Forward-thinking neobanks are turning to the latest technology to offer their users tailored investment solutions and opening new revenue streams in the process.
Investing is all about having the ability to shape your financial future and make a small mark on the economy around you at the same time. Sadly, the doors of private and venture equity have traditionally been closed to your average person. However, the definition of who can be included in wealth management is being rewritten thanks to the latest technological advances and innovative investment solutions.
But, how exactly has this been made possible, and what opportunities does this present for neobanks?
People are getting used to digital banking and using apps for traditional banking services. A combination of vastly improved online accessibility, together with intelligent technology and much-improved software functionality, has come together to bring a more intuitive experience for customers. Thanks to these advancements in technology solutions, investment services are now readily available to more people than ever before—such as Robinhood’s stock trading and investment app and Betterment’s investing and saving app, both of which are based in the US.
Incumbents are getting challenged
Customers are not the only ones feeling the effects of improved accessibility to investment and wealth management. Neobanks and challenger banks are challenging the incumbents on traditional banking services particularly without the need for local branches. It’s challenging the normative practices of the incumbent banks who dominate the investment landscape.
Neobanks accelerate digital banking
Many customers have switched to digital banking thanks largely to the wide availability of banking apps on smartphones. Initially, customers have made this switch from in-person banking—and even from desktop browsers—for the convenience and quickness of completing financial transactions via mobile banking apps. Moreover, customers are increasingly switching to digital-only neobanks as they learn to do all their banking via their smartphones, tablets, and desktops.
Investment services closely follow
Now that these customers can satisfy their immediate banking requirements online and on the go—balance checks, transfers between accounts, and payments for example—they are turning their attention to their longer-term financial needs, including saving and investing to meet financial goals and financial planning (more on these below).
This is where neobanks and financial middleware providers are stepping in to create seamless investment services that can be readily added to existing mobile banking apps or built as stand-alone solutions.
Specialized fintech services—such as robo-advisors—focus on investment services and specialize in combining the underlying technology, portfolio management, regulatory requirements, and tax. Challenger banks and new players can readily offer their customers investment and portfolio services by easily adding them to their services thanks to products offered by innovative fintech middleware providers, such as Bambu’s white label robo-advisor solution.
A key way intelligent investment services are winning over new and existing customers is by combining market information, advice, and the help and support users need to make sound investment decisions, and packaging it all into an app that delivers an exceptional user experience.
Investment apps make it easy (and even fun) for users to meet their financial goals with:
- interactive user-led goal-setting features,
- markets trends and analysis, and portfolio progress features,
- transparency on fees and costs,
- complete breakdowns of the investment funds,
- customizable investment portfolios,
- quick and seamless account opening and management,
- and—of course—plenty of customer support options including in-app chat, email, and even online video calls in some cases.
Neobanks want to expand their traditional banking services (payments, credit cards, exchange rates, etc.) into investments. By using a blend of innovative solutions and personable features, investment apps and the middleware providers behind them are helping to make neobanks a permanent fixture in opening up wealth planning to even more people. What is more, it creates new revenue stream opportunities for the challenger banks ready to open up these services to their customers as well.
Investment services complement neobank’s existing products
Alongside their strategies to gain new customers, neobanks are also growing and developing in line with their existing users and adding new investment services to accommodate their financial needs. When challenger banks and neobanks first open, they typically offer standard products and services competitively to attract customers—such as low current account fees, competitive debit and credit cards, and a user-friendly app. But, as their customers grow with their new banking app, their preferences, needs, and expectations undoubtedly change too.
So, to make investment services available, neobanks and challengers banks are building agility into their services so they can listen to feedback and offer new services to grow with their customers. They are doing this through strategic partnerships with these specialist fintech middleware providers (like robo-advisors) to bring new products to market at cheaper and more quickly than developing them in-house.
The right service at the right time
Every stage of the wealth development cycle comes with a very different mindset. The key to successfully growing with your customers is to listen to them and be reactive as their needs change and they progress along their wealth management cycle. This means retaining customers and expanding your service footprint when customers progress from saving to investing.
To successfully accompany your customers from one stage to the next—and open up new wealth management opportunities to even more people in the process—it’s important to plan and understand your specific customers’ thinking and needs at every major step. Digital banks appeal most to Gen Zs and Millennials: tech-savvy users at the start or early stages of their wealth management cycle. Challenger banks create powerful incentives for customer loyalty such as competitive rates, easy transfers, and customer spending pattern analysis.
Once these customers are ready to move to investment services based on data, their digital-first bank can pro-actively propose tailored investment services to suit their specific needs, such as ethical and environmentally friendly investments.
Digital-first neobanks offer their customers:
- a go-to source for key banking activities (e.g., money transfers, savings, expense tracking) and use this strong base to move onto investment and portfolio management services,
- trust-building for customers to remain loyal so neobanks can stay competitive and increase their market share,
- the right amount of information to make sound investment choices, leading to better engagement, higher revenue, and better customer retention,
- a better financial position over time through investment services,
- empowerment and greater control over their savings and investments.
Neobanks that grow with their customers over time benefit by offering more services to the same customers as their financial position improves and they progress from managing their daily finances to saving and finally investing.
Tailored investment advice leads the way
For most people, wealth management just becomes too complicated for customers to actively engage in and effectively manage their investments on their own. Market information, asymmetric risks, diversification options—it is simply too much for a casual investor to keep track of. This is where investors traditionally turned to trusted professionals to make their investment decisions on their behalf.
From physical to digital investment
Today—in the age of AI, automation, intuitive user interfaces, and predictive user behaviors—this level of personalized investment assistance can now be delivered to individual users via smartphone apps so they can enjoy the same services right from the comfort of their living room sofa.
Robo-advisers are one of the key innovations driving this trend forwards. They harness the power of big data and automation to offer financial advice and asset management to customers with minimum or even no back-end human supervision. Neobanks are in a unique position to create more efficient products as they digitize back-office portfolio management and adopt solutions like white-label investment apps.
For example, when a customer is ready to turn their attention to investing, the robo-advisor will collect information about their financial situation and goals and then use the information to offer recommendations and automatically invest the customer’s funds in their chosen product.
Neobanks set new industry standards with intelligent investment services
The combination of the latest technologies and customers’ keenness to manage all their finances via their smartphones has opened up investment opportunities to more people than ever before. At the forefront of this trend are challenger banks who have the agility to respond to their customers’ needs and offer them the latest cutting-edge investment services. Furthermore, they can do this with minimal business investment, and without overly complex implementation projects by selecting the right partners.
Self-service options like robo-advisors can be readily incorporated into existing banking apps, and those challenger banks that are doing so are creating industry-wide standards and taking the lion’s share of early adopter attention, customers, and growth potential as they go.
Visit our wealth as a service page to learn more about how you can easily add our robo-advisor investment solution to your existing app and open up investing to your existing customers.