Today's neobanks and neobrokers have achieved in just a few years where many online banks of the 1990s failed. They are growing faster, appealing to investors worldwide, and gaining the trust of new target groups who had previously had little involvement with financial topics.

The basic idea of ​​both generations of financial service providers is quite comparable. Both the digital banking pioneers of the 1990s and today's disruptors wanted to make financial services more accessible, affordable, and convenient. The first online banks' starting positions were promising. They commanded the trust of large customer groups, established brands, and often impressive locations. Marble halls and formal halls dominated customer meetings for a long time. Yet only a few succeeded in converting these advantages into sustainable growth.

In contrast, neobanks are now building networks with millions of customers in record time. This development is no coincidence: it can be attributed to four factors:

• Firstly, modern providers make technology not only suitable for the masses, but also for individual use – and this goes far beyond a simple app.
• Second, they view compliance not as an obstacle but as a strategic advantage.
• Third, their structures are designed for scalability from the start, from onboarding to fraud detection.
• And fourth, they manage to build trust without relying on lavish stores or big brand names. Instead, they rely on transparent, understandable products and services that they develop step by step.

Why a broad customer base is not an advantage

Many banks that ventured into the digital world in the 1990s had a broad customer base. What initially seemed like a strategic advantage proved in practice to be a hindrance to innovation for many.

The reason? Established institutions had to carefully consider every change. Would it jeopardise their existing business model? How would long-standing customers react? Would it even fit with their brand image? This reluctance often led to bold and forward-looking ideas being delayed or abandoned altogether.

Neobanks, on the other hand, started from scratch. They consistently aligned their processes with the customer journey and the desired outcomes. The focus was not on individual products, but on meeting specific needs, such as wealth creation, real estate purchases, or retirement planning. The first thousand users of a neobroker represented an opportunity rather than a risk factor. They could test, make mistakes, and learn from them – without jeopardising their reputation with an established clientele.

This gave rise to a completely different culture of innovation. Many of the decisions made in this process led not only to better products, but also to lower costs and greater accessibility. For example, branch networks were abandoned, processes were automated, and freemium models with optional premium services – such as for ETF investments or cryptocurrencies – were introduced.

Paradigm shift: from “improve” to “do we even need this?”

The difference between traditional online banks and today's disruptors lies primarily in their mindset. Many established providers operate according to the principle of preservation and expansion. They focus on securing existing business models, margins, and market share. For them, innovation often means gradually optimising what already exists. The question is: How can we improve what we are already doing a little bit?

Neobanks and neobrokers operate differently. Their approach is characterised by change and evolution. They question fundamental assumptions. Do we really need human advisers for asset allocation? Why are minimum investment amounts so high? Why ca not financial planning be as intuitive and inspiring as using Spotify or Instagram?

They are also challenging the traditional principle of exclusivity in wealth management. In the past, a personalised, tailored service was part of the value proposition. Today, the challenge is to make this level of customisation accessible on a large scale. The platforms that lead the way here are not only mobile-friendly, but also data-driven, utilise APIs, and are embedded in the broader financial ecosystem. They adapt flexibly to changing user needs and draw on insights from behavioral research to guide their clients through complex decisions – understandable, clear, and without overwhelming them.

Compliance as an opportunity rather than a risk

Many new banks are leveraging this challenger mentality to strategically leverage regulatory requirements to their advantage. While traditional institutions often treat regulatory compliance with caution or even reluctance, fintechs see it as an opportunity.

It is important to emphasise that the caution of established players does not stem from disregard; on the contrary: traditional banks take compliance very seriously and are often leaders in adhering to strict regulations. However, their approach is rather defensive and risk-averse. They often have compliance departments that act as gatekeepers, whose default answer is, once again, 'no.'

Neobanks and neobrokers go beyond mere regulatory compliance—they embed it into their value proposition. For them, compliance is often a matter of design: How can we meet regulatory requirements while providing a seamless customer experience? These companies seamlessly integrate processes like Know Your Customer and Anti-Money Laundering into modern user interfaces and leverage tools like real-time alerts to actively foster trust.

The new generation of financial service providers has therefore understood that trust cannot be created solely through tradition, but rather through transparent, understandable protective measures.

How neobanks build trust without brand awareness

Trust is the most important currency in banking – especially when billions of customer funds and sensitive personal data are at stake. On paper, the banks of the 1990s were well positioned for this: with tradition, a respectable reputation, and extensive branch networks.

But these very strengths became a challenge during the transition to mobile banking models. The transition from marble halls to apps was difficult – many customers were skeptical and strongly attached to the analog world.

Neobanks, on the other hand, have learned to build trust digitally—from using simple language to being completely transparent about how they make money. They rely on intuitive, educational user experiences, replacing the old reliance on paperwork and prestige. Today's neo-players start with low-risk, easy-to-understand products and build credibility gradually. Education also plays a central role: Their platforms do not just execute—they explain and guide, deepening investor understanding and loyalty.

This does not mean that the early online banks are doomed or will disappear altogether. But they have been struggling for some time, and they are beginning to see the added value of a bolder approach to digitalisation—something their competitors are already implementing. In fact, many traditional banks are now actively collaborating with fintechs to develop modern financial solutions that integrate with their existing offerings. It is a win-win-win situation—not only for both types of financial service providers, but also for their customers.

Read th original article here.