The future of banking, neobanks and payment orchestration

By Alex Reddish, Managing Director of Tribe Payments

  1. What are some of the challenges neobanks will face in 2024?

Neobank customer numbers are thriving, with one billion globally. In the UK, for example, almost a third of consumers now have a neobank account. But while neobanks are great at UX design and adding cool features, fewer people actually use them as a primary account. The big banks still have the edge when it comes to gaining consumer trust. This means neobanks are lagging far behind when it comes to profitability.

We’re also living in a very different world from the one awash with abundant fintech funding flows of just a couple of years ago, and many of the neobanks that splashed out with huge growth ambitions are now having to slash their spending forecasts. In this cyclical environment, big banks and fintechs like PayPal and their deep pockets may have the edge – and an unfair advantage – for now. They’re more able to subsidise perks like cashback and rewards and shore up balance sheets. In contrast, smaller players or those more sensitive to economic headwinds are in a much more precarious position than before.

But fast growth leaves behind niches that are primed for neobanks to step into. Some neobanks have launched to target the gig economy, where many workers are underbanked and need a financial provider that understands their specific needs. The main consumer neobanks have focused on a particular type of customer in order to grow and move towards profitability. Finding the niches that are big enough to support a fintech business is where we will see new neobanks thrive. We’re unlikely to see a new Starling or Monzo any time soon, but there’s room to compete by targeting different sets of customers, not a new wave of disruptors, but new banks filling in the gaps. Where there are gaps where people feel they’re not being served well enough by either incumbents or neobanks, an opportunity exists. 

  • Digitally native customers are demanding more from their payments experience – how can merchants and banks keep up?

In a more hyper-personalised, hyper-contextualised market, customers expect a more relevant, more personal digital experience. They want merchants to offer pricing in their local currency and accept local payment methods. To provide this seamless checkout process, merchants need an acquirer with extensive knowledge of international markets and, more importantly, data on payment habits within those locales to help merchants boost their conversion rates and shopper growth.  

The issue will be whether merchants have the right tools and partners to make these payment options a successful part of the customer experience. Too often, merchant struggle with a lack of visibility of payment methods and overall customer data and trends. Adding new payment methods and building better customer experiences is a huge opportunity for many merchants, but only if merchants can partner with the right acquirer who can deliver solutions for all these blind spots.

Banks will also need infrastructure to replicate the needs and wants of their end users. But several long-standing core banking systems are beginning to creak under the strain of adding new services. They can’t give the CX expected by increasingly tech-savvy and digitally native customers. This is where modular technology enables new services, products, compliance, verticals and new customer use cases.  

Service orchestration is currently in its infancy, but it has the potential to make a big impact. Tribe has previously examined XaaS, and the potential rise of agency-style companies that aggregate service-led fintechs and provide packages solutions for customers, which would further reduce friction, although whether it remains up for debate.

  • How is payments infrastructure orchestration enhancing efficiency for financial institutions?

Infrastructure orchestration is the key to greater efficiency all round – not just in the back office but in every component of a financial institution. Previously there was a clamour for large businesses to try to each become all-in-one providers and cater for every need possible. Then there was the great unbundling, with fintechs providing a specific service at a higher level of quality, thanks to being dedicated to it rather than it being an afterthought.  

What we’re now seeing is somewhat of a re-bundling. Not every financial institution wants to build everything in-house, and more banks are recognising that handing off a technology process or CX process to outside specialists can make game-changing improvements.   

Tribe acts as an infrastructure orchestrator – we have customer-facing technology that is also designed for use at the back end. We combine front-end wallet capabilities for end users to manage cards, bank transfers and crypto payments with back-end functionality that supports banking services. 

The principal design is to reduce aggravation to customers and deliver a richer, more seamless experience. We’re bringing together a fragmented market, and crucially, it’s a quick route to market for those looking to deliver multiple pieces of technology. It’s about the aggregation of relevant products. 


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