Photograph of a lady holding her smartphone and looking at the screen

The majority of banking app users are aged 18 to 45. Yura Fresh | Unsplash

On adoption trends, recent events, and the global outlook

Neobanks are quickly becoming an essential financial tool, particularly because they offer integrations into the social, economic and business aspects of consumer’s lives. They support contactless payments, financial planning, spending insights and consolidation functions for everyday financial optimisations — according to Alina Kornienko.

Digital payments continue to increase, with 2020 already showing year-on-year growth of 15 per cent. Coupled with steady growth is the impact that COVID-19 is having across the globe. So far, there are signs that the pandemic is acting as a catalyst of sorts for the adoption of digital payment solutions and banking apps.

The challenger banks, or neobanks as they prefer to be called, play a key role in the increase in online transactions. Following the latest report from data insights and consulting company Kantar, neobanks have now firmly established themselves as highstreet names in China, India and Brazil. Indeed, India has already seen significant fintech activity in 2020 and the country has overtaken China in fintech funding for the first time in five quarters. Nevertheless, the Chinese cumulative transaction value is forecast to reach $1.9 billion this year: the highest national value worldwide, according to a recent report by the online statistics portal Statista.

Outside these three major adopter countries, neobanks continue to be viewed as something of a novelty among consumers. They represent a free and easy way to bank, but they are not a replacement for the traditional brick and mortar high street banks. That said, 2020 could be the year that customers see past the convenience of neobanks and begin to see their true value for purchasing items online and offline, converting currencies, transferring funds and effective financial management.

In the United Kingdom, the use of cash has been actively discouraged since the outbreak of COVID-19, with cash transactions steeply declining. A similar trend is seen across the European nations alongside increasing preference towards online payments during the strict lockdown and social distancing measures seen in many countries.

Estonia is already well-placed to be a European fintech leader. The Estonian government has taken steps to enhance its identity infrastructure with the e-residency programme and digital personal identities. These forward-thinking solutions enable citizens to readily sign contracts, initiate bank transfers, file their tax returns and perform other key tasks. As a result, the Baltic nation is an active hub for tech companies and attracts ambitious fintech startups eager to reach international audiences.

Quppy is one such Estonian fintech company with lofty globe-spanning ambitions. They stand apart somewhat from neobanks since they are striving to unify fiat and cryptocurrency assets for users to manage funds from a single app. Their ultimate goal is to alleviate the headaches associated with owning multiple wallets and apps for managing both cryptocurrencies and traditional currencies.

MillGens had the pleasure of catching up with Alina Kornienko, Chief Operations Officer for Quppy Europe, and discussing the digital payment solutions in 2020 and beyond.

Quppy logo and brand stylings

“Users are fast seeing the true value of online banking apps,” Alina Kornienko, Quppy COO

MillGens: What characteristics and trends are you seeing among the adopters of digital payment solutions, such as Quppy?

Alina Kornienko: “Neobank users are predominantly aged from 18 to 45 years old. However, we are seeing people over 60 using our services as well. Although people of this generation are less attracted to online and digital financial services than their younger peers, we have recently noticed an increase in these customers corresponding with national and regional lockdown measures. These customers often receive assistance from younger family members to access their finances online via their smartphones.

“On a national level, China is — of course — the largest consumer of digital payments. The country has 900 million to 1.1bn. people making payments and transactions via WeChat Pay: the financial arm of Tencent’s multi-purpose messaging, social media and mobile payment app WeChat.”

M: Where are adoption rates the highest and what can other countries learn from this?

“We are seeing mass adoption of payment solutions apps in China, India and Brazil largely due to national neobank leaders getting the balance right between consumer needs and trust. 93 per cent of Chinese consumers have used a neobank, mainly due to the integration of social media and payment services such as WeChat Pay and Alipay. Around half of all Indians have used neobanking services largely thanks to the payments and financial system PayTM. In Brazil, roughly one-third of citizens have used a challenger bank, primarily Nubank which has 20m. users.

“On first appearance, it is unusual that in Europe and North America the full impact of neobanks does not seem to have arrived yet. The technology is here and ready as can be seen in other countries. However, there seems to be an issue of trust — especially when compared to traditional banks that are well-established in these regions. This is coupled with the notion that neobanks are still just a novelty and not real competition for the brick and mortar financial institutions. That said, Europe is a dynamic, ever-changing place and we are seeing very promising user behaviour so far in 2020.”

M: How have recent events impacted the uptake of digital payment solutions and what is the outlook?

“The outbreak of COVID-19 has revealed that individuals and companies lacking effective digital financial management tools and procedures are set to struggle when faced with a crisis or a significant outside challenge. Over a billion people use digital payments technologies and the number of adopters is growing every month. True some of these consumers will be using their traditional bank’s app for the first time, but this nevertheless shows a willingness to adopt new ways of managing their finances.

“As we see it, the COVID-19 crisis has exposed several vulnerabilities and cumbersome financial practices. Governments are actively discouraging the use of cash due to its virus-transmitting risks, forcing people to find alternative digital payment choices. Furthermore, the sharp rise in demand for essential products has encouraged online payments. Finally, geographic banks have had to close their branches leaving customers with little choice but to seek other ways to manage their finances. We believe the shift towards contactless payments, online financial management and funds consolidation via apps will accelerate the adoption of digital payment solutions, especially in regions where uptake has been comparatively slower.

“Once the neobank novelty idea wears off in Europe and North America, we believe consumers will see the true value of using online payment services via their smartphone. We are striving to make digital payments accessible and friendly for everyone and we believe that people the world over will greatly benefit from using our service to decrease the costs associated with managing their finances.”