What Traditional Banks Can Learn From Neobanks

3 Min. Reading Time

Key Takeaways (WIK): While traditional online banks are struggling with stagnant user numbers, neobanks and brokers are growing rapidly. The difference lies not in the idea – both aim to democratize financial services – but in the implementation. The new generation of financial service providers has radically rethought their approach. Karl im Brahm, DACH-CEO at banking software provider Objectway, explains what established players should look out for from their challengers.

While traditional online banks are grappling with stagnant user numbers, neobanks and brokers are experiencing rapid growth. The difference lies not in the idea – both aim to democratize financial services – but in the execution. The new generation of financial service providers has radically rethought their approach. Karl im Brahm, DACH-CEO at banking software provider Objectway, explains what established players should look out for from their challengers.

Neobanks and brokers – today’s disruptors in the banking sector – scale faster, operate internationally, and reach target groups that previously rarely engaged with financial investments. They are leaving established online banks behind. However, the established banks’ foothold since the 1990s was solid: existing customer relationships, strong brands, physical presence. Yet, their success often remained limited. In contrast, neobanks are built on four principles: scalable technology-based personalization, proactive use of regulatory requirements, thoughtful automation – and trust, which is not based on tradition but transparency.

The Curse of Legacy Customers

The broad customer base of traditional banks has become a strategic risk for these institutions. Innovations often had to accommodate existing expectations, which slowed bold changes. Neobanks, on the other hand, started without legacy issues. Their organizations follow the customer journey, not established product structures. They can therefore build their solutions around life goals – such as wealth accumulation or retirement planning – and experiment in early stages without losing the trust of established target groups.

Crucial to their success was also their business model: no branches, highly automated, freemium-based.

Disruption Starts in the Mind

Many online banks think in small steps – their innovation is often incremental. In contrast, neobanks challenge central paradigms: Why are minimum investments necessary? Why are personal advisors required? Why can’t financial planning be as intuitive as Spotify? The difference lies in the mindset: Defending existing structures versus deliberate re-imagining.

Modern platforms combine mobile accessibility with data-driven personalization, API openness, and behavioral design – they help users make complex decisions simply, without overwhelming them. Another key difference: While many banks view compliance as a hindrance, for neobanks it is part of their core brand. They integrate KYC (Know Your Customer) and AML (Anti-Money Laundering) processes into user experience and use regulatory requirements to build trust.

Neobanks Build Trust Without Marble Halls

Building trust today is not achieved through representation, but through digital user experiences. Neobanks explain their business models openly, avoid jargon, and focus on easy-to-understand products. Education is part of the platform: Investors are guided, not just served.

The early online banks are not obsolete – many are now collaborating with fintechs to develop hybrid models. The sector is moving, albeit slowly, but purposefully. Those who want to survive need the courage to change. The tools are available – only the cultural shift often remains the challenge.

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