amounts of data on their customers over many years, giving them unique information and insight into their spending patterns and financial problems. They are therefore in a wonderful position to give them a custom trading platform depending on their requirements.

Neobanks already carry out this, including Revolut. In August 2019, the ‘finance super app’ unveiled its commission-free stock trading platform, and others soon followed.

Suppliers are a minority

But thus far, there are only a few of them. The vast majority lack such offerings. And of those that do, only half grant access to more than one financial instrument.

That is as a result of how difficult they are to put up. To maintain compliance, digital banks must set up the necessary financial systems, rules, and processes in addition to applying for regulatory authorization.

Collaborating with others

Despite all of this, assistance is available. Neobanks can deliver their own offering by collaborating with fintech firms that offer trade services, as one solution. According to our recent analysis, which indicated that 59% of neobanks had partnered with an investing-as-a-service provider to introduce new products, many had already taken this path.

Neobanks must offer novel services to be profitable. Following the success of its first full year profit in 2021, where more than half of its sales came from foreign exchange and wealth services, Revolut, for one, has made such an inclusion a priority.

Sustaining growth

For many neobanks that are nearing maturity, this is a crucial time. For them to continue growing and maintaining their competitive advantage, they must implement new methods for sustainability and profitability.

But using technology is the only way to properly implement these methods. Neobanks can solve consumers’ pain areas while also guaranteeing that they continue to have a seamless experience thanks to technology.

Making use of technology

Neobanks’ ultimate goal is to increase client retention and decrease turnover. Increased revenues equate to increased profit margins.

To do this, they must turn clients into advocates by providing them with a highly personalized experience that encourages them to utilize their services more frequently. The usage of digital tools and services makes this possible.

Offering financial trading services is essentially an additional tool for neobanks. They can generate profit and further expansion if they can deliver it effectively.

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