Increasingly customers are demanding faster, more efficient and secure banking services to match those that they receive from other sectors such as retail. That’s where neobanks have stepped up over the last decade to fill a gap in the market.

Neobanks have been one of the biggest disruptors of financial services in recent times. Offering customers exclusively digital services, they enable them to do almost all of their banking at the click of a button, wherever and whenever they want.

But most have grown too far and too fast, stretching themselves too thinly in their quest to gain more customers. As a result, they have struggled to turn a profit, with less than five percent breaking even, as per a report by Simon-Kucher & Partners.

While some may have come up with a winning product or service, they have been so focused on it that they have lost sight of new and emerging trends that could impact them. Others have been too concerned about opening as many accounts as possible without thinking through how they can make them truly profitable.

So what can they do to reverse this worrying trend and start making a profit for themselves?

Trading services as a solution

By their very nature, neobanks rely on collecting vast amounts of customer data in order to provide themselves with the necessary insight to develop new products and services that best meet their customers’ needs. That lends them well to providing financial trading services as a solution.

By drawing on the existing knowledge that they have of their customers’ financial circumstances and spending behaviours, they can design a personalised trading offering that is both relevant and timely for the end user.

It’s already being done in some quarters. Revolut has led the way with the launch of its commission-free stock trading platform in August 2019.

Lack of offerings

There’s no doubt that many digital banks have come on leaps and bounds in terms of the provision of new trading services in recent years. Yet, the majority still don’t offer them to their customers. Furthermore, only half of those that do so only offer access to one financial instrument.

That’s because it’s a highly complex process to develop and launch one. In addition to putting in place the right financial infrastructure, logic and workflows, neobanks also have to secure the appropriate regulatory licensing in order to operate them.

At a critical juncture

Neobanks have reached a tipping point. To stay competitive and continue to grow, they must have a coherent plan in place to deliver profitability, while continuing to remain sustainable.

In order to achieve this, neobanks need to leverage the technology at their disposal. To do so, they need to go above and beyond in terms of their digital offering, including offering trading services.

Forming partnerships

For those neobanks that don’t necessarily have the capabilities to launch a fully-fledged trading services product, there is help at hand. By collaborating with fintech startups, they can deliver such a service.

Revolut is already clearly benefitting from providing trading services, as reflected in the first full-year profit which it achieved in 2021, with more than half of its revenues coming from foreign exchange and wealth services. As increasingly more companies come on board, with our research finding that 59% choose to partner with an investing-as-a-service provider to launch new offerings, so that trend only looks set to continue.

Technology is key

Moving forward, as always, technology is key for neobanks. By fully leveraging it they can provide the best possible customer experience and, thus, improve satisfaction levels, loyalty and retention, resulting in the opportunity to upsell and cross-sell other products and services, and, ultimately, gain greater profits and growth.

That’s why neobanks should be offering financial trading services as standard. Their popularity will only continue to grow as people seek to make the most of their investments during these tough economic times.