Neobanks - also sometimes referred to as online banks and/or direct banks - have been growing in proliferation over the last decade, as fintechs try to address the segment of customers who have been unhappy with the level of service provided in the usual crediting institutions.
Since neobanks are fintech companies, their future in Europe and the United States seems very promising to experts. In fact, the industry has become so popular that the world's financial capitals, such as London and New York, are ready to fight for the title of a global fintech center and are luring start-ups and neobanks with favorable conditions for registration and taxation.
But regulators have also taken notice, and are trying to figure out how best to regulate them.
In an article published today on BusinessInsider.com The European Central Bank might raise capital requirements for neobanks, staff writer Sarah Kocianski says that:
The ECB suggests that fintech applicants might be mandated to hold more than the usual minimum capital requirements. That's because, according to the ECB, a startup could be at greater risk of financial losses than a more established business. It goes on to outline two potential scenarios in which an applicant may end up needing to hold additional capital.
If the ECB adopts the guide, it could make it even harder for neobanks to thrive. Minimum capital requirements are already high for a new bank in Europe, which is one of the main reasons so few have successfully established themselves.
How will the European Union look at these new regulations, and will other countries come to emulate them?
Read the source article at Business Insider