A recent report by Simon-Kucher & Partners states that only 5% of the world’s Neobanks are profitable. While the opportunity in the sector is significant, becoming profitable before having to shut down seems like quite a challenge. In this article, Traderoot explores the Neobanking problem and ways to fast-track profitability.

The Neobanking Revolution

Neobanks are essentially online-only financial institutions that provide banking services to their customers through mobile phone apps or other digital platforms. The opportunity is definitely there, customers are tired of paying exorbitant fees and using not-so-user-friendly outdated systems. People are willing to throw in the towel and part ways with their outdated bank as long as they are offered an efficient, trustworthy and reliable solution to fulfil their banking needs and more.

The only problem is that Neobanks’ focus on providing online financial services has served as a catalyst for change within the entire banking sector. Traditional banks are starting to put their foot down, realising the need for online financial services. This is making it incredibly difficult for Neobanks to scoop up customers and become profitable.

Another problem is that Neobanks appear to be spreading themselves extremely thin by quickly expanding to new countries too quickly. Neobanks are too focused on expanding their customer base without looking at the finer details: profitability.


How Can Neobanks Fast-Track Their Profitability Time?

Just like any other business decision, profitability should be at the centre of every future decision a Neobank makes. Whether that be a new product or an expansion to a new region, it should be done with the goal of profitability. Here are a few ways that Neobanks can fast-track their profitability time:


Strategically Selecting Products

Neobanks need to focus on strategically selecting the products they offer. Simple bank accounts and card-based payments services, while both important, have severe levels of competition. Neobanks cannot solely survive from offering these two products alone. Neobanks need to focus on identifying trends before it’s too late. Current trends show that Buy Now Pay Later (BNPL) services, Embedded Finance, Cryptocurrencies and digital lending and investments are hot products for Neobanks to consider.


Operate in Niches

Instead of focusing on broadly targeting customers, Neobanks can target specific niches. This can include targeting things like specific communities, gender or job type and then identifying and solving a specific pain point within that niche.

By catering to a specific niche, a neobank is able to customise their service and products to solve the problems and meet the needs of that specific niche. Technology enables more contextual communication, design, messaging and services, enabling a niche community ro identify with a specific neobank. Beyond services and products, niche communities may rally behind a neobank that has an aligned purpose such as a social cause or stance. Alternatively the neobank could cater to a specific interest or passion point of a niche by offering services related to funding these interests, for example travel or the purchase of sports equipment.

An instance of a niche neobanking offering could be a bank that caters specifically to Gen Z. In this case, many members of Gen Z are working in the gig economy, so developing solutions to cater for this unique industry would be prudent.

If these unique offerings are used to establish a neobanks’ brand position and value proposition, the neobank will be able to build affinity within this niche market and onboard a significant portion of this market.

While offering bespoke services or products, adhering to regulatory requirements and compliance is still imperative. Traderoot’s Risk Methods and Solutions is able to offer insight and advice relating to compliance while our various fintech modules can fast track deployment of unique services while still ensuring compliance.


Keep Development CapEx Low

Development Capital expenditure (CapEx), especially for Neobanks can be incredibly high. Neobanks need to realistically reduce their development CapEx if they wish to become and remain profitable in the future.

“Traderoot provides various white label solutions that can help Neobanks cost-effectively fast-track the route to market, reducing sunk costs and allowing more capital to be allocated to growing market share,” says Traderoot CEO, Jan Ludik.

Traderoot is a strategic financial software development company that provides advanced, global, finance solutions which leverage the latest technology and provide direct business benefits.


If you’re looking to explore or build payment solutions outside of the traditional legacy payment ecosystem, Traderoot can assist you. Alternatively, if you’re looking for a cutting-edge plug and play solution, we also licence advanced business solutions for leading Neobanks.

For more information take a look at our website or email us on sales@traderooteurope.com