Neobanks have several operational advantages that help minimize losses — but only to an extent. For example, they lack expensive legacy back-end systems or legacy channels. This allows them to have better operational efficiency (i.e. lower cost-to-income ratios). Moreover, they have lower distribution and customer acquisition costs, and their modern backend systems allow them to better use APIs to layer third-party services.
Looking ahead, these foundational advantages could help neobanks become profitable at scale. To grow at scale, three further factors are set to help: 1) building on the freemium pricing strategy, 2) multilayered premium subscriptions, and 3) targeting niche demographics (e.g. SMBs, women, etc.)