If you could build your own neobank, what would be your first product and why?

Welcome to the Fintech Nerd Collective:

Each month we ask some of the brightest (and most curious) minds in fintech one key question. They can answer however they see fit. The goal is to crowdsource some knowledge, have a little fun, and maybe spark an idea or two for the fintech community. Have a question? Let us know here.

In this first edition, we asked the collective:

Question 1

If you could build your own Neobank, what would be your first product and why?

Here’s what the collective had to say 👇

Cokie is the founder of Lasagna Technology.

Let’s assume I built a card for a beauty brand, which, for simplicity’s sake, we’ll call Coco Collective. I buy a moisturizer. Coco Collective’s return policy only allows returns of unused and unopened products within 10 days. But I wanted to try it! That’s why I bought it! So I give it a shot and it gives me a rash. Yuck. And now I’m stuck with it. OR AM I?! My product would be called “First Aid.” First Aid is an insurance product that offers an embedded layer of consumer protection. If somebody has a visceral reaction to a product, it arrives faulty, or any number of eccentricities happen in the online shopping process, First Aid will supersede the brands return policy by going to bat for you. All you have to do is click on the transaction and First Aid will start fighting the good fight.Embedded insurance, embedded consumer protection, embedded security. Where your money goes, First Aid follows. (Please reach out to me on Twitter if you want to fund Coco Collective.)

Alex is the writer of Fintech Takes.

PFHM — Personal Financial Happiness Management. Banking isn’t broken because the UIs are ugly. Banking isn’t broken because fees, as a generic concept, are evil. Banking isn’t broken because it didn’t come with enough glow-in-the-dark debit cards. Banking is broken because, for far too many people, money = stress. 85 million Americans believe that ‘developing a healthier relationship between money and happiness’ is crucial to their future financial success. So, let’s build that! Let’s build a PFM-like interface that overlays a person’s financial accounts in order to help them quantify which financial behaviors and milestones (everything from a daily Starbucks coffee to paying off their mortgage early) make them happiest and then nudges future financial decisions in the right direction.

Ian is the founder of Fintech Today.

I had to drop out of college due to some family health issues at the time and the fact that we couldn’t drop $60 G’s a year for school. When we went to get a loan, I couldn’t find a co-signer, which I now think is a solvable problem. Co-signing loans is just a way for the lender to mitigate risk, but what if that risk could be shared across 3 or 5 people instead of 1? The product here isn’t a neobank exactly-it’s a wedge on onboard young people looking to start their career. The neobank would automate things like FAFSA applications and other financial aid documentation, allow co-signers to send money to students. Students can spend their money where but get rewarded for purchases like books and food at local restaurants. The neobank can help students get a head start on paying back their loans by offering discounted interest rates and better rewards for more co-signers you bring in too. Banks are supposed to simplify your financial like, starting with simple financial products but in theory that extends to anywhere else your financial info is used. Having a neobank that’s supremely focused on helping college students manage their loans, tuition payments, and co-signers not only gives users the power, responsibility, and visibility to own their financial decisions but make smarter ones too.

Jason is the writer of Fintech Business Weekly.

Let’s call my first neobank product “FrictionMode™,” which would be a collection of UX commitment devices designed to boost information salience and add friction when spending to help counter cognitive biases like hyperbolic discounting and time-inconsistent preferences. Examples include requiring a user to re-enable a card before making a transaction and push notifications of total month-to-date spend vs. budget after each transaction. Think of it as the digital equivalent of freezing your credit card in a block of ice — something to make you think twice before clicking “Buy.”

Nik is the writer of This Week in Fintech.

This may be cheating, but I would abstract away the entire notion of a ‘bank’ or dedicated service provider that users have to visit. The neobank would just be an address, like a telephone number, SSN, or QR code, that users can reference in specific contexts. This address can be pinged for tasks such as show balance, make payment, receive loan, collect payroll — but users would never need to visit a bank website to do these things. Instead, they would just permission their account to different services the same way you ‘permission’ people to send and receive messages from you in a variety of apps when you share your phone number with them.

Saira is the host of Girls Just Wanna Have Funds.

The neobank I’d love to build would be one for our pets. By far the most beloved children in the U.S., Americans spent $99 billion in 2020 alone* and should absolutely have their own neobank. The first product I’d provide is a debit card that gives 5% cashback on necessary items: pet foods, supplies, pet insurance, trips to the vet, and even trips to daycare. Direct deposits could be split out into savings plans for various bills attached to your pet as well. Partnerships would be built with local pet shops, where special discounts are given for using your debit card on your most important child. Special giveaways to cardholders for their pets would be included on a monthly basis with entries into the giveaway based on the number of swipes per month. A day at the pet salon, a special grooming, or free pet care, while the owner is on vacation, would all be up for grabs. If you upload a receipt of your debit card swiping at a rescue shelter to save an animal, you’d receive 10% cashback instead of the standard. Cashback rewards would, of course, be offered in USD… but also in dogecoin.

Marc is the writer of Net Interest.

The OG challenger bank, at least in the UK, was Egg. Founded in 1998, it went on to win 5% of the UK credit card market and accumulate over £8 billion of deposits. Like the challenger banks of today, it had a whizzy credit card with a distinctive logo; it distributed a broad range of products — insurance, personal loans, and mutual funds as well as savings deposits and credit cards; and it expanded abroad. One of its founders even went off to set up a competing challenger bank (Cahoot) just like the founder of Monzo did from Starling. Egg started with customer deposits and it may have been on to something. After all, you want to go to where the money is. Its customer base was more affluent and therefore more predisposed to the cross-selling that came next. Egg ultimately failed, sure — seen off by a succession of challenges from rising customer acquisition costs to expensive international expansion to the denouement of a credit cycle. But getting those deposits, and the trust that came with them was a sterling first step.

Lex is the writer of The Fintech Blueprint.

The neobank market is extremely crowded, and the outcomes for winning the neobank wars are somewhat short-term. Similarly, digital wallets and crypto brokerages are very competitive space. Instead, I would try to use the BitClout approach to finance. Whereas BitClout cloned the user/follower graph from Twitter and moved it wholesale to a new blockchain, I would do the same for some set of financial institutions — recreating the balances and liabilities at scale for millions of people on an open-source programmable blockchain. The chain would have all the services that regular banks offer, and would be bootstrapped with the entire financial asset population. To do this, you need access to big data, and a lot of desire to seek risk. But it could tip over where money sits entirely.

Simon is the writer of Fintech Brainfood.

If it’s possible for Facebook to build a model of your unique advertising preferences and make that tool available to any advertiser globally; why can’t I have that as a Neobank?

So why don’t we build the Neobank of you? The modular bank that reacts to your preferences. This is where HM Bradley is going by offering rewards on your most used merchants. But what about savings and investments that reflect who you are? What about nudges that remind you to save, just after payday? What about defaulting you into money-saving coupons. Imagine if you had a private banker in your pocket. A sort of “make your own mixtape” version of the new community-led Neobanks. A lot of services like Copilot.money or Snoop.app are heading in this direction, but the step-change here is building the core experience around your behaviors, preferences, and data over time.

Alan is the writer of Fintech Radar.

I hate to be that person, but let’s take our hand off the product button for just a second. It’s incredibly tempting to jump to a product when thinking about bringing a fintech proposition to market. The reality is that it rarely starts there. It usually begins with the customer and then turns to the product. We see this play out as more new neobank brands come to market focused on a segment or persona — think Daylight (LGBT+ focused) or Cheese (Asian community focused). Taking a new proposition to market always starts with the customer and the problem they’re trying to solve. Ok, so where do you start with a new neobank proposition? I actually think being focused on a particular segment has become challenging with everyone trying to build the “bank for community x”. So instead, I’d be focused on what I refer to as “x disguised as y” opportunities. Take Deel, for example. They’re an SME challenger bank disguised as an employer of record (EOR). Taking a leaf from their playbook, I’d focus on SME banking (better margins and genuine willingness to pay), and I’d offer a service like being an EOR and then slowly tunnel my way into banking services starting with a multicurrency account. Solve a real business problem, build trust and offer more value aligned with the business challenges they face. Yep, it’s classic bank cross-selling but done in a way that truly adds value to the customer.

Aika is the writer of Aika’s Newsletter on fintech.

I have a theory of neobanks: they are either top-down or bottom-up. Top-down neobanks have grand plans to build everyday banking accounts, so they scale fast and at high costs. Bottom-up neobanks build one financial product first, usually in lending, and then expand vertically, but held hostage by their profitable pasts they grow much slower. Both approaches are not for a faint hearted (me), so here is an easy-peasy alternative. For any neobank, customer acquisition costs are the most important thing and so a large distribution channel trumps a superior product quality, at least initially. That’s why if I were to start a neobank, I would jump on the rails of an existing rich customer channel — Walmart (ok, it’s taken), McDonalds, Zara or LVMH — ooh just a thought of a bank by Louis Vuitton makes me dizzy. My first product would be a buy-now-pay-later on bags, shortly followed by subscriptions on shoes, savings interest in the form of exclusive drops, and at some point lending of NFTs of vintage collections (ok, this one is crazy, but I’ll keep digging). Bernard Arnault, if you’re reading this, let’s talk!