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    Natalie Monko Lead Project Manager

    Neobank Technology: Deciphering Architectures of the Top Banking Apps

    The term ‘neobank’ has been in use since 2016 and refers to financial firms that operate online only and serve as an alternative to traditional banks with their physical branches. The neobank business model offers cutting-edge, fast, and customer-oriented services. In recent years neobanks popularity has been growing, especially among younger generations.

    The neobank market share has been increasing, accordingly. Statista reports that the market size was estimated at nearly 35 billion U.S. dollars in 2020 and is forecast to reach a value of 722.6 billion U.S. dollars by 2028.

    World’s top independent neobanks and their value according to Statista

    Neobanks have various ways to start and enter new markets:

    • Getting a banking license offers some advantages such as a broader services range, larger customer base, long-term efficient capital base, and competitive advantage in the fintech market.

    For example, N26 has been a fully licensed bank since 2016. They provide customers with a range of premium financial services, as well as the security. The account holders are protected up to €100,000 by the German Deposit Protection scheme.

    • Building partnerships with banks can be one of the ways to expand and to ensure compliance with applicable laws and regulations.

    For instance, Monzo partnered with Sutton Bank, Member of the Federal Deposit Insurance Corporation (FDIC). The partnership provides their mobile banking app with banking services and accounts are FDIC insured up to $250,000. As another example, Chime does not refer to itself as a bank: it partners with regional banks to deliver easy-to-use financial products. All of their members’ account balances are safely held at regulated, FDIC-insured banks.

    • Using banking as a service allows reducing expenses and time to market, while ensuring a better customer experience.

    For example, Galileo Financial Technologies, a banking-as-a-service provider, powers world’s most innovative companies such as Monzo, Dave, MoneyLion, SoFi.

    When you consider developing a neobank app, we prepared this article to tell you about the technologies that power the most successful solutions on the global market. Here at Surf, we are used to pioneering solutions and approaches that help our clients outperform their competitors. And we are sure that analyzing the profit-making industry-specific solutions is one of the necessary steps on your own way to success.

    Techstack behind success stories of the top neobanks

    Microservice architecture as basis of a modern bank back end – based on Monzo experience

    Founders of Monzo bank initially planned to build a system with the best technology that would offer the best current account and business bank accounts. And what is more, the system had to be scalable to support the needs of millions of customers.

    From the examples of large companies like Amazon, Netflix, and Twitter, they knew that a single monolithic codebase does not allow easy scaling. So, the Monzo team chose to build a back end as a collection of distributed microservices. The solution was not typical for an early-stage startup. But the company succeeded in creating a product that can be changed anytime in the future.

    Surf has the microservice-based projects in the portfolio both building microservice architecture from scratch and breaking the monolith into microservices. In general, the architecture of this type allows for better fault tolerance, scalability, faster and easier deployments. We have already described in detail the advantages of microservice architecture in banking, so feel free to learn more about it. 

    Migration to improve engineering productivity — how Chime moved to AWS

    Before the migration to Amazon Web Services (AWS), Chime was hosted in a vendor-managed data center. With the growth of the services and member base, the company realized the need for an infrastructure that could be scaled fast and would be resilient to ensure the required availability. As the Chime team position themselves as member-obsessed and work hard on providing better services, reliable data, and security. That’s why they saw the migration to AWS as a great opportunity to achieve the goals mentioned. The migration started in 2019 and was completed in 2021. 

    AWS offers a lot of services covering databases, caching, messaging, deployment infrastructure, and more. Mike Barrett, VP of Engineering Services at Chime said: “By making every part of engineers’ jobs a little—or a lot—easier, Amazon Web Services (AWS) helps companies like Chime focus on their core competencies and deliver better products and services.”

    Fast-paced growth with Google Cloud Platform —  Revolut experience 

    Another successful example presents Revolut, launched in 2015. As the company extended in terms of functionality and acquired more customers, it became clear their initial cloud-based solution could not support their rapid growth. They needed an infrastructure that would allow automating deployments, while maintaining stability and security.

    The company decided on Google Cloud Platform for its new infrastructure. The key advantage of the platform is that it is simple and intuitive. Google Cloud allows automating deployment multiple times a day with Compute Engine and Google Cloud application programming interfaces (APIs), maintaining resilience due to incremental snapshotting and security with easy segregation using Cloud Identity and Access Management.

    Scaling without sacrificing quality — how Nubank switched to Flutter

    Nubank grew extremely rapidly and faced the lack of native mobile specialists to release new products quickly and simultaneously for iOS and Android platforms. That’s why the company decided to switch to a cross-platform technology to deliver value on a single architecture and programming language and to keep up with their ambitions for shipping new products. 

    The choice of Nubank was Flutter as it outperformed other platforms in terms of the pre-specified criteria: Flutter offered better hot reload abilities and strong documentation.  

    Noe Branagan, Engineering Manager, Nubank, said: “Having Flutter as our main technology has significantly reduced the barrier, allowing new engineers to be able to contribute to our app within days after being onboarded.” As a result, the performance has significantly improved.

    At Surf, we have been building Flutter-based apps since the technology appeared, and it has already grown into an integral part of our company’s culture.

    Here are some of the benefits Flutter offers for the banking domain:

    • faster time to market;
    • possibility to optimize expenses: an in-house team of Flutter developers requires fewer costs than two native teams;
    • the single codebase, which provides for easier testing and debugging;
    • Flutter-powered apps are easy to maintain, scale, and develop;
    • users see practically no difference from native apps: smooth animations, system-specific interface elements, gestures;
    • security: Dart code is compiled into native code that is not human-readable. It complicates reverse engineering and improves security compared to Java, Kotlin, or React Native projects.

    How Tinkoff built a chatbot to improve customer experience 

    Neobanks are customer-focused: the technologies to power the front end are no less important than reliable security, continuous deployment, or forward-looking architecture. Banks employ new technologies such as biometry, chatbots, and AI to add value to their model of remote customer relationships. 

    One of the popular trends in banking is chatbots. NMSC reports that the value of the global chatbot in the banking, financial services, and insurance (BFSI) market is forecast to increase to 6.83 billion U.S. dollars by 2030 from 586 million U.S. dollars in 2019. 

    The world’s first voice assistant created by a bank as a proprietary solution using deep neural network models and voice technologies is Oleg, built by Tinkoff bank. Oleg is integrated into the bank’s app and designed to help customers manage their financial services within the bank ecosystem. Oleg differs through the emotion-based approach: the AI-based bot can make jokes, be sad, and is learning. Therefore, customers feel like they are talking to the real person, and not a machine.

    In 2021, according to Markswebb analytical agency, Oleg occupied the top positions in the ‘Best Customer Experience in Chats’ and ‘Customer Experience Quality in Bank Chats’ ratings.

    Test automation for banking apps

    Banks and financial institutions deal with customers’ sensitive information and have always attracted fraudsters ready to use any gaps or weaknesses in the products. Therefore, many banking apps face a lot of security concerns, and testing shall receive special attention when we speak about financial services.

    One of the successful Accenture case studies runs about a global bank that planned to create a unified testing function to enhance end-to-end test automation. The main goal was to deliver high-quality applications faster and more cost-effectively. Accenture teamed up with the bank to implement the end-to-end testing transformation, and as a result, the unified testing model helped the bank reduce its testing cycle from 12 weeks to just 4.5. The bank was able to reduce overall time to market by more than 60%. In terms of quality, the defect leakage has decreased by 75%.

    We at Surf have many financial projects in our portfolio and are sure that test automation is a good fit for banking apps. First, you need automated tests when you plan the long-term development of your app (from 6 months and longer), and this is usually the case with bank products. At the same time, if you plan to add new features regularly (for example, every 2-3 weeks), the automated tests will help ensure high quality and accelerate the time to market.

    Last but not least, here is the diagram that demonstrates how expenses for testing grow with time depending on the testing model.

    Summing up

    Based on our experience in building neobanks for our clients, here are some significant aspects for you to pay attention to when planning to build your future product. They are:

    • flexibility both in terms of business model and technology stack;
    • innovative solutions to improve customer experience; 
    • security due to compliance with regulation and choosing reliable partners;
    • continuous automated deployment for faster releases;
    • easy scalability powered by the right choice of technologies;
    • test automation that allows ensuring high quality.

    If you plan to develop your own project and need more advice and assistance, the Surf team is ready to help. Contact us at [email protected]