Neobanks 2.0: How Challenger Banks Are Moving from Niche to Necessary

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How Digital Banks Are Moving from Niche to Necessary

Mathias Schutz [00:00:00]:

Hello and a warm welcome to today’s webinar, How Digital Banks Are Moving from Niche to Necessary. Let me quickly introduce myself. My name is Mathias Schutz; I am Deputy CEO and Chief Revenue Officer at Natech. We are a leading banking technology platform in Southern Europe, and we’re empowering financial institutions of all sizes to compete and grow alongside establishment competitors. I’m very delighted to guide you to today’s session about this very interesting topic. As you know, over the past decade, challenger banks have rapidly transformed the financial landscape. What began small tech-driven, has now become a really force driving industry and it’s changing a lot.

[00:01:00]

I would like to give you a big brief overview about this session today. We will have four guests with me, and I’ll introduce them to you shortly. We will guide you through a number of very interesting questions. Along the session you will have a chance to always address any questions which we will address at the latest at the end of the session, but we might also take them up during the webinar. Now let me please introduce you to this very valuable expert panel that we have been able to create here today. I would like to start first with Panagiotis Kriaris. He’s a FinTech thought leader with almost 150,000 followers on LinkedIn. Then we have Simon Yousseff, he’s CTO and co-founder of Neon, one of the pioneer neobanks in Switzerland, founded in 2017. Representing on the other side a very latest challenger bank, freshly on the market, Snappi, we have here Alex Maruta as the CTO of Snappi, the challenger bank that was launched in Greece in August this year. Last but not least, we are having Javier Guevara Torres with us, he is CEO and co-founder at C-Innovation, a leading independent FinTech and digital banking research firm.

I hope I spelled all the names perfectly or more or less good, and did not make any mistake. With that, I would like to start a deep dive in the very first question. It’s like a bit of a provocative question for which I want to have an answer from all of the panelists with a yes and no and with one short sense of explanation. The question is: are challenger banks dead or are they just reborn? Who wants to start?

Panagiotis Kriaris [00:03:09]:

I can start.

Mathias Schutz [00:03:10]:

Perfect.

Panagiotis Kriaris [00:03:13]:

I think they were never dead. They are now emerging as a more disciplined, I would say infrastructure player. I normally call this that they are going from the 1.0 play to the 2.0 play, meaning that they started from a niche perspective. They were mainly focusing on the growth side, and now they are maturing and they need to change gear, focus on profitability. I think on the regulation side they also need to do things differently. They are reborn for me, as a more sustainable player, many times spacing eye-to-eye the big banks.

Mathias Schutz [00:04:05]:

It was a very long first sentence. Thanks a lot, Panagiotis. Maybe Alex, you want to continue?

Alex Maruta [00:04:11]:

Yeah, absolutely. I think I take the same stance here as Panagiotis. I believe they’re not dead, they haven’t been. But definitely we see now the next phase of growth for many of these players. If I can give examples, we’re seeing Revolut, we’re seeing neobanks in South America. I think in the first phase they really focused a lot on growth, and now it’s the second phase, the profitability, the strong valuations; and then switching slowly towards the more asset-heavy part of the balance sheet like lending and investment banking. I think this is the next stage for them.

Mathias Schutz [00:04:54]:

Well, maybe Simon to give it another flavor from your side?

Simon Yousseff [00:04:58]:

I’m sorry to disappoint, but I completely share the perspective of Panagiotis and Alex. Certainly not dead; in fact evolving, growing. I believe the play for most neobank was to start with a very plain manila product, typically cards and accounts, something that everybody uses, become known, become a brand, and then adding more niche products to also drive profitability. That’s what we are doing and we see that with basically all the players. I think it’s pretty successful.

Mathias Schutz [00:05:34]:

Okay, thank you. I guess from Javier, we won’t get a different answer, or will you break the ice?

Javier Torres [00:05:42]:

Thank you, Matthias. I think I agree with most of the group, absolutely, they have not died. But I do think there is something that has been dying from the model, and is the unsustainable version that relied on free banking, interchange and acquisition spending. The models, from what we have seen in the market from innovation, we ran a research three years ago in 2023 on European digital banks, and we have done a new version this year that we just released on November at the beginning. What we are seeing is that they’re not just apps and the model have changed considerably. Now the front-end interface is ending, and the new era is full financial institutions with economic depth, as Panagiotis mentioned. It’s now a new beginning. But the unsustainable model is totally debt in terms of free banking and interchange reliance.

Mathias Schutz [00:06:55]:

I think that’s a very valid point, Javier. That leads me directly to the next question. When we are talking about neobank 2.0, it’s very much about making profitable business, not doing just free things. I would love to hear from Alex. Since Snappi is still a young kid, a new kid on the block, I think Snappi was launched about two, three months ago, how are you addressing the path to monetize and to create a profitable journey with the clients even though it’s still at an early stage? What can you share with us here?

Alex Maruta [00:07:45]:

I think this is an interesting question, and I think everyone here will probably have a different answer. We are the new kid on the block, and that means for us to first enter the market and make sure that we make a name for ourselves to attract as many customers as we can. How do we do that? With products that solve real day challenges for our customers. From day one, Snappi I think took the right decision, the right path to offer a buy-now-pay-later product, to essentially address a larger consumer market, be attractive for these customers, be also attractive for merchants, and through this product to make sure that we attract as many customers and we create as much interest as we can. From here, I think we definitely see the need for focusing more on the profitability, because we’re coming from a phase of large investments, building the infrastructure, working with Natech for the core banking platform, the core banking systems, the cloud native infrastructure. All of that took time to implement and build up. I think now we’re entering the phase where we’re really focusing on the products that move the needle. For us, we believe that lending is that next frontier. Snappi will definitely zoom in a lot on lending products as we progress from here onwards.

[00:09:19]:

But to maybe answer the question a bit differently, I think for a digital bank to really become healthy, there are probably multiple levels that they have to look at. One is indeed this interest fee, premium products, diversified interest revenue. I think the next one, especially for larger banks, and I think here Simon you can talk a bit more about Neon that has quite a large user base already, looking at that cohort economics, how do you go from just using the cards to going into investment and now trying to monetize the customers through different products? The last of course is making sure that the risk and the compliance side, through automation, you try to put a cap on those costs. Because otherwise they will just explode. We see that also at Snappi, the regulatory space is putting a lot of demand and we are investing heavily in trying to automate as much as possible on the backend to keep those costs in check.

Mathias Schutz [00:10:28]:

All right. I don’t know, Simon, can you bring the perspective from let’s say the guy who is already a long time on the block?

Simon Yousseff [00:10:39]:

Happy to do that. I believe user growth is in fact a vanity metric. It’s important to have users, but just chasing them it says very little about activity, potential or even creditworthiness of users. From our perspective, the play is to activate on our base products and also on ancillary products, and then to add products quickly. Copying what Alex just said, there’s a certain infrastructure you need for that, and I believe we’ll cover that later anyways. We see in our cohorts that for example when we launch joint accounts, we have quite a bunch of users who onboarded and immediately signed up for the joint account. Similarly for trading, from our base users we have almost 15% of trading users, but overall it’s 25, meaning the users who joined Neon after we launched trading is a very high fraction of trading users. The message is cohorts are different and product activation depends on the timing, but is basically the name of the game here.

Mathias Schutz [00:11:59]:

Maybe different views from Panagiotis or Javier on this topic?

Panagiotis Kriaris [00:12:07]:

I wouldn’t say I have a different view, but I would try to summarize the things that they need to do to be successful. Building on what was mentioned before, I would summarize it as follows. First of all, the talented banks need to go to the primary account. How do you do this? To get the salary, to get the bills. Then you need to look at cross-selling. Meaning credit, savings, investment, insurance. You’re going to have to have very low churn, meaning that then you have to look at the NPS and you need to solve problems. Then it was mentioned, credit. This is the real engine. Lending in the modern era means cards, it means buy-now- pay-later, it means SME. Then you need to have the non-interest income, meaning payments, driving. This affects wealth, B2B, software as a service. At the same time you need to have the control, and the marginal cost of acquiring new customers should be close to zero. How do you do this? Cloud native, API, automated back office, operations. I think that’s the way you break even and how do you become profitable.

Mathias Schutz [00:13:28]:

Very interesting. Javier, from your side?

Javier Torres [00:13:31]:

Yes, from my side I can add from what we see in the market. What we see now in 2025 is that licensing is the new mode. We saw some players that started just with partnerships, and they have been starting to require licenses, and it links to what the panel has said and is focused on profitability. That’s one of the regulatory infrastructure that we see players are building and making sure they have the right infrastructure on regulatory in place. Second, that links to what was mentioned also by Panagiotis, on monetization. What we see is that the winners, as we call it in our research, have around three to five monetization engines. It can be lending, wealth, investing, subscriptions, and many also are starting to go into SME business as a new monetization area. I think those are the key two points I can see from the market. Licensing, monetization from a new stack, and also a third one, product dev. Before we were talking about having user growth, many neobanks are growing very fast, but now what is really interesting is they are adding a lot of products to their catalog. We see players like Bourso Bank in France that have more than 50 banking products, a lot of wealth. Also Revolut, N26 Bank moving into the SME lines. In summary, what we see of the neobanks or digital banks that are winning, they’re licensed, they’re diversified, and they’re building ecosystems.

Mathias Schutz [00:15:36]:

If I get you right, it’s really about extending the value chain and becoming full scale players in the longer round. In that context, I think it would be interesting to ask Simon, because your model at Neon, you are dependent on a bank in the background because you are not yourself a bank. Do you see yourself limitations that you cannot grow the value chain, or what can you share on that here?

Simon Yousseff [00:16:10]:

Mathias, that’s correct. We are partnering with HBL, it’s a super successful relationship. From my angle it’s quite symbiotic. Clearly it does not limit in any way or form user growth, and it does not limit product growth. We have a bunch of partners outside of HBL, we just launched Pillar 3A this week Monday with Decart Finance and Leonhart Bank in the background. We have a partnership with Wise, and there’s a bunch of smaller ones. Ultimately there’s two major ways to play for neobanks, having your own license and your own setup or partnering. We chose the partnering approach. For us having a good flexible, stable partner takes away a lot of pain because we need to orchestrate a lot less. That means we can focus on the core side, growing clients and also growing products.

Mathias Schutz [00:17:13]:

Then allow me to ask a follow up question here, Simon. It’s all according to the script, but  if you had to turn the wheel back in time and start all over again, would you again build that together with a bank that is providing the license, in your case HBL, Swiss Universal Bank? Or would you say you better go the way as Snappi did, full banking license from scratch? What is your view in retrospect?

Simon Yousseff [00:17:51]:

Life is not an AB test, so I will never know. What we built is hugely successful. It works out quite nicely, so I have no regrets whatsoever.

Mathias Schutz [00:18:02]:

That’s good, very nice to hear that. Let’s move on to another topic. What would be also interesting to have the views from all of you. We know now for the three years, the two magic letters, AI, are in everybody’s mouth, everybody’s talking about it. We have heard from Javier before that automation is very important. From experience of all, have you seen very successful models how AI has been brought into play into challenger banks, and what is the way forward on it? What would you expect? Maybe here it would be nice to start with Javier first, because you brought it up.

Javier Torres [00:19:04]:

Thank you, Mathias. Yes, what we have seen recently, I think the most interesting change on AI, is that until now AI has been staying behind the scenes, so preventing fraud, onboarding, credit scoring. But what we see now is that it’s becoming a product, a visible differentiation of those that are getting early into the AI. We can see some examples that goes more into commercial AI. We have open bank, the digital bank of Santander, that is moving into investment assistant with artificial intelligence. They just launched it in Germany, they’re using in Spain. It’s basically giving more tools to investors when they face the market. Also we have Robinhood, which is not a bank but is going more into that side, data space, launching banking products and also now AI for behavioral personalized alerts and also on investment activity. One that has been now sometime there is Klarna, with AI, with the shopping lens, so finding cheaper prices and better merchants. It is driving e-commerce intelligence. I think from my side, what we see is that AI used to be invisible, now it’s becoming a stage differentiator. From open bank and new bank also, to tailor credit and rewards. It is going to be on the side of the customer, and it’s helping them to get better decision-making.

Mathias Schutz [00:21:00]:

Good. Panagiotis, what are your observations? What developments do you see?

Panagiotis Kriaris [00:21:09]:

I think for me the most interesting part is the following when it comes to AI: we have always been talking about customer centricity when it comes to banks, right? How do you do this? You need to personalize. On the other hand, you have an issue. If you need to personalize then that needs to be at the scale. You have on the one hand side mass, on the other hand side you have personalization, and these used to be two different things. How can mass be personalized? What AI is doing on the front end is that it allows banks to do exactly this. It gives them the tool to do what we call mass personalization. If you look at the trends over the past many years, this is clearly a trend that you see. If you look at the platforms, if you look at the big tech, this is the name of the game. Now what banks are having is the tool and the means to do that. For me, this is as much as a threat as it is an opportunity. I was for example reading some reports that say that on the one hand side, banks are to benefit the most from AI; and on the other hand you see also numbers about the challengers. What do they have to lose if they don’t adjust? If I have to summarize, I would say the front end is key. What does it mean? It means mass personalization; it means the tools. Then you have the operational side, where the automation degree, I think I was reading a McKinsey report that said that you can save up to 20%, which is very significant. I think this is something that they need to take into account. Then of course we have all the bits and pieces around the compliance, around the data part, and about the decision making. The decision-making process can improve dramatically if banks use the right tools. I would see the AI and the agents, and that’s probably also a different discussion, how the agents change the game, more as an opportunity for banks in general and especially for challenger banks to shift the game, and to play the game on the technology side and get the tools that maybe they were not so easy to have a few years ago but now they’re here. You always need to see the opportunity side rather than the third side, I would say.

Mathias Schutz [00:23:50]:

Absolutely. Passing over to Simon, I don’t know, can you already share some first examples on how you are using AI in-house or what you plan to do? As long as you can disclose it, it would be interesting to see what the thoughts are from your end. Then I also want to hear that from Alex.

Simon Yousseff [00:24:13]:

So we are using AI for three different things. We use it for each employee for every neo knowledge, to work faster or get that job done easier. I think that’s what everybody is doing, that’s very straightforward. We are using some agents for this already, so we’re experimenting a little bit. It’s not super widespread yet. Number two is we have already three client-facing products in the market for 15 months almost. You can analyze your personal finances, all your transactions, you can ask all sorts of questions. How much did I spend on SPB last year, or would it be better to get alerts instead of paying individual tickets? All of that. We have trading advice set up. We have a neo knowledge database, which is extremely well used. All of this is client-facing, and that was maybe a bit unorthodox. We started with this and now as the third step we’re building in-house AI tooling. The next big step here will be helping our customer agents write better customer service mails, or answer tickets faster, better. I think we have already quite some experience. Let me maybe share one nugget here. The Finsight piece, which is quite complex, quite powerful, is used very little. That’s not so interesting for clients even though it’s very powerful. However, we have trading advice, AI-based, which collects all the numbers, exposure across industries and geographies. The client gets a report on his portfolio and an assessment, what changes can you expect for example under Trump presidency or something like that. This really helps a lot to activate users for trading that makes them think. Yeah, I believe a mixture between generic AI and human in the loop call to action, can be quite powerful. That’s what we’re seeing for this product.

Mathias Schutz [00:26:40]:

Good. Alex?

Alex Maruta [00:26:41]:

Yeah, I think that’s very inspiring what my colleagues here had to mention. At Snappi we look at AI from two perspectives. One on the attack front, and the other one on the defensive side. When we thinking about attack and using AI, I think we’re coming very close to what Panagiotis and Javier had to mention here, customer diversification, serving your customer, understanding their needs, personalization, and so forth. However, we are at the beginning of the journey, so I have to admit that the emphasis has not been that much in this space. I think right now, at least for us, the emphasis is more on the operational side, on the defensive side, trying to make sure that we build an operations machine that is ready to scale, and that we’re not going to see a linear growth with the customer base as we go along. The pilots that we’re starting or we have already started are mostly on this side, looking for example, how we can deploy agents to help the customer service colleagues, really understanding the product features when our customers are calling in, that they can be served on the spot and immediately. One of the unique selling points of Snappi in Greece is indeed that we have always a human person, a human behind the phone, ready to answer and guide the clients. Of course at some point this is not a scalable model. We are trying to take all of the learnings that we can at this point in time, embed it into structured documentation that we give afterwards to our agents to produce live texts and more documentation and more material for the customer service to better serve the customers. Simon, we shared the same background and I think here we also look at the world in the same way, because I also have the idea to say, let’s invest in this knowledge base early in the days so that once it’s there and once it exists, it’s much easier to let the agents run freely and learn from that so that we can then serve the customers, the customer support agents and so forth, in a much easier way. This is for us right now the emphasis.

[00:29:10]:

If we look again on the attack side, the lending space has much to benefit from this technology. We’re predominantly looking at decision models and credit decisioning engines and affordability models and so forth, which I think are going to be the next frontier if we look at the lending roadmap that we have in front of us. However, I also want to mention that we’re in a luxurious position as a bank, because we’re working with Natech Banking solutions, and Natech is a technology company. In that sense I see less the need for us as a bank to invest that massively in AI, because we have a technical powerhouse behind us that invest by themselves in these technologies. The people, the developers, the engineers, are all getting skilled in that sense. I think the synergy between a tech company and the bank has a lot of benefits. I don’t really see the need of duplicating the same type of capabilities on both sides of the fence, if that makes sense.

Mathias Schutz [00:30:18]:

Maybe if I may just ask a follow up question, Alex, you mentioned that Snappi is very unusual as a challenger bank setting on life agents instead of using AI. What was the deliberate decision behind? What is the rationale behind that?

Alex Maruta [00:30:39]:

That’s a really good question, Matthias. What I’ve sensed from, because I’m not a Greek person myself, what I sense is that in the Greek market there is indeed a desire from the consumers to be handled, to be treated in a more attentive way, if I can call it that. I think everyone has experiences working with bots, with agents; they’re not that friendly. Snappi saw that opportunity in the market to say, if we can do things differently, let’s try to do so. This personal touch where we have a person dealing with other person’s challenges, it’s a really unique differentiator, because it allows us first to learn. It’s much easier to learn when you’re talking to the people and hearing there are challenges, hear their problems, and understanding what we need to do better. Secondly, if we can do that with this personal touch, I think it also comes across as a plus to the customer. Personally, I would definitely like to experience this with more services out there, because at some point you can’t solve all your problems with AI, let’s call it that. I think ultimately in Greece we have this luxury to afford to have the models in place. If we’re looking at the other challenger banks like Revolut, that’s not present. Combining the differentiator with the fact that the market supports these services, I think that was the smart thing to do.

Mathias Schutz [00:32:31]:

Alright, thanks a lot for the insights, Alex. By having asked this question, I would like to motivate everyone participating in this webinar, if you have any questions please use the chat at any time so that we can take this up in the course of the session or also towards the end. Please feel free. Any question, we have a very interesting audience here, so I’m sure everyone has interesting questions to ask. I would like to move on to slightly different topic. Being in the banking space, even if a Neobank, there’s also always the regulatory side to business, AML, KYC, anti-money laundering, know your client security, operational resilience.  There’s a lot of burden on the institutions. My question would be also to be added to all of you, how can neobanks or challenger banks find the right balance between innovation and regulation and resilience to move on quickly? Because if you want to be perfect on everything in terms of regulation, probably you’ll be super clean and proper in everything, but it’ll kill your innovation. It would be interesting to see everybody’s view on how to find the right balance on this challenge. Maybe we can start first with Javier.

Javier Torres [00:34:14]:

Okay, Matthias. It’s a quite interesting question. I think the balance on innovation regulation comes from the architecture. The strongest models that we can see there at the customer layer goes into pricing, partnerships, contextual services, while also keeping risk and compliance centralized. Some of them are also automated, auditable and embedded into the core stack. From my view, the innovation in this stage of neobank 2 becomes from a scalable governance as a structure. The tradeoff between innovation and regulation disappears and it becomes like a design strategy for those banks. I think that’s how I see the balance between innovation and regulation needs to be into the design strategy going on.

Mathias Schutz [00:35:23]:

Panagiotis, what is your view on it?

Panagiotis Kriaris [00:35:29]:

I would say the following. If you look at the long game, what banks are trying to do, they’re trying to become the primary bank. How do you become the primary bank? You need to have a reputation, you need to be systemic, and you need to have resilience. I would argue that no amount of innovation can compensate for poor resilience. You can do whatever you like; if you have a failure, if you don’t have the trust, then you can never become the primary bank. That’s the big challenge. If you look at the landscape today, you have all kinds of things. For example, we had very recently the instant payment regulation. The way that you’re handling, let’s say the fraud is changing. Then you have the attackers on APIs, on the mobile channels. At the end of the day, the regulators also are connecting now growth to resilience. The best example is probably what has happened with Revolut in the UK, where compliance was the number one factor behind the delay. The delay has to do with lending. As you said before, if you cannot play the balance of the game, you cannot become profitable, you cannot grow. Then what is the first thing that the regulator is looking at so that they give you the permission to do so? Resilience, compliance, risk, the entire setup. This was not from the beginning the strong point of challenger banks, but now they need to change the models. This needs to be taken into account as one of the main trust generating factors. At the end of the day, if you look at this from a different angle, we are now looking at an increasingly commoditized market. How do we differentiate trust? The UX side is I would say the easy one. But trust and safety is something that you need to build. You gradually build it, but it can be lost within an hour. This is why this is the big challenge.

Mathias Schutz [00:37:50]:

Very interesting. It’d also interesting probably to get the Simon’s view over the time. How have you seen this balance evolving since the inception of Neon Bank? I guess it’s become more tough now over time.

Simon Yousseff [00:38:08]:

Actually not, because we have this partnership with HBL. From day one they were very clear which clients they want to accept or are willing to accept. It’s in our culture to have AML and KYC. Maybe not super top notch, but really good. We are nowhere near a level where we would have to discuss this with the regulator. It’s on a very good level. From my angle that’s table stakes, because what you’re seeing with Revolut or also N26 in Germany, it keeps them busy, because they were a bit too close to a threshold where the regulator became active. Interestingly for me, AML and KYC are two very different beasts. KYC and the client identity that is needed for any new product where you need a new partner, you need to be able to play that. AML on the other hand is more fluid. We have seen a fair share of money mules over the years. It’s almost like when a bear tries to hunt you down, you don’t have to be faster than the bear, but you have to be faster than the next neobank. Because the money mules, they always go to the institute with the lease controls. Whenever you see a new influx of money mules, you realize, I have to add a little bit more. Yeah, that’s what we did.

Mathias Schutz [00:39:41]:

Very interesting. Alex, you’ve just taken off with Snappi two months ago. How do you see the balance between innovation and the management of resilience and operation risk?

Alex Maruta [00:39:56]:

Definitely on the resilience side, we’ve invested a lot in the last couple of months, especially with DORA, the European regulation that comes across. We took the action quite early in the day to make sure that whatever we build on the cloud banking platform, that it is built with the resilience in mind. We’re now seeing to a large extent the benefits of that. Yes, we’ve had some outages that were caused by our cloud provider. Yes, we had for example some payments impacted but also from a third party. But never did we come across a situation where our process wasn’t able to detect or to fail over or to take actions to mitigate in a relatively short period of time. Here I want to put also emphasis on the fact that if we’re looking at banks in general, we’re able to fail over our entire banking platform within three hours in a completely different region, a completely different setup. That I think brings a lot of comfort also to the regulator, seeing the level of maturity that we have on this front. However, coming back on the initial question, how do we balance this compliance versus innovation? It’s a thin line, I have to admit. We as a challenger bank, we always want to move faster than it’s possible. However, what we’ve seen is that if we take the time from the beginning to work together with our compliance colleagues, with our legal colleagues, and definitely have an open channel with the regulator, to take them on the journey and explain what we’re doing, I think that also has a lot of benefits because it allows us to build once and build it the right time around. Of course sometimes mistakes can happen, but we also have a very good reaction speed so to say, because Natech really does help a lot in that sense, having the dedicated teams, the engineers that can act fast. It allows us to pivot or move swiftly. I think this agility for banks is definitely absolutely crucial, because if you don’t have it, you also can’t keep up with the change. When change happens, especially from the regulatory side, you do need to act fast. Otherwise you’re going to be caught in this constant keeping busy with the regulator type of exercise. We can’t afford that because our mindset is focused on customers, on products, on features, and we don’t want to be caught in this game of constantly trying to rebuild something that already was there, just to satisfy the ever-changing regulatory landscape.

Mathias Schutz [00:43:06]:

Very good. We are reaching slowly towards the end. I would like to raise one bigger theme now before we come to the Q&A at the very end. We have seen that partnership, ecosystem collaboration of infrastructure is a very important point. We have heard it in this call before. We know it for instance, Simon, you have your HBL as a bank supporting you as a strong backbone and a strong partner. Alex, on Snappi. I know buy-now-pay-later, you can only do that if you have a strong network of merchants. I think in today’s world it’s very important to have a strong way to build an ecosystem of collaboration. Out of this one, your experiences maybe starting first with Panagiotis, what do you think is key to be successful in building a partnership and building up and growing an ecosystem for a challenger bank?

Panagiotis Kriaris [00:44:16]:

I would say it’s two things. On the one hand side, it’s the technology. On the other hand side, it is the expectations on the business side and how you are setting the expectations on the business case. If I start with the technology side, it goes without saying that you need to be cloud native, API first, event driven, the capabilities. It makes a lot of sense to have this horizontal view of capabilities as your services. Then it makes a lot of sense to have an ecosystem of specialist partners. Depending on the vertical that we’re targeting, you need to have the right partners, and also on the software side. What we have been seeing over the past few years is that software is becoming a distribution channel. How do you take advantage of this? What challenger banks don’t have, most of the times they don’t have their own distribution channels, so they need to find ways on how to go out on the market. The better that you do this, the most successful you are. There’s only one bet that is key to this, and this is your partners. Basically the question is, how do you enable your partners to go out and they sell for you on your behalf, and it becomes a win-win relationship?

[00:45:52]:

You need to get the technology side correctly, you need to connect to your partners using the right technology, the APIs. You need to do it easy for them. Then on the business side, the distribution model and the business logic have to work. You need to have the metrics to follow who is delivering and who is not delivering. You need to have the business compensation model that makes sense for them. I will repeat for once more the software channel, which is very significant as a distribution layer. The specialization on a vertical basis; it’s not enough if you go across the market and you say, I would like to do something very generic. You need to have a very concrete understanding. You need to pick and choose three, four verticals, then you need to focus on those. You need to say, this is for example, if you have a buy-now-pay-later offering, you need to say these are the three, four verticals that make sense for me. These are the right partners, and this is my strategy. If I have for example a very different offering, then I do the same with a different partner mindset, and I do exactly the same, and so on and so forth. You need to have a strategy, how to connect all these bits and pieces at the end of the day together. That’s for me key.

Mathias Schutz [00:47:10]:

Very interesting. Javier, what’s your view? Anything to add on Panagiotis’s perspective?

Javier Torres [00:47:16]:

Yeah, very quickly. I think a bank should define their economics first, and then go and find partners to accelerate the scale. What it means is going into the core risk engines, have the compliance, the product manufacturing, I see that it should be in-house to determine the economics and regulatory control. Then the speed on orchestration. We see partners coming into e-commerce, accounting tools, for example for SME banking, we see travel, telecom, all that lifestyle services are helping with that speed on orchestration. This creates very modular systems where the banks own the money engine, and integrate high value services for clients, SME banks as well, around that. That’s the view.

Mathias Schutz [00:48:23]:

Very interesting. Alex, from your perspective how do you see?

Alex Maruta [00:48:29]:

Matthias, very quickly here. I see the world pretty much in a similar way with Javier and Panagiotis. For me, coming from a technology background and being a technology leader myself, I think the emphasis is definitely on building technology that allows the organization to integrate easier with external parties. Hence also the vision that we have for Snappi to play in as a service domain. That’s for us key because we see definitely what Panagiotis is referring to here with integrating in lifestyle services, integrating with other players, enabling your products through different channels and different platforms, and software being a very good vehicle for our financial products. We definitely see that as a market opportunity. If you were to ask me personally, I’d say that the future for banks looks also a bit invisible, if I can call it that, the invisible banking where the storefront, yes it will always exist, but the financial services will be very much embedded in all the other types of application services, products and things that consumers use and not necessarily having to go specifically to a Snappi tile on their screen and going, okay, now I do payments or now I do banking. From that perspective, I think my emphasis definitely goes on technology, building from the very beginning in a composable way that allows you to pivot and allows yourself to expose your products and services to other platforms and systems.

Mathias Schutz [00:50:22]:

Alright. Last one but not least, Simon, what’s your approach on growing the partnerships and the ecosystem?

Simon Yousseff [00:50:33]:

Before I start, I believe we have a completely different model from what has been described so far. We have many partnerships where our clients access the offerings of partners in our app. We are not present in some other location website or at some partner, but the partner is present at Neon, in that sense. We have more than 20 partnerships, and it’s a bit volatile because some work. We increase them or keep them, and we also actively manage the portfolio. It’s a whole capability. You need infrastructure, you need to have the KYC, IDP, at least for the financial products. Ideally you have an API gateway to deliver via software. We need to have the right people to connect with partners, identify them, convince them, negotiate good deals for our clients and then also for us. Then we need the processes in place to do that very seamlessly and with very little friction. Across operations, data, we have separated landing zone, we have a whole set up to ensure privacy of client data and so on. But we don’t want to think about that when adding a new partner. That’s in place once and for all, and then if a partner wants to work with us he should follow that goal set, if you will.

Mathias Schutz [00:52:06]:

Very interesting. We are almost at the end. Just would like to raise the last call to the participants, if there’s any questions, please feel free to add it to the chat, or if there’s from the dear panelists, any final statements that anybody wants to make. Other than that, I would have a last question to everyone. But I’m kindly asking if there is any statements to be made, now is the time,

Alex Maruta [00:52:41]:

Maybe I’ll make a quick statement. Just wanted to do a call out. I’m also a client of Neon in Switzerland and I really appreciate and I like the products. I think you guys have done a fantastic job in integrating also AI, but also the other products under one hood. Maybe keep in mind this invisible banking because in a ChatGPT era, I don’t know who’s going to be using banking apps in the next 20 years.

Simon Yousseff [00:53:12]:

Wow, that was a very nice compliment from a fellow neobank CTO. I really appreciate that. Thanks a lot.

Mathias Schutz [00:53:22]:

Good. To close, one last question, looking forward, buzzword, neobank 3.0. what comes into your mind? Panagiotis?

Panagiotis Kriaris [00:53:39]:

In a few words, I would say profitability. I would say partnerships. I would say you need to be able to deal with agents. There’s a very big discussion around what agents are changing. I would say very briefly that banks used to have to go to the customer, and now they’re going to have to address an additional layer, the agent. At the same time you need to make yourself discoverable. It’s not only the banks that are going to have this talent, but the banks need to address this as well. The question is, how do you balance this? If you are used to a model that has been addressing very different things, how do you make the suites? I would say that challenger banks have a bit of a slight benefit here because they’re more agile and they’re more flexible, and this might allow them to move faster to this model. At the end of the day, as a very last comment, it is a bit of an oxymoron for me, but if you look at where challenger banks started, now they have to go much closer to the traditional banking model to become profitable. This an oxymoron. If you look at the things like compliance, if you look at lending, the balance sheet, it’s a bit of a shift if you think about it at the end.

Mathias Schutz [00:55:10]:

Thanks a lot, Panagiotis. Javier, your thought about Neobank 3.0 in the future?

Javier Torres [00:55:24]:

Okay. We’re moving into a structural transformation. What we see is moving from UX to value creation. We’re moving from volume to economic death. Two years ago we were measuring digital banks by valuation, by number of users, by funding. Now it’s different. We have, as Panagiotis says, they’re behaving more like a bank, and we have more data to compare. That’s what we are benchmarking at the moment. Also we’re moving from basic automatization to AI driving intelligence and trust. What we are becoming is seeing more banks compliant, more banks profitable, and more banks moving into AI.

Mathias Schutz [00:56:20]:

Very good. Alex, your brief statement on Neobank 3.0?

Alex Maruta [00:56:25]:

I have to go back to the initial terms of invisible banking. I’m a strong believer in that future. I’d say that financial services being provided everywhere and anywhere without necessarily the storefront, and probably banking will become a more consolidated space in the future.

Mathias Schutz [00:56:52]:

Simon, last statement from you to the future of neobanking.

Simon Yousseff [00:56:58]:

In the future, clients will want to pay, lend, and invest, just like 500 years ago. They want to be in control and they don’t want to think about risks, et cetera. I believe in invisible finances; Alex called it for payments and small-scale lending, buy-now-pay-later. I do believe that for big loans like mortgages and for investments, it’ll be structurally the same as today.

Mathias Schutz [00:57:27]:

Super. I would like to thank you all very much my dear panelists for the very interesting conversation. For the guests attending, it was very nice having you here. Thanks a lot, Javier, Panagiotis, Simon and Alex, it was a pleasure meeting you here in this panel. I wish everyone a wonderful afternoon. Thank you very much.

Alex Maruta [00:57:49]:

Thank you. Bye.