Neobank and tokenization

By 09/09/2022 No Comments

Neobank is the “bank of the future”

Traditional banking is often imagined as a collection of most often malfunctioning paperwork, forms and ATMs: today, digitalisation continues to redefine the financial sector and customers are leaning their demands toward a rapid shift to digital banking services. While traditional banks and fintechs are coordinating and defining their systems to meet these demands, through the Neobank concept, digital bridges are being created to connect numerous businesses and users to digital financial services, especially in areas that are  not sufficiently covered by traditional banking.

The term Neobank refers to a uniquely digital banking system since it includes in the whole the latest generation of banks, which do not have any physical branches or locations, but are rather present only in a virtual dimension. In summary, the so-called Neobank is nothing more than a type of company ready to provide ultra-modern, totally technological banking services through websites, software or apps, including the possibility of conducting transactions electronically, investing in cryptocurrencies, and finally, saving money through the creation of digital piggy banks, offering its users an easier and definitely “smart” experience.


Neobank and Challenger bank: points of contact and points of divergence

The first major difference between neo banks and so-called challenger banks lies in their physical presence; in fact, the Neobank model is entirely digital, basing its business development on clouds that its customers can reach through web platforms and applications (simplifying many solutions, for both SMEs and start-ups). The biggest asset that Neobanks can offer to SMEs is a certain level of flexibility in accessing a wide range of services, while also providing additional functionality such as payroll, expense management, automated accounting services and integrating business workflows through banking services. The Neobank model, however, does not have any banking license, and in order to operate, they rely on partner banks. “Challenger” banks, on the other hand, also leveraging technological resources to simplify banking processes, maintain a physical presence and differ from Neobanks for the fact that they hold a license that implies offering both a range of traditional banking services and, at the same time, various digital capabilities.


The technology revolution is also about banks and blockchain

By now, technology is an integral part of our daily lives, contributing in multiple areas to the protection and the security of users and consumers.The inclusion of blockchain is occurring at a time in history in which this innovation is managing to monopolize widespread attention among Cryptocurrencies, Bitcoin, Smart Contracts etc. To simplify the concept, the Blockchain is a set of technologies, which is presented as a chain of blocks that contain transactions within them: the consensus related to transactions is found on a series of “nodes”, in which information and data of a given process is recorded and finally, the information inside of  this “register” is completely traceable,  while its exact origin can be reconstructed at any time. Its applications are many and the potential is enormous especially in the financial field, increasing transparency, speed and reliability in processes. In a nutshell it implies:

  • improvements in information sharing;
  • decreased chances of fraud or data theft;
  • simplification in payment and data management;
  • increased customer confidence;
  • time savings through automation of processes.


The tokenization system and Avaloq solutions

When discussing blockchain technology, it is also important to discuss one of its main consequences: tokenization. This term refers to a process aimed at representing a given resource or object within a blockchain file. The transformation process involves extracting the properties of that object, digitizing them and importing them within the “block” of a blockchain. The moment in which the object is registered can be transferred or stored. During this process, the object is assigned a token that allows it to be manipulated as part of said blockchain. The use of tokens that are based on DLT (Distributed Ledger Technology) is also increasing its volume of business in other areas, and asset tokenization is being defined as one of the most important use cases within the financial markets. This term refers to the creation of digital tokens on the blockchain that represent that asset and their potential seems seemingly limitless, as any real asset could be tokenized and stored on the blockchain.

Undoubtedly, blockchain technology opens the door to a whole universe of possibilities that are altogether difficult to explain or even interpret: the potential of blockchain technology and tokenization is enormous, improving security margins, adding transparency and traceability, reducing costs for any intermediaries, but most importantly accessing information securely from anywhere.

Avaloq, the Core Banking system used by Allinweb aims to personalise the business, while tending to improve the efficiency of operations on online platforms,  embracing the use of digital resources and by automating processes and reducing costs.  On the basis of data production and processing, operations are more efficient, eliminating labor-intensive activities in almost all back-office activities.  The real breakthrough, in short, lies in the impact of having these tokens in digitized form. In this scenario, Avaloq, argues the case for blockchain technology to profoundly transform the financial services industry, demonstrating that the tokenization of so-called non-bankable assets carries a number of implications for blockchain, where smart contracts provide both proof of acquisition and a medium of exchange aimed at monetizing investments.