Julius Kirscheneder is the CMO and co-founder of neon. In this interview with moneyland.ch, he explains the current state of digitization in the Swiss banking sector and provides insights into neon’s future plans.
Digitization is all the rage in the Swiss banking sector. How far along are Swiss banks with regards to digitization?
Julius Kirscheneder: There is still a lot of room for improvement. One can see that efforts are being made, but many solutions are still not very intuitive and, in our opinion, not customer-friendly enough.
Many of the opportunities which are presented by digitization have been ignored by Swiss banks. The absence of services like digital account opening is one example. In many other countries, digital account opening which is fast, simple and still secure has already been offered for many years.
Increasingly, more and more consumers in Switzerland have come to expect the same simple digital solutions which they use every day from banks as well. Only a minority of airline passengers buy their tickets at travel agencies. Nobody would expect to send a letter in order to open an e-scooter account.
Digitization also presents banks with an opportunity to move to leaner structures and reduce their costs, which effectively translates into lower fees for end customers. This transformation is not easy, but it is doable. Fully-digitized processes are the future for a large part of the service sector.
The coronavirus crisis will accelerate digitization. Have you already noticed its effects?
We have already benefited from this trend. Because many Swiss banks closed their branch offices, customers were almost forced to turn to digital banking solutions.
The fully digital account opening process from neon which is available 24 hours a day and 7 days a week via mobile app is an attractive option.
Another interesting development is that our customers have been using less cash and contactless card payments – including mobile payments – are increasing. Online payments are also increasing significantly.
For neon as a company, the switch to home office and online meetings was not a major change. The company has always worked that way – which is also part of digitization.
The app-based financial services sector is home to major international players like Revolut and TransferWise which have also gained a stake in the Swiss market. Are these foreign service providers a threat to Swiss banks?
Yes and no.
These new financial services providers have proven that banking can be done differently. They have proven this on many points: Pricing; ease of use; features. That is a major threat to established banks because they may lose customers – and are in fact already losing customers.
On the other hand, this intrusion presents Swiss banks with a major opportunity because it is forcing them to make changes. This will definitely benefit the sector as a whole.
Does neon compete primarily with international neobanks or with other Swiss banks?
We see both international players and Swiss banks as beneficial competition. From an end-user perspective, our primary competitors in Switzerland are obviously banks. The vast majority of Swiss consumers still hold accounts at conventional banks because having a Swiss bank account is almost a must for everyday banking in Switzerland and there have been no real alternatives until now.
We compete with international neobanks primarily from a product perspective. Who offers the best features? Which service offers the cheapest solution and the simplest handling? If we can present good arguments in this regard, we are better positioned to compete for the customers of conventional banks.
How is neon different from international neobanks like Revolut and TransferWise?
Our Swissness. neon was built for the Swiss market. It provides a Swiss account which meets Swiss banking standards. Our customer’s money is not held somewhere abroad, but at out Swiss partner bank the Hypothekarbank Lenzburg which is covered by the Swiss depositor protection scheme.
All records are held in Switzerland. We are also the only app-based banking service to offer services which are specific to Switzerland. Our users can scan Swiss deposit slips and pay eBills. They can also link their accounts to Twint.
How is neon different from established Swiss banks?
We have a different philosophy and a different way of doing things. Communication with customers is on a first-name basis. We can be contacted quickly and personally, and take the time to help our users.
We are 100% transparent and do not use hidden fees. Our business model is digital and based on cost optimization. We do not have any branch offices or manager bonuses. Our product and processes are as simple and digitized as possible. This enables us to keep our fees low.
What is your biggest USP?
A combination of the two previous answers: Neon combines a simple, cheap and digital product with Swissness.
According to a 2019 moneyland.ch survey covering mobile banking, men use mobile banking more than women and young adults use mobile banking more than older adults. Has that also been your experience at neon?
Yes, that is unfortunately the case. Women make up around 20% of our customer base. We have not yet been able to fully ascertain why that is the case, neither do we want to simply accept that this is the way things are.
neon is a unisex product and the women making up our user base use neon similarly to their male counterparts. We will be working towards better understanding the makeup of our user base and how we can make neon even more understandable and accessible to women.
In terms of age, our user base is relatively young, with most of our customers being between 25 and 50 years old. These are consumers who already understand the high fees which apply to regular accounts and are also accustomed to using apps and other digital tools.
But we also have users as young as 16 and as old as 80. We think that is cool, because nobody should be excluded from the neon advantages.
Will neon remain free of basic account fees?
Of course. We also constantly work towards reducing the fees we charge for paid services. In spring, for example, we did away with currency exchange rate markups completely. We also recently entered into a collaboration with TransferWise which lets our users make fast and affordable international transfers directly from neon.
Neon comes with a Mastercard prepaid card. Why did you choose that card specifically?
The main reason we chose to offer Mastercard prepaid cards is that this card was already widely used in Switzerland at the time of our launch, making a quick implementation possible. It is important to understand that the neon card is not a prepaid card in the standard use of the term. Users do not have to load credits onto the card. It works like a debit card which debits charges directly from your neon account balance. You can use the neon Mastercard just like other Mastercard debit cards and also use it to make online payments.
Where do you see neon in five years?
In a very different Swiss banking world. We will do everything to make everyday payments in Switzerland more customer friendly and to make Swiss banking services internationally competitive once again.
To reach those goals, we will continue to drive development of our services and to add innovative products. We will also extend our ecosystem through partnerships with other service providers that think like neon: simple; cheap; digital; with satisfied customers.
Our goal is to build the largest mobile user base in Switzerland within the next five years. But we always plan one step at the time.
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