What Traditional Banks Can Learn From Neobanks

3 min read

Key points: While traditional online banks struggle 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 execution. The new generation of financial service providers has fundamentally rethought the approach. Karl im Brahm, DACH-CEO at banking software provider Objectway, explains what established players can learn from their challengers.

While traditional online banks struggle 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 execution. The new generation of financial service providers has fundamentally rethought the approach. Karl im Brahm, DACH-CEO at banking software provider Objectway, explains what established players can learn from their challengers.

Neobanks and brokers – the current disruptors of the banking industry – scale faster, operate more internationally, and reach audiences that previously had little interest in investing. They seem to leave established online banks behind. Yet, these online banks had a solid starting point since the 1990s: existing customer relationships, strong brands, physical presence. However, their success often remained limited. In contrast, neobanks focus on four principles: consistent personalization based on scalable technology, proactive use of regulatory requirements, thoughtful automation – and trust that relies on transparency rather than tradition.

The Curse of Existing Customers

The broad customer base of traditional banks has become a strategic risk for them. Innovations had to consider existing expectations – this hindered bold changes.

Neobanks, on the other hand, started with a clean slate. Their organization follows the customer journey, not established product structures. Therefore, they can build their solutions around life goals – such as wealth accumulation or retirement planning – and experiment in early phases without losing the trust of established target groups.

Their business model was also crucial: no branches, highly automated, freemium-based.

Disruption starts in the mind

Many online banks, on the other hand, think in small steps – their innovation is usually incremental. In contrast, neobanks question central paradigms: Why are minimum investments necessary? Why are personal advisors needed? Why can’t financial planning be as intuitive as Spotify? The difference lies in the mindset: defending existing structures versus deliberate redesign.

Modern platforms combine mobile accessibility with data-driven personalization, API openness, and behavioral design – they help users make complex decisions easily without overwhelming them. Another crucial difference: while many banks view compliance as an obstacle, for neobanks it is part of their brand core. They integrate Know-Your-Customer and anti-money laundering processes into the user experience and use regulatory requirements to build trust.

Neobanks build trust without marble halls

Building trust today isn’t about grandeur but digital user experiences. Neobanks openly explain their business models, avoid jargon, and offer easy-to-understand products. Education is part of the platform: investors are guided, not just served.

Early online banks aren’t obsolete – many now collaborate with fintechs to develop hybrid models. The industry is evolving, albeit slowly but deliberately. To survive, the courage to change is essential. The tools are ready – the cultural shift often isn’t.

Source image: Unsplash / SumUp

“Education is part of the platform: investors are guided, not just served.”

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