Neobanking and the Push Toward Better Customer Service in Banking…Finally

Article originally published on ValueWalk

While neobanks initially emerged in response to the barriers presented by traditional banks, they have become viable businesses in their own right by offering products, services, and a level of convenience that traditional banks have been slow to adopt.

Traditional Banks Slow To Respond To Evolving Customer Preferences

Though most traditional banks have worked to add new features and services, overall they have been slow to respond to evolving customer preferences. Take mobile apps for example. Most major banks today offer a mobile app that enables customers to conduct some of their banking via their phones. But these platforms often act and feel like digital extensions of their monolithic physical branches, clumsily ported onto your phone, and unable to harness the immense power that smartphones and internet-connectivity offers.

As frustrating as it is, this lack of innovation on the part of traditional banks makes sense if you consider their history. For decades, the biggest banks in the world functioned within the structure of an oligopoly and it wasn’t until fairly recently that they ever needed to worry about new kinds of competition.

While this lack of innovation has reduced the appeal of big banks among customers and has created space for the emergence of neobanks, it is not the only contributing factor to this shift in customer perspective. Unethical behavior by banks has come to the forefront in the past decade as many of the world’s biggest traditional banks have embroiled themselves in scandals and the details of those scandals have been broadcast to the public.

To name just a few, Deutsche Bank has been linked to money laundering, Wells Fargo paid a $185 million fine for creating millions of accounts on behalf of customers without their knowledge, and the financial crisis of 2007–2008 reads like a murderer’s row of the biggest names in the global banking industry. Additionally, repeated regulatory attempts by world governments to rein in unethical banking practices have merely resulted in newer, more creative ways for banks to break the rules in pursuit of profits.

It’s safe to say that this shady behavior has not sat well with customers. According to a survey by The World Economic Forum, “45.3 percent of respondents said they ‘disagree’ with the statement that they trust banks to be fair and honest.” This lack of trust in banks has paved the way for neobanks to enter the finance space, opening customers’ minds to consider alternative banking options.

Now consider some of the advantages that neobanks such as PayPal, Square, Alipay, Monzo, Wealthfront, Robinhood and Simple offer.

It starts with greater convenience. By offering a way for customers to bank from the palm of their hand, neobanks are able to avoid incurring the real estate and operational costs associated with maintaining and operating physical branches. These cost savings can then be passed along to customers in the form of lower interest rates on loans.

Beyond offering lower rates, neobanks also focus on making loans more accessible. They bring with them far less bureaucracy than traditional banks offer, enabling customers to get faster loan approval. This has also been the narrow focus for my company SALT, where digital asset-backed lending has enabled us to provide our customers with access to cash and offer competitive interest rates without having to take their credit scores into account.

Unlike traditional banks, neobanks have boomed in the time of smartphones, building their platforms with a mobile-first approach. This completely digital environment produces a user-friendly interface, driven by cutting-edge APIs.

Neobanks’ systems tend to be both highly automated and scalable. They offer open infrastructures with the idea that other creative applications can be built on top of their basic banking platform to improve their offerings. This also means they can adapt quite rapidly to a fast-changing industry. It’s far more likely to see one of these newcomers start to offer cryptoasset services before any traditional institution.

While big banks seek to own as many pieces of a customer’s financial existence as possible, neobanks understand that choice is the future of finance. By offering customers the opportunity to choose from an array of creative banking solutions, neobanks are completely disrupting the banking industry. While some companies are offering microlending, others are offering commission-free stock trading, undercutting the costs of even the lowest-price discount brokers.

Combine these offerings with FDIC-insured savings accounts, checking accounts with debit cards, ATM access, credit cards, and mobile-first features such as mobile check deposits, and customers have nearly every banking service they need in one place.

Even with all of these advances, neobanks still constitute a small percentage of the overall banking and financial services space, leaving plenty of room for significant growth. How that growth manifests itself remains an open question.

That question is this: Will fintech companies overtake traditional banks, or just add competition?

The answer will likely depend largely on how quickly and extensively traditional banks evolve. Historically, they’ve been slow to change, and haven’t paid the price for that intransigence. That’s because over the years, most banking customers have been fairly inert, accepting higher interest rates on loans, recursively punitive overdraft fees, and monthly account maintenance fees because they haven’t found better alternatives that they can trust.

The current COVID-19 pandemic could force change, both among banking service consumers and the industry itself. Visits to physical bank branches were already an inconvenience to customers before the outbreak of COVID-19. Now that banks are inevitably having to focus on their digital service offerings, even traditional banking customers will get to experience fully digital banking. How well their bank performs in this aspect will determine whether a customer remains loyal to their bank following the crisis, or chooses to make the switch to a neobank that can better meet their needs.

As more customers seek better banking alternatives, the younger generation will be able to teach traditional banking customers about the benefits of neobanks. From there, it won’t take much due diligence before more people realize that neobanks offer smoother platforms, better interest rates, and more flexibility than traditional banks.

If that happens and traditional banks’ market share starts to erode at a faster pace, traditional banks will be faced with the classic build-or-buy dilemma. Will they hire the best, more forward-thinking engineers to catch up to neobanks’ superior technology and user interfaces? Will they seek to acquire leading fintech companies as a way to protect themselves? Or will they remain complacent, and let fintech upstarts pass them by?

Stock-trading app Robinhood suffered multiple shutdowns as financial markets crashed in early March. Chime, a leading branchless U.S. bank, has experienced multiple outages over the past year, with the company’s five million users unable to see their balances and intermittently unable to use their debit cards. Above all other banking features, customers want to know that they can access their money when necessary, so these kinds of setbacks must subside if fintech contenders want to make serious headway.

Meanwhile, regulatory complexity within countries and across regions is contributing to “winner take most” outcomes for fintech disruptors. Neobanks need to invest more in regional compliance to gain traction, rather than trying to launch globally on day one.

The landscape is changing rapidly for neobanks, and it will keep changing. Venture capital-backed startups will try to grab a big piece of the consumer banking world, but they’ll face plenty of competition. We might also see fintech firms partner and bundle services in an effort to compete head-on with the big banks.

Ultimately, the future of banking could simply come down to consumer awareness. Take my brother-in-law for example. After recently receiving a check from his grandfather, he sent it home to his parents so they could deposit it into his bank account. Although he’s highly educated and technologically savvy, he had no idea that he could deposit the check in a matter of seconds with a mobile banking app. Instances like this demonstrate that there’s still ways to go in terms of shifting consumers’ mindsets to challenge traditional banking.

It’s something that people don’t really think about, unless they work in the industry, or need to get a mortgage or some other major service from their bank.

Just as disruption has changed consumer habits in so many other industries, it will eventually do so in banking. Neobanks are better positioned to integrate with top data transfer network providers like Plaid, as they think about service through a lens that is different from that of traditional banks. As consumers become more aware of alternative banking options, they will catch on to the advantages of neobanks and inevitably make the switch, choosing to abandon their traditional bank in the process.

For the banking industry, change is already here. And more change is coming.

About the Author

Rob Odell is Co-President & Chief Product Officer at SALT where he is responsible for developing the strategic direction of the company and managing the product and marketing teams. Rob has been a Bitcoin believer since 2013 after being introduced to it by a Bali-based coffee roaster selling his beans for Bitcoin. SALT allows borrowers to use their cryptoassets as collateral to secure cash or stablecoin loans.

New Changes Add Value for SALT Supporters

After identifying and evaluating new ways to add value for SALT Membership Unit (“SALT”) supporters, we’re excited to announce that we’re 1. now accepting SALT as collateral for a cash or stablecoin loan and 2. switching from a staking model to a redemption model.

How will this work when the price of SALT varies across exchanges?

Since Binance and Bittrex delisted SALT in February and May respectively, we’ve been searching for a valid third-party pricing source by which to value SALT. We define valid exchange pricing as the trading price on an unmanipulated market where the trading volume is high enough that a sufficient number of buyers and sellers can establish a price at which to transact. We determined that Binance and Bittrex were the only two exchanges to offer a sufficient market for SALT to provide validity in the previous year. To mitigate this change in pricing validity, we have taken the 60-day moving average from Coinmarketcap.com, using the 60 days prior to the delisting announcement by Bittrex. Using this pricing mechanism, we are recognizing a price of $0.15 per SALT on our platform. If, in the future, SALT is listed on an exchange with adequate trading volume, accessibility, and market depth to provide us with price validity, we will immediately recognize such third-party pricing.

What does this mean if I’ve already staked SALT to secure a loan?

If you currently have a loan with us and you staked SALT to get a reduced interest rate, your SALT will automatically be recognized as collateral in your collateral wallet and your interest rate will remain the same.

What else can I do with my SALT?

We are moving from a staking model to a redemption model. This means that while you can still use your SALT to secure a lower APR on your crypto-backed loan, the new redemption program will allow you to redeem your SALT rather than stake it. The reason we’ve switched to this new model is to offer you value for your SALT upfront. From now on, you can redeem your SALT to reduce your interest rate for lower monthly payments (go to saltlending.com for loan terms and options). The amount of SALT required to do so depends upon the size of your loan.

What if I don’t own SALT?

If you don’t own SALT, these changes will not impact you. Our goal with switching to a redemption model and adding SALT as a collateral type is to reward early supporters of SALT by offering them additional ways to use their SALT tokens the way they were intended to be used — to engage with our lending platform.

Client Spotlight: Justin Podhola, Founder and CEO, Elite Mining Inc.

We learn a lot from the people who use our platform every day and enjoy collecting their feedback so we can use it to continue improving your experience with SALT. We spoke with our business client Justin Podhola, founder and CEO of Elite Mining Inc. — a company that generates mining capabilities through clean energy.

Tell us a bit about your background. How and when did you become involved in the blockchain/cryptocurrency space?
I’ve had quite a few years of trading experience overall. I started out trading on the US Stock Exchange over 10 years ago. Following that, I worked in real estate, building homes and flipping houses. I’ve always been a tech junkie, but I never really had a good place to put my knowledge and skills to work. Eventually one of my buddies asked me if I’d ever heard of Bitcoin, and while I was really interested in the technology, it didn’t make any sense to me at the time because I didn’t take the time to understand it. I started doing some research on it in 2016 and in early 2017 I decided to go ahead and take a chance on cryptocurrencies, and spent my life savings to start mining. I’m so glad I did because I’ve been so much better off because of it, and I’m able to contribute to an ecosystem that really resonates with me as a person.

Throughout the past couple of years, we’ve found there’s a strong need for proof of work and proof of stake, especially right now in the current markets for a lot of the smaller coins. They need more infrastructure built around them. Based on this research, I founded Elite Mining Inc. in late 2017. The business is profitable, but at the end of the day, the most important thing is that we’re able to provide security for blockchains. This market is ever-evolving and we’re looking forward to seeing where it goes.

Given your company focuses on clean mining, can you tell us about what that entails and why you decided to go that direction?
The current narrative around mining is that it’s going to harm the planet in the future — I’m really focused on not only squashing this notion, but on becoming the leader in clean and profitable mining. Bitcoin is sound money, and for our new cryptosphere to really lead the next generation of miners, we have to be focused on both reducing emissions and securing Dnet blockchains.

The sentiment is that being green with clean / renewable energy ends up losing you profits, but prior to founding the company, we conducted about six months’ worth of due diligence before we chose the state in which we wanted all of our facilities to be located. We wanted to be located in a geographic area that would allow us to scale into the hundreds of megawatts range and simultaneously be nearly 100% clean in our energy consumption for POW and POS (Proof of Work and Proof of Stake). Specifically and what ultimately made our decision is the fact that Washington State is the leading hydroelectricity-producing state in the nation, without a close second, but yet inherently has some of the lowest electricity rates in the entire world.

Washington State is inherently 91 to 92 percent all clean energy, which is the reason we chose it for our business. We looked at other states including New York, Montana, and Texas, but ultimately I was already living in the best state for what we wanted to do. The biggest pain point for renewable energy and mining is figuring out how to scale with it — we knew that operating out of Washington would allow us to do that. Having made this decision, we’re able to take advantage of some of the best electricity rates in the world and constantly deploy renewables on a distinct time scale within our operations to maintain the backbone of our operations, and at the same time lower our electricity costs in perpetuity.

Why did you take out a SALT loan and what made you choose SALT as your loan provider?
There are a few things that drew me to SALT. The first thing was the branding — I thought it was absolutely clean and genius. The SALT brand reminds me of Nike because it has a simple logo with strong meaning behind it. It’s a straightforward concept and given the colors and themes are good, I thought the company had a strong possibility of selling itself well. The next thing that caught my attention was SALT’s platform — it was extremely unique in the way the company built its tokenomics and membership benefits out of the SALT token. That really intrigued me, and as I conducted additional research, I learned early on that while I needed to cover the costs of electricity and of buying more rigs, there’d come a point where I’d want to try and keep as much Bitcoin and Ethereum as I could. I anticipated future appreciation, so I didn’t want to sell my assets. I figured that using SALT would put my business at an advantage because we could HODL all of our Bitcoin and Ethereum, use it as collateral, and generate additional income as a result of long-term appreciation. We don’t know where Bitcoin will be in two to three years, but by that point, if I hadn’t decided to do something like this now and use SALT to HODL my crypto, I would lose essentially 30–40 percent of my holding coin assets by having to sell them off to continue running my business. For me, using SALT was a no-brainer.

How is your SALT loan helping you accomplish your goals?
First of all, the SALT loan is enabling us to hold our assets, which is the most important attribute. Our most valuable assets are our Bitcoin and Ethereum, and while we also mine other coins, we’re able to sell into Bitcoin and Ethereum. Now that we’ve implemented SALT into our business model; we’re going to consistently contribute more to our BTC and ETH wallets on the SALT platform by adding more collateral over time. I can continue to add collateral as I go along, instead of paying bills directly by selling my Bitcoin and losing that future appreciation value. Then into the future, months down the road if I need cash, want to expand the company, ramp up operations for more rigs, or move to a new facility, I have the liquidity to be able to do so, yet I can still hold at least good chunk of my assets. To me that’s a powerful tool that’s going to add a lot to our company.

Would you consider a second loan with SALT?
Yes, and actually my second loan would likely be a personal loan. I’m bullish in the market right now and believe the market has leveled off for the most part, which triggers the trader signal in me for a green light to reduce margin calls and to be optimistic on long range trends for the value of my cryptocurrency.

What would you say to people who have cryptocurrency but may be skeptical about collateralizing it?
First of all, it’s important to do your due diligence, but I’d recommend going to SALT because they have a professional team and are an excellent company overall. They don’t waver in their terminology, and they’re good at communicating. Most importantly, they have excellent customer service — you can get ahold of them at any time.

There are a lot of scams out there, and there are a few lenders I would be careful of because they don’t have insurances in place if something were to happen to their lending solution. Knowing SALT has insurance is what gives me the confidence to take out a loan because at the end of the day I know they’re making sure to be extra cautious for their customers and that they have my best interests in mind. Additionally, security is number one, and I feel confident that SALT has an extremely secure platform, they have built their products on chain. SALT has developed their own tech stack, obtained their own licenses in the US and abroad, and they have an absolutely awesome SALT app on their phone that allows me in a blink of an eye to view and manage my assets via Smartphone 24/7/365. Through this ownership of these assets they have built, it allows them to really offer solutions to future clients that can grow in the foreseeable future. These aspects combined with their fast response time is why I would recommend them to someone looking for a crypto-backed loan. I’ve had experiences with other lenders and relatively speaking, they’ve been a little slow to get back to me. Given this is the 21st Century, I like things to be fast.

Are there any specific characteristics that you like about the SALT platform in particular?

I love the automated margin call system. It enables me to be hands-off, so I don’t have to worry about checking my loan every single day. I’m a very busy person, as I’m currently running two businesses and have a wife and kids. I don’t want to be checking my computer every day for my LTV, so to me the automated margin system alone is worth choosing SALT — time is money.
It’s extremely easy to apply for a loan. It took me just a few minutes to slide the scale over and figure out how much collateral I wanted to use and then two minutes to complete the application process. SALT responded quickly to me after I submitted the application.
The platform is simple. It’s clean, and there’s not a lot of jargon to comb through, which makes it significantly easier to go through the loan process.

In your experience, what’s something about our process that you think may prevent people from taking out a SALT loan?
One thing I think might be hard for people to understand and may prevent them from taking out a loan is that at this point, it takes a lot of collateral to back your loan — potentially more than the average person would expect. However, what’s important to understand is that it’s an emerging market and SALT has a certain level of responsibility to its investors and lenders, so overcollateralization of your loan is a necessary precaution for the time being. They’ve compensated for this recently by coming out with new, ridiculously good interest rates.

If you were going to choose the next collateral for SALT, what would you choose and why?
I would choose Dash — I think it’s a no-brainer. Dash has great market penetration right now — it has a strong following and is a no-nonsense coin. I also think Zcash would be another decent choice, as it is garnering quite a bit of adoption currently as well.

Announcing 24/7 Member Support

Member Support 24/7 — Growing with the Community

We understand that navigating the ins and outs of blockchain technology can be difficult. Although we love the technology, we want to be certain that we are doing everything possible to make the SALT experience pleasant for our members rather than interacting with a faceless technology company.

At SALT Blockchain Lending, creating real connections with our members is essential to our day to day work. Ensuring our team has the necessary tools to develop and nurture relationships with our community is critical to our success. With that, we’re happy to announce that SALT Members will now enjoy 24/7 email support. This expansion of our service is the first vital step to create lasting relationships with our members.

Staffing for the 24/7 support structure, we have expanded our Member Support team with additional resources in complimentary time zones. In building a team in the Asian Pacific (APAC), along with a greater expansion of our team in the Republic of Mauritius, we will always have available resources for our member queries.

Whether inquiring about our service prior to becoming a member, or further understanding the process that occurs at the maturity date of the loan, maintaining top customer experience matters. We want our customers to be as informed about the process as possible and, more importantly, to have the confidence that comes with knowing that a member of the SALT Team can be reached at any time.

Beyond the loan process, SALT members should know that they can reach out for general inquiries, trouble shooting, education around SALT Lending’s product line, or suggestions on how we can improve our business. If you’re already a SALT member or are simply interested in learning more, please contact us, at ANYTIME, with your questions at [email protected]