Neobanks: What is Freemium Banking?

Neobanks: What is Freemium Banking?

Did you know that neobanks hold at least one billion accounts globally? As of 2021, the neobanking market was valued at over $47.39 billion. This tremendous growth in the neobanking sector can be traced back to the growing convergence between the technology and finance sectors.  

If current predictions are anything to go by, the neobanking market will grow by 53.4% by 2030. So, what is triggering this astronomical growth rate in the neobanking sector? The freemium model of strategic marketing has been fronted as a significant contributor to shaping the growth of the neobanking sector.  

While neobanking is a decade-long concept in Europe, most people still lack finer details about neobanks. Here, we evaluate the idea of neobanks and the related concept of freemium banking.  

What Is Neobanking, and How Does it Work?

The Neobanking industry refers to the digital space within which all the online fintech establishments offer online banking operations.  

Neobanking adopts mobile banking as the leading platform in enabling electronic money transfers, bill payments, and direct bank deposits. Compared to traditional banking, neobanks often specialise in a few unique financial services.  

You probably are wondering what is neobanking and how does it work? Neobanks operates entirely online through web and mobile apps. Neobanks generally capitalise on advanced technology and exceptional user experience to meet the growing demand for online banking.  

Why Choose Neobanking?

Over the years, the digital revolution has left traditional banks playing catch up as the wave of online banking grows steadily. The ease of access and the convenience that comes with neobanking are the top reasons why you should consider neobanks.  

  • Neobanking Offers Exclusive Digital Presence

The number of smartphone users globally stands at over 6.648 billion today. With greater access to high-speed internet now a reality, neobanking will become a core concept in the fintech industry. This exclusive digital presence forms a vital core advantage for the client.  

  • Lower Fees

Compared to traditional banking, neobanks charge customers lower operational costs. The fact that neobanks don’t need to invest in brick-and-mortar outlets means they can maintain lower operating costs. The trickle effect is lower or no fees charged to the customers.  

What is Freemium Model

Neobanking has adopted the freemium model of operation over the years. Freemium refers to a business model which a company uses to provide primary or limited features to customers. The essential services come without any extra charge. However, the neobanks then charge a premium for other advanced features that the customers may need. The term freemium combines two words, free and premium, a modern pricing strategy within the neobanking context.  

Most neobanks have benefited immensely from the introduction of this model. When all conditions are met, the freemium model can be instrumental in driving revenue and accelerating profits. As a marketing tool, the freemium model helps neobanks penetrate the market before introducing premium, more advanced products.  

The freemium model has contributed to helping neobanks to scale up and attract a new user base, and this has been achieved without expending resources in the marketing process. If neobanks can keep operational costs low while ensuring user convenience, neobanking will continue to be a viable option in the future.  

Sprout with us!

With Neobanks’ extraordinary growth rate, they are bound to surpass traditional banking in most ways possible. If you're looking for a reliable neobank, Sprout Asia can hook you up with one of our neobanking partners when you decide to incorporate or use our corporate secretarial services.

Contact us to find out more information and to arrange a free consultation.