The beginning of the 21st century can be considered the era of the information and telecommunications technology revolution, and with it, many sectors have had an important boost to develop as never before. One of the sectors that has benefited the most is the financial industry, in which neobanks are constantly developing. But what is a neobank?
A neobank, basically, is a new type of institution dedicated to offering financial services through 100% digital means, such as websites or mobile applications. They differ from their predecessors, the traditional banks, by operating only through these digital platforms, without any network of physical branches.
However, these new financial institutions offer services that are well known to all, such as accounts in Euros, payment cards, certain credit products, among others.
Given their 100% digital nature, neobanks are much more inclusive – since they reach clients historically underserved by traditional banking – and manage to reduce operating costs considerably, which is reflected in the low price at which they offer their services. Understanding theneobank meaning, many may ask “and can it be safe to trust my money to such an institution?”.
For the peace of mind of many, the answer is Yes! And time proves it. Not surprisingly, there was some shock in people at the beginning, it is not easy to trust your money to anyone who just appears on the road.
However today many can’t imagine their life without their neobank, as it facilitates almost every transaction they make on a daily basis. Storing money, making quick transfers, shopping on the Internet, in a physical store, paying at the movies, in a restaurant, etc. Neobanks have changed the way we relate to our money and, basically, our lives.
In fact, opening a neobank account and storing money there is very safe. To give an example, Blackcatcard is precisely one of those institutions that has developed a whole technological and financial infrastructure, which allows it to guarantee its clients bank-level security.
From a certain point of view, neobanks are a very interesting alternative to traditional banks if we analyze the way they manage client deposits. One of the characteristics of banks is that they can use depositors’ money to generate some return by disbursing credits, making investments, among other activities allowed by law to these financial intermediation institutions.
And of course, all investments have a risk. If the depositors’ money is mismanaged or misinvested, it can be lost. For example in Europe, if a similar situation occurs, and classic banks collapse, they must pay up to 100,000 Euros to their clients as part of their deposit guarantee scheme.
What if a client had more than 100,000 Euros in his account? In theory he could only receive what is missing if the bank first settles all its other obligations. And such financial tragedies do happen, as recently occurred with the well-known Silicon Valley Bank, which gained the trust of many start-ups and important Fintech companies worldwide.
Neobanks, on the other hand, are not allowed to use their clients’ money in any case. The total amount of client deposits must always correspond to what is actually in the neobank’s funds, so that the depositors’ money always has a real backing. EU regulators, for example, are very strict in this regard and require neobanks to submit daily balance sheet reports.
Therefore neobanks, such as Blackcatcard, are definitely a very important option that many are already taking advantage of. All you need is Internet access to receive very secure and low-cost financial services.
