Risks of the Neobanks’ Activities in the Conditions of the Economy

Digitalization

KARINA KAPLIAR1, NATALIA MASLOVA2, VALENTYN HNOIEVYI3

1International Business, Educational and Scientific Institute of International Relations,

Taras Shevchenko National University of Kyiv,

36/1, Yuriia Illienka Str., 04119, Kyiv,

UKRAINE

2Department of Banking, State,

University of Trade and Economics,

19, Kyoto Str., 02000, Kyiv,

UKRAINE

3Department of Economic Design and Marketing,

Interregional Academy of Personnel Management,

79, Svoboda Ave., 39630, Kremenchuk,

UKRAINE

Abstract: - The operation of neobanks, as a new banking concept, is currently gaining great popularity.

However, their activities are associated with specific risks that are not characteristic of classic banks. The

inefficient risk management can harm not only the banks themselves but also customers as well as the entire

banking system. The article aims to identify opportunities and threats in the resistance of neo-banks to risks

against the background of companies' digitalization. The current study applied graphic, analytical research

methods (determination of specific weight and structure fractions), parameterization methods using the matrix

approach and linear functional dependence, and the method of strategic SWOT analysis. The application of

advanced digital technologies enables neobanks to enhance their flexibility and ability to quickly adapt to

changes in the market. The utilization of artificial intelligence allows neobanks to supply their customers with

personalized solutions and services, which can increase customer loyalty and satisfaction. However, neobanks

face specific risks that can negatively affect their activities and entail grave problems both for the bank itself

and for its customers. The growing use of digital technologies increases the risk of cyber-attacks and

unauthorized access to customer financial data. Given the above, neobanks should pay due attention to cyber

security and ensure the highest protection of their customers’ data. Operation shortcomings, technical issues,

and work breakdowns also present a considerable risk, as they can negatively affect the customer's trust and

lead to the loss of business partners and reputation. Therefore, the success of neobanks depends on the ability to

effectively manage these specific risks and ensure a high level of security for their financial services. The

scientific novelty of the obtained results lies in the proposed parametric model for estimating the integrated

neobanks’ risks drawing on the specified component risks. The research findings can be applied to elaborating

a framework of project documents for promoting the development of neobanking while designing the neo-

banks’ risk management policy based on the proposed parametric risk estimation approach. The conducted

study is promising in terms of opening up perspectives for future research, in particular as regards the

effectiveness of neobanks’ risk management given the digitalization in the economic sphere.

Key-Words: - digitalization, neobanking, cyber security, cyber threat, fintech banks, artificial intelligence.

Received: July 9, 2022. Revised: October 6, 2023. Accepted: November 9, 2023. Available online: December 13, 2023.

1 Introduction

For several decades, banking institutions have been

the principal intermediaries for customers to access

a variety of financial products and services.

However, to date, the stability of this mediating

function is gradually decreasing, and the role of

traditional banks is being transformed considerably,

[1]. During the period of pandemic restrictions of

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

the coronavirus, [2], banking activity experienced a

particularly transformative impact, when personal

contact between bank employees and customers was

entirely prohibited. Apparently, alongside digitaliza-

tion, this became another driver which prompted the

emergence of banks of a new format — namely,

neobanks, [3]. Being full participants in the

financial market, neobanks are fintech companies

that operate under their banking license or function

based on the license of an existing bank. Such banks

focus exclusively on the digital format and do not

have traditional brick-and-mortar branches. They

cut down on costs, which has a positive effect on

providing more favorable service fees, and

favorable interest rates and ensuring numerous

benefits to their customers.

Neobanks are banks that operate based on an

online platform, utilizing modern digital

technologies, and accordingly do not have physical

divisions or branches. Neobanks emerged after the

2008 crisis when there was a pressing necessity to

optimize the costs of traditional banking business.

The functioning of neobanks as a modern alternative

to traditional banks is linked to the development of

digitalization, [4]. The rapid development of the

digital client environment is observed in several

areas across the economy. Consequently, the need to

ensure the ability to make calculations or pay

payments without the need to visit bank branches

has become a prerequisite for the further

development of commodity-monetary relations.

Neobanks offer virtually all banking services

without any need to visit a banking institution. Nev-

ertheless, such advantages and ease of use in terms

of financial services may incur certain risks that are

inherent in any product in the digital environment,

[5]. Moreover, there may be specific risks that are

pertinent to neobanks, such as fintech companies in

which clients can not exert any influence. In this

connection, a contradiction arises between the

convenience and safety of the neobanks’ services as

full participants in the financial market. The

prospects for the functioning and development of

neo banking as a type of business and field of

activity depend on how this contradiction will be

addressed, both directly by the neobanks themselves

and by the overall digital infrastructure. Drawing on

the above, the purpose of the study is to identify

opportunities and threats in the neobanks resilience

in terms of risks in the conditions of economies’

digitalization. In accordance with the set goal, the

research addresses the tasks as follows:

- To examine the dynamics of the development in

the neobanking market on the background of digital-

ization processes in the economy;

- To determine the impact of digitalization on the

activities of neobanks and the risks of their

activities;

- To identify the strengths and weaknesses, as well

as opportunities and threats for neobanks, related to

the impact of digitalization.

2 Literature Review

When viewed as financial market participants, neo-

banks are relatively new entities. Their emergence is

associated with the impact of two large groups of

factors. The first group is represented by the

development of digital technologies and the digital

business environment. Consequently, the banking

services transition to the digital environment is a

result of trade digitalization, in particular

international trade, [4]. But this factor was not ex-

plicitly crucial in the emergence of neobanks, since

traditional banks while developing customer service

systems, began to offer some services remotely,

which made them much more convenient for

customers. Another group of factors is related to the

business model of the neobank's operation, [6], [7].

The said model is based on the complete absence of

physical branches, and the entire work with clients

takes place remotely, exclusively through digital

services. The emergence of a new business model is

crucial in the emergence of a new bank format,

namely neobanks.

Neobanks is focusing on improving many of its

external customer-facing operations with digital

solutions. At the same time, a lot of processes in

traditional banks are still largely performed directly

by people in a manual mode to process customer

inquiries, [8]. This high degree of manual

processing is expensive, and time-consuming and

can lead to inconsistent results and high error rates.

These inefficiencies consequently have an essential

impact on the customer experience, which neobanks

lack to a large degree.

In an analytical study, [9], it is noted that such a

feature of the business model can ensure high

profitability of neobanks in the future. However, for

that end, it is indispensable to have certain

prerequisites, among which, in particular, there is

effective risk management in place. Among the

major risks are as follows: the risk of fraud,

reliability of data storage, and cyber threats.

According to, [10], the risks of neobanking are

directly related to the essence and specificity

thereof. Neobanks is a financial technology

company that operates digitally online or via a

mobile application. It is the digital environment in

which Neobank operates that creates the major risks.

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

At the same time, the results of a technological

transformation study of the banking sector in 90

countries, [11], demonstrate that neobanking

reduces the risks of Internet fraud in low-risk

countries by 37%, and in low- and medium-risk

countries - by 25%. The digital environment as es-

sentially the environment of neobanks, is not seen

by all researchers as an unequivocal reason for the

neobanking riskiness. If we compare the risks of

fraud, then even the percentage of risk inherent in

neo-banks can be much lower than the percentage of

riskiness of traditional banks. From this point of

standpoint, neobanks appear to be much more

attractive to customers.

The characteristic feature of neobanks is that

they can offer customers personalized banking

services, [12], which makes them much more

appealing to customers as compared to traditional

banks. The strategy of neobanks in interaction with

clients involves the creation of a banking product

that is as easy to use, convenient, and transparent as

possible. It is the convenience and ease of use that is

the key to the success of neobanks as compared to

traditional banks in their fight for customers.

However, as noted in yet another study, [5], this

ease of use may be perceived by the customer as a

considerable risk. From their subjective standpoint,

the client may associate the simplicity of using the

application with its lack of protection against

fraudulent actions. Therefore, according to the

researchers, access to the data contained in the

application must be reliably protected so that

primarily the clients themselves feel the reliability

and safety of using such a service. Given the above,

it can be assumed that neo-banks pose a significant

threat to traditional banks due to their convenience

for customers. Indeed, neobanking increases

competition in the field, however, as noted, [3],

traditional banks should not consider neobanks as a

threat. Through cooperation with non-banks, they

can receive numerous advantages, but the

introduction of digitalization in traditional banks is

also important in this process. In, [13], the authors

reach similar conclusions, noting from a survey that

most respondents recognize some regulatory

compliance issues in neobanks compared to

traditional banks. At the same time, these problems

are offset by significant advantages for clients due

to the high convenience of services provided by

non-banks.

The findings of a study examining cyber risks

for neobanks, [14], are worthy of note. The results

of this study indicate that cyber risks for neobanks

are correlated with the level of risk for the country’s

economy as a whole. Thus, for groups of countries

in which cyber risks are high, they remain high for

neobanks as well. Notably, in those groups of

countries where the level of cyber risk is quite low,

it is also low for neobanks. Given this, we can

conclude that neobanks do not produce new risks or

increase existing ones. This can be explained by the

fact that in countries where the level of digital

security is at a high level, it is equally high in all

areas of the economy, and conversely: as due to

neobanking is not based on any unique technologies

or those used exclusively by neobanks.

The analysis of literary sources showed that the

risks of neobanks are not unambiguous and call for

a thorough study. The researched papers do not

contain an unambiguous approach to the types of

risks specific to neobanks, moreover, the vast

majority of studies generalize risks at the level of

the banking system or the level of risks specific to

the economy of a specific country.

3 Methods

The research was carried out in three stages. The

first stage involved an analysis in terms of the

dynamics of the neobanks development worldwide.

At this stage, we examined the following indicators:

- the volume of transactions carried out by

neobanks;

- the number of biobank clients;

- the key participants in the market of neobanks.

In the second stage, the impact of economies’ digi-

talization on the neobanks’ activities was analyzed

and the risks of their activities were determined. At

this stage, it was important to distinguish the risks

that are characteristic of neobanks as part of the

banking system and the risks that are characteristic

of the entire system. It was also important to

highlight the specific risks of neobanks, which are

inherent in them as unique fintech companies. A

parametric model for calculating the integral risk of

neobanks based on the use of the matrix method of

calculating the integral risk and the functional

dependence of the integral risk on the neobanks’

risks was also proposed.

In the third stage will be conducted a SWOT

analysis in terms of the neo-banks’ capabilities to

take advantage of the opportunities and counter the

risks entailed by the economy's digitalization.

Accordingly, the strengths, weaknesses,

opportunities, and threats for neobanks will be

assessed at this stage of the research as opposed to

the specific risks that are typical exclusively thereof.

The research used data regarding the neobanks

transaction volume as well as the number of their

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

users for the period 2017-2022 and forecast values

until the year 2027. The dynamics analysis of neo-

banking development will be conducted utilizing an

analytical and graphical method for calculating the

annual indicators growth and data visualization.

Further, the method of strategic SWOT analysis will

be applied to determine the internal and external

factors of digitization's impact on neobanks. Data

for the first stage of the study were taken from the

official website of the statistical agency, [15], [16],

[17], [18]. The research calculations and elaboration

of visualizations were carried out in Microsoft

Excel.

All of the calculated values provided in the

article are the values simulated for the sake of

clarity in displaying the order of parameter

calculations and filling in the analytical tables. The

numerical values provided do not reflect any real

data and are presented to reflect the process of

applying the parametric model of calculating the

integral risk of neobanks based on the use of the

matrix method of calculating the integral risk and

the functional dependence of the integral risk on the

neobanks risks.

4 Results

In recent years, there has been a significant increase

in the volume of the neo-banking market, which

indicates that more and more users of banking

services prefer digital solutions in the use of

banking services (Figure 1).

Figure 1 illustrates how the volume of neo-

banks’ transactions is growing annually, although

the rate of growth is decreasing. The decrease in the

yearly growth is due to the gradual saturation of the

market, as well as the fact that neobanks compete

with traditional banks that also offer online services

to their customers. At the same time, there is a rapid

increase in the number of biobank clients (Figure 2),

which can testify to the rapid development of this

sector in the financial market. However, as can be

seen from Figure 3, the data indicate a steady trend

toward growth in the volume of Neobank

transactions per 1 user.

Fig. 1: Dynamics growth of the neo banking market, [15], [16]

0,23 0,45 0,83

1,48

2,5

3,34

4,74

6,11

7,31

8,35

9,25

95,65217391

84,44444444

78,31325301

68,91891892

33,6

41,91616766

28,90295359

19,63993453

14,22708618

10,77844311

100

120

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Transaction volume, USD trillion (right scale) Annual growth, % (left scale)

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

Fig. 2: Dynamics growth of neo-bank customers (millions of users), [15], [16]

Fig. 3: The average volume of neo-banking transactions per user (thousands of USD), [17]

Fig. 4: Key participants in the neobanking market in 2022 by number of customers (%), [18]

18,95 32,61

55,89

93,06

145,9

188,4

250,7

301,8

338,1

361,9 376,9

100

150

200

250

300

350

400

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

12,39 13,74 15,05 16,31 17,45 18,38 19,76 21,11 22,55 24,04 25,53

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Cash App

16%

Revolut

Tinkoff

Stocard

Venmo

Monzo

Chime

KakaoBank

Nubank

Starling Bank

Other

38%

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

The above trend indicates that along with the

number of neo-bank clients, the amount of

calculations they conduct is also growing. Among

other things, this shows that there is a flow of

capital from traditional banks to the disposal of

neobanks, which means that users trust such fintech

banks.

As of 2022, the 10 largest neobanks in the world

accounted for more than 60% of the customers of all

neobanks (Figure 4).

The data in Figure 3 indicate that at this stage of

shaping the neobanking market, it has an

oligopolistic structure. Entry into the market is

limited, as it is necessary to obtain a license from

the regulator to start such an activity, as well as the

need to possess a considerable initial investment to

start the activity. At the same time, there is a

tendency for the appearance of new market

participants, which will increase competition

between them.

When it comes to probing deeper into the neo-

banking development from the standpoint of

institutional economic theory, obviously the

former’s development is related precisely to the

digital society development and the spread of digital

technologies among the population of most

countries globally. At the brick-and-mortar banks,

their digital communication channels are profusely

developing, for instance, mobile applications and

online banking to ensure customers' convenience

and accessibility of services. Consequently, it

enables the customers with convenience and speed

to bank from virtually any location. Furthermore,

banks actively use artificial intelligence and

analytics to process large volumes of customer and

transaction data. It allows for forecasting customer

behavior, providing personalized recommendations

and offers, as well as ensuring a high-security level

by detecting suspicious transactions.

At the same time, neobanks, being, in fact, a

product of digitalization, are also actively exposed

to the influence of digitalization. Neobanks have

digital platforms based on mobile applications and

web platforms. This allows them to provide

innovative and convenient financial services that

appeal to a young and tech-savvy audience. Further,

digitalization encourages the development of

formats for providing payment services. Neobanks

often offer innovative payment solutions such as

prepaid cards, contactless payments, money

transfers through mobile applications, which

provide more convenient and faster transactions.

Some neobanks focus on providing investment

services, allowing clients to invest in various assets

through digital platforms with low fees and minimal

restrictions.

Neobanks, like any financial institution, have

risk threats in their activities. This is due to the

specifics of their activity, business model, and use

of digital technologies. Further, some of these risks

should be considered (Figure 5).

Fig. 5: Risks inherent in neobanks against the

digitalization background

Technological risk. Neobanks are heavily

dependent on technology such as mobile

applications, web platforms, and other digital

solutions. Therefore, they are exposed to

technological risk related to possible technical

failures, data retention problems, cyber-attacks, and

other technical problems can negatively

affect customer trust.

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

Digital technologies allow neobanks to expand

their activities in international markets without the

need to open physical offices in each country. This

opens up new opportunities for increasing the client

base and increasing profits. Neobanks have great

potential to successfully grow and counter risks, but

they must actively work on improving security,

personalization, and competitiveness to successfully

retain and attract customers in the digital world.

Drawing on the constructed matrix illustrating

the SWOT analysis, it is expedient to quantify the

impact of each element. To address this task, we

first elaborate a weight matrix of relationships

between strengths (S), weaknesses (W),

opportunities (O), and threats (T). The matrix is

filled in drawing on a parameterized employees’

expert estimation representing Neobank’s relevant

departments (Table 3).

Table 3. Weight matrix of relationships between

strengths (S), weaknesses (W), opportunities (O)

and threats (T)*

Note: *The parameters of the coefficients in the table are

given to demonstrate a calculation example and do not

reflect real values

Having addressed the above, it is necessary to

normalize the weights of each element. To do this,

we divided each element of the weight matrix by the

sum of the weights for the applicable category (Ta-

ble 4).

Table 4. Normalized weight matrix of relationships

between strengths (S), weaknesses (W), opportuni-

ties (O), and threats (T)*

0.450

0.2941

0.3043

0.1500

0.1765

0.1739

0.1000

0.3478

0.3000

0.2500

Note: *The parameters of the coefficients in the table are

given to demonstrate a calculation example and do not

reflect real values

Drawing on the obtained weights, we can

determine the parameterized value of the influence

degree of each element in the SWOT matrix, which

is defined as the sum of the products of the

normalized weights by the factor weights:

For strengths (S):

0.45*9+0.2941*5+0.3043*7+0.15*3=7.1054

For weaknesses (W):

0.1765*3+0.1739*4+0.1×2=1.488

For opportunities (O): 0.3478*8+0.3*6=5.6704

For threats (T): 0.25*5=1.25

The obtained values represent an estimation of

each element’s impact on the SWOT matrix and

allow an evaluation of the ratio of its elements.

Determination of the ratio of influence is based on

the obtained indicators, which are given in the

previous paragraph. The greater the value of the

indicator, the stronger its influence. In our example,

the strengths have a value of 7.1054, which is the

largest. Accordingly, strengths have the greatest

impact, which should be taken into account when

making relevant management decisions.

5 Discussion

Comparing the obtained results with the results of

other studies, it is worth noting that several studies

also maintain that neobanks are characterized by the

risks of the traditional banking system, [20], [21]. In

our research, we highlight the risks that are specific

to neobanks due to the specifics of their activities.

This insight into the risks significantly widens the

divide between traditional banks and neobanks to

tackle such risks.

A recent study, [22], reveals the issue of the

location of neobanks and indicates that more than

57% of all neobanks in Europe are located in

Germany, Italy, and France. However, the results of

our research show that the impact of digitization on

economies is so significant that the activities of

neobanks are not in any way limited territorially.

Moreover, the determining factors in their

development are institutional factors that provide

the necessary regulatory and legislative basis for

their functioning.

In yet another study, [4], [23], the authors

conclude that the key differences between

traditional banks and neobanks lie in the differences

in their business models. Based on this, the risks

also differ. The findings of our research indicate the

presence of both common risks and solely particular

ones that are specific to neobanks. A study, [24], is

devoted to the management of one of these risks, in

which a strategy for addressing the security of

information assets is elaborated. Violation of the

security of information assets, according to our

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

classification, belongs to the technological risks of

neobanks, which are defined in work as the most

threatening. Therefore, the noted work is helpful for

further deepening the author's research, in particular,

the formation of approaches to the management of

certain technological risks. The results of the SWOT

analysis show that neobanks also have certain

advantages compared to traditional banks due to the

specificity of their business model, which is based

on digitalization. Our conclusions about the

advantages of neobanks are also confirmed by

research on the future of banking, [25], in which it is

noted that the latest technical solutions of neobanks

can make them leaders in the industry, allow them

to capture a significant share of the market and

significantly increase profitability.

Although at this stage of neobanks’

development, their absolute virtuality is perceived

more from the point of view of risk, in the near

future the development of technologies will provide

such a high level of cyber protection that it will

become practically insignificant for the financial

sector, [2]. In this case, we share the authors’ stand-

point, as we believe that digitization is impossible

without improving security, and the trend toward

digitization is unquestionable. Under such

conditions, with maximum cyber security, neobanks

will be able to direct resources to the maximum

extent to the realization of their opportunities, which

we discovered during the SWOT analysis.

Despite all the advantages of neobanking, they

will come short of displacing traditional banks from

the market, [26]. This is because the latter are also

transforming their business models and

implementing solutions to provide their customers

with online payment platforms and remote account

management. Hence, the researchers, [27], come to

a similar conclusion, maintaining that consumers of

banking services who are clients of neobanks tend to

keep open accounts in traditional banks as well, as a

way to minimize risks. In, [3], [13], the authors also

emphasize that neo-banks should not be perceived

as a threat by traditional banks. At the same time,

the latter should use the opportunity to cooperate

with non-banks to improve the customer experience,

reduce operating costs, reach a larger audience, and

increase the availability of financial services. Our

research shows that traditional banks today remain

more reliable providers of financial services, which

can give them a temporary advantage in attracting

customers. While neo-banks are at the stage of

formation, traditional banks have time to carry out

the necessary digital transformations.

Drawing on the results of our research, the

opportunities for the development of neobanks are

connected with the use of artificial intelligence. It is

artificial intelligence that will ensure the collection

and analysis of data about customers, their behavior,

and preferences and will provide the opportunity to

use this information to enhance the services and

provide personalized offers to customers. Similar

conclusions are arrived at in a study devoted to the

future of banking, [28]. Artificial intelligence will

be inextricably linked with digitization, and

therefore its use in the development of neobanking

is also inevitable.

Thus, the key advantage of the presented

research is the formation of a thorough list of risks

specific to neobanks, as well as their comparison

with the main opportunities in the field of

neobanking. This allows us to propose the main

areas of integral risk assessment for neobanks based

on specific components, which is a key contribution

of the work beyond alternative studies. In contrast to

many studies, the work revealed that today, the

sphere of neobanking is characterized by a higher

level of risk than traditional banks. However, this

conclusion is limited to the analysis of purely

technological risks, in particular, fraud in the

electronic sphere.

6 Conclusion

Neobanks have the advantage of using advanced

digital technologies, which allows them to provide

convenient and innovative financial services. This

can help the former to attract new customers and

retain existing ones, helping to counter the risk of

losing customers. The absence of physical branches

allows neobanks to be flexible and quickly adapt to

changing market conditions. Consequently, this

allows for reducing the risk of loss of

competitiveness in the market. The use of artificial

intelligence and analytics allows neobanks to

provide personalized solutions and services to

customers, which increases customer loyalty and

satisfaction, thereby reducing the risk of losing

customers. Digital technologies provide neobanks

with the opportunity to expand their activities in

international markets without the need to open

physical offices in each country. This opens up new

opportunities for increasing the client base and

increasing profits.

However, neobanks are characterized by

specific risks that can significantly harm both the

bank itself and its clients. With the use of digital

technologies, the risk of cyberattacks and

unauthorized access to customer financial data

increases. Neobanks must pay due attention to cyber

security and ensure data protection. Outages, errors,

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

and other technical problems can negatively affect

customer confidence and lead to loss of business.

The scientific novelty of the obtained results lies in

the proposed parametric model of neobanks’

integral risk assessment based on the outlined

component risks.

The obtained results can be applied in the

elaboration of framework project documents for

promoting the development of neobanking as well

as while developing the neobanks’ risk management

policy based on the proposed parametric risk

estimation approach.

The conducted research opens promising

perspectives for future research regarding the

effectiveness of neobanks’ risk management in the

current conditions of economies’ digitalization.

References:

[1] Nicoletti, B. Banking 5.0: How Fintech Will

Change Traditional Banks in the 'New Nor-

mal' Post Pandemic. Palgrave Macmillan

Cham, 2021. https://doi.org/10.1007/978-3-

030-75871-4.

[2] Monis, E., Pai, R. Neo Banks: A Paradigm

Shift in Banking, International Journal of

Case Studies in Business, IT, and Education,

Vol. 7, No. 2, 2023, pp. 318-332,

https://doi.org/10.47992/IJCSBE.2581.6942.0

275.

[3] Yusuf, T. U. N. A., Fidanboy, Ö. The effect of

the digitalization process on the banking sec-

tor, The International New Issues in Social

Sciences, Vol. 11 No. 1, pp. 77-106, 2023.

https://dergipark.org.tr/en/pub/tinisos/issue/78

787/1117283.

[4] Temelkov, Z. Difference between Traditional

bank model and Fintech based digital bank

and Neobanks model, Socio Brains, No. 74,

2020, pp. 8-15, [Online].

http://eprints.ugd.edu.mk/27605/1/2._Zoran_T

emelkov.pdf (Accessed Date: November 29,

2023).

[5] Shabu, K., Vasanthagoal, R. Neo banking in

India: Opportunities and Challenges from

Customer Perspective. Proceedings of the In-

ternational Conference on Innovative Compu-

ting & Communication, 2022,

http://dx.doi.org/10.2139/ssrn.4037656.

[6] Redesigning Financial Services. How digital

banks are upending the traditional industry,

2022, [Online]. https://redesigning-

fs.com/wp-content/uploads/2022/02/The-

ascent-of-Neobanks.pdf (Accessed Date: No-

vember 29, 2023).

[7] Shettar, R. Neo Bank: A new Landscape,

Journal of Xi'an University of Architecture &

Technology, Vol. 12, No. 3, 2020, pp. 3843-

3847, [Online].

https://docplayer.net/199628531-Neo-bank-a-

new-landscape.html (Accessed Date: Novem-

ber 29, 2023).

[8] Temelkov, Z. Factors affecting neobanks sus-

tainability and development. Journal of Eco-

nomics, Vol. 7, No. 1, 2022,

https://doi.org/10.46763/JOE227.1001t.

[9] Stegmeier, C., Verburg, M. The Future of

Neobanking. How can Neobanks unlock prof-

itable growth? Simon-Kucher & Partners;

Strategy & Marketing Consultants, 2022,

[Online]. https://www.simon-

kucher.com/sites/default/files/WP_Neo-

Banking_A4_Digital_CBU.pdf (Accessed

Date: November 29, 2023).

[10] Bansal, S., Garg, N. Neo banking as disrup-

tive innovation to Indian banking sector, Eu-

ropean Chemical Bulletin, Vol. 12, Spec. Iss.

4, 2023, pp. 11113-11123, [Online].

https://www.eurchembull.com/uploads/paper/

70b123ca1a82f8ad0ef1fa25c11d4f2f.pdf (Ac-

cessed Date: November 29, 2023).

[11] Belgavi, V. The evolution of neobanks in In-

dia - Impact on the financial ecosystem, PwC,

2021, [Online].

https://www.pwc.in/assets/pdfs/consulting/fin

ancial-services/fintech/publications/the-

evolution-of-neobanks-in-india.pdf (Accessed

Date: November 29, 2023).

[12] Reepu, R. Banking of the Upcoming Age: Neo

Banks. IGI Global, 2023.

https://doi.org/10.4018/978-1-6684-8312-

1.ch004.

[13] Sardar, S., Anjaria, K. The future of banking:

How neo banks are changing the industry, In-

ternational Journal of Management, Public

Policy and Research, Vol. 2, No. 2, pp. 32-41,

2023. https://doi.org/10.55829/ijmpr.v2i2.153.

[14] Koibichuk, V., Ostrovska, N., Kashiyeva, F.,

Kwilinski, A. Innovation technology and

cyber frauds risks of neobanks: Gravity model

analysis, Marketing and Management of Inno-

vations, Vol. 1, 2021, pp.253-265,

https://doi.org/10.21272/mmi.2021.1-19.

[15] Statista. Neobanking – Worldwide, 2023,

[Online].

https://www.statista.com/outlook/dmo/fintech

/neobanking/worldwide (Accessed Date: No-

vember 29, 2023).

[16] Statista. Market size of neobanks from 2021 to

2023, with a forecast for 2030, 2023,

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024

[Online].

https://www.statista.com/statistics/1228241/n

eobanks-global-market-size/ (Accessed Date:

November 29, 2023).

[17] Seon. Neobanking Index: The State of Neo-

banks in 2022, 2023, [Online].

https://seon.io/resources/neobanking-index/

(Accessed Date: November 29, 2023).

[18] The Business Research Company. Neobank-

ing Global Market Report 2023. 2023,

[Online].

https://www.thebusinessresearchcompany.co

m/report/neobanking-global-market-report

(Accessed Date: November 29, 2023).

[19] Unit21. 24 Neobank Statistics to Help with

Risk and Compliance. The Customizable No-

Code Platform for Risk & Compliance Opera-

tions, 2022, [Online].

https://www.unit21.ai/blog/neobank-

statistics#statistics-about-neobanking-and-

fraud (Accessed Date: November 29, 2023).

[20] Temelkov, Z. Factors affecting neobanks sus-

tainability and development, Journal of Eco-

nomics, Vol. 7, No. 1, 2022, [Online].

https://js.ugd.edu.mk/index.php/JE/article/vie

w/4930/4340 (Accessed Date: November 29,

2023).

[21] Jagrič, T., Amon, A. Key factors of neobank-

ing’s occurrence, Journal of Innovative Busi-

ness and Management, Vol. 15, no. 1, 2023,

pp. 1-12,

https://doi.org/10.32015/JIBM.2023.15.1.1.

[22] Citterio, A., Marques, B. P., Tanda, A. The

early days of neobanks in Europe: Identifica-

tion, performance, and riskiness, European

Financial Management Association, 2023,

[Online].

https://www.efmaefm.org/0EFMAMEETING

S/EFMA%20ANNUAL%20MEETINGS/202

3-UK/papers/EFMA%202023_stage-

4455_question-Full%20Paper_id-362.pdf

(Accessed Date: November 29, 2023).

[23] Hopkinson, G., Klarova, D., Turcan, R., Gu-

lieva, V. How neobanks' business models

challenge traditional banks, International

Business Centre at Aalborg University, 2019,

[Online].

https://www.researchgate.net/publication/335

205599_How_neobanks%27_business_model

s_challenge_traditional_banks (Accessed

Date: November 29, 2023).

[24] Gorodianska, L., Nosenko, T., Vember, V.

Neobanks Operations and Security Features,

IEEE International Scientific-Practical Con-

ference Problems of Infocommunications, Sci-

ence and Technology (PIC S&T), 2019,

https://doi.org/10.1109/PICST47496.2019.906

1268.

[25] Aranca. Neobanks – The Future of Banking.

Social Report, 2022, Online available from

https://www.aranca.com/assets/docs/Neobank

s_Nishima%20Arora%20FINAL.pdf (Ac-

cessed Date: November 29, 2023).

[26] Murinde, V., Rizopoulos, E., Zachariadis, M.

The impact of the FinTech revolution on the

future of banking: Opportunities and risks, In-

ternational Review of Financial Analysis, Vol.

81, 2022,

https://doi.org/10.1016/j.irfa.2022.102103.

[27] Banga, C., Beena, F., Manchandani, P.,

Shukla, V. Growth and Future of Neo Banks –

A Survey, 2023 International Conference on

Computational Intelligence and Knowledge

Economy, 2023,

https://doi.org/10.1109/ICCIKE58312.2023.1

0131692.

[28] McKinsey&Company. Building the AI bank of

the future, 2021, [Online].

https://www.mckinsey.com/~/media/mckinsey

/industries/financial%20services/our%20insig

hts/building%20the%20ai%20bank%20of%20

the%20future/building-the-ai-bank-of-the-

future.pdf (Accessed Date: November 29,

2023).

Contribution of Individual Authors to the

Creation of a Scientific Article (Ghostwriting

Policy)

The authors equally contributed to the present

research, at all stages from the formulation of the

problem to the final findings and solution.

Sources of Funding for Research Presented in a

Scientific Article or Scientific Article Itself

No funding was received for conducting this study.

Conflict of Interest

The authors have no conflicts of interest to declare.

Creative Commons Attribution License 4.0

(Attribution 4.0 International, CC BY 4.0)

This article is published under the terms of the

Creative Commons Attribution License 4.0

https://creativecommons.org/licenses/by/4.0/deed.en

_US

WSEAS TRANSACTIONS on INFORMATION SCIENCE and APPLICATIONS

DOI: 10.37394/23209.2024.21.2

Karina Kapliar, Natalia Maslova,

Valentyn Hnoievyi

E-ISSN: 2224-3402

Volume 21, 2024