How do neo banks make money?

Neo banks, also known as digital banks or online-only banks, make money through various avenues, leveraging their technology-driven approach to banking. Below are some common ways neo banks generate revenue:

1. Interest Rate Margins: Neo banks earn money by lending out funds deposited by customers at higher interest rates than what they pay for deposits. This interest rate spread is a primary source of revenue for these banks.

2. Account Fees: Charging fees for specific services like foreign transactions, ATM use, or account maintenance helps neo banks generate income. Some neo banks offer premium account services at a fee, further boosting their earnings.

3. Partnerships and Commissions: Neo banks often partner with other financial institutions or service providers to offer products like insurance, investments, or loans. They may earn commissions or referral fees for facilitating these services to their customers.

4. Data Monetization: Analyzing customer data insights can be another revenue stream for neo banks. By leveraging customer behavior data (with proper consent), they can offer personalized services to customers or sell anonymized data to third parties for market research.

5. Cross-Selling: Neo banks use their digital platforms to cross-sell various financial products and services to their customer base. This strategy helps increase revenue through increased customer engagement and product adoption.

### Risks and Benefits of Neo Banks:

Risks:

– Cybersecurity threats due to the digital nature of operations.

– Limited physical presence can be a downside for customers needing in