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January 22, 2024 • Issue 24:01:02

Neobanking

getting ready for prime time

By Patti Murphy a combined annual growth rate of 49 percent between now
While the name may imply otherwise, neobanks are not and 2033 when it is expected to exceed $5.4 trillion. Busi-
ness accounts dominate the neobanking space with 66 per-
new. Block, founded by Jack Dorsey and Jim McKelvey as cent of global market share, Market.us noted, adding that
Square in 2009, jolted the payments industry by launching a payments and money transfers are the most popular activi-
platform and dongle that enabled small merchants without ties with a 41 percent share.
a merchant account to use smartphones and tablets as POS
devices. The startup quickly evolved into a nimble neobank The typical neobank is lean and agile, using digital technol-
offering a range of business and banking services. ogies, artificial intelligence and related processes to reduce
costs. They rely on data-driven approaches to customer ser-
"Square recognized early on that not only is banking servic- vice, which in turn lead to seamless customer experiences.
es a great income opportunity, but it's also great for reten- They do not rely on brick-and-mortar offices, and there is
tion," noted James Shepherd, founder of ISO Amp. "When no legacy equipment to support, so they can make changes
someone uses their bank as their payment processing pro- quickly and easily.
vider they are much less likely to cancel that service."

Neobanks are financial technology companies that provide
digital and mobile solutions for managing payments and Contributed articles inside by:
other financial routines. They differ from digital banks,
which tend to be full-service banks that operate online. Nick Cuuci................................................................................................28
Some observers consider neobanks to be a subset of digital
banks. Ken Musante ...................................................................................30, 34
Mark Chambers .....................................................................................31
Research firm Market.us estimated the global neobank-
ing market exceeded $148.7 billion in 2023 and will chart Allen Kopelman .....................................................................................33

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