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The global neobanking market was valued at approximately $98 billion in 2023 and is projected to grow to $3.4 trillion by 2032, with a compound annual growth rate (CAGR) of 48.6% from 2024 to 2030ⁱ. The banks’ digital-first solutions and the continuing demand for customer-first convenience offerings are at the heart of this growth story.
While neobanks are revolutionizing the banking industry, going global and growing sustainably in any economic or regulatory environment is hard. Routefusion’s Unified Payment API, backed by one of the most seasoned teams in the industry, helps neobanks address payments and compliance-related challenges with confidence.
While we break down the benefits of partnering with Routefusion below, tech-savvy readers can also go directly to our API docs to learn more.
This white paper explores how Routefusion's unified payment API can help neobanks overcome these challenges, streamline payment processes, and enhance service offerings.
In order to stay competitive with both existing incumbent banks and an increasingly crowded landscape of new banks, neobanks must stay competitive in not just their digital offerings, but in operational efficiency and customer satisfaction.
Cross-border transactions for Neobanks are often complex and costly, regulatory compliance demands are resource-intensive, fraud prevention requires robust security measures, and integrating multiple payment systems is often cumbersome. These challenges can create bottlenecks in operational efficiency and customer satisfaction, impeding future growth prospects.
There are approximately 180 currencies recognized as legal tender in 195 countries worldwide. This number includes both widely used international currencies and those used in specific regions or countries. Managing multiple currencies requires frequent exchanges and conversions, which can incur significant costs. Fluctuating exchange rates can also introduce volatility and risk, affecting pricing strategies and financial planning.
They need to have the right banking partners across every region, which can be time-consuming and expensive.
These traditional banking partners are often slow, expensive, and complicated, creating a bottleneck for neobanks that aim to provide seamless international services.
Routefusion’s API provides a single access point for multiple payment corridors and networks, enabling neobanks to offer fast, cost-effective, and reliable cross-border transactions. By aggregating various financial institutions and local payment networks into a single API, Routefusion eliminates the need for neobanks to manage multiple partnerships and integrations.
Integration time: It takes a customer approximately 1 month to integrate with Routefusion vs. 6 months to integrate directly with a bank or another payments platform. With Routefusion’s speed-to-market, neobanks can integrate fast and grow even faster.
Efficiency: Transactions are processed more quickly, reducing the time customers wait for international payments.
Cost-Effectiveness: Routefusion’s smart routing orchestrates payments through corridors that are the lowest cost and most efficient for the customer. By leveraging local payment networks, Routefusion also minimizes the fees associated with traditional cross-border transactions.
Navigating the complex web of regulatory requirements across different jurisdictions is a major challenge for neobanks, and requires significant resources and expertise - this is one of Routefusion’s biggest competitive strengths. Addressing these regulatory compliance challenges requires neobanks to invest in robust compliance management systems and establish strong partnerships with regulatory experts and compliance solution providers like Routefusion.
Anti-Money Laundering (AML) and Know Your Customer (KYC) Regulations: Neobanks must comply with stringent AML and KYC regulations to prevent their platforms from being used for illicit activities like money laundering or terrorist financing. Verifying customer identities and monitoring transactions for suspicious activity can be resource-intensive and technologically complex.
Payment Services Directive (PSD2): In regions governed by PSD2, neobanks must ensure compliance with open banking regulations, which require them to provide third-party providers (TPPs) with access to customer account information and payment initiation services. Implementing secure APIs and maintaining data privacy while facilitating third-party access can be challenging.
Cross-Border Payments Compliance: Neobanks operating internationally must navigate the complexities of cross-border payment regulations, including foreign exchange controls, sanctions regimes, and international payment standards. Ensuring compliance with diverse regulatory frameworks while facilitating seamless cross-border transactions requires sophisticated payment infrastructure and regulatory expertise.
Transaction Monitoring and Reporting: Neobanks must monitor customer transactions for suspicious patterns and report any potentially illicit activity to regulatory authorities. Developing robust transaction monitoring systems capable of detecting anomalies in real time and generating accurate regulatory reports is essential for compliance.
Regulatory Changes and Updates: The regulatory landscape governing payments is constantly evolving, with new laws, guidelines, and enforcement actions emerging regularly. Neobanks must stay abreast of regulatory changes relevant to their operations and adapt their compliance programs accordingly to avoid non-compliance penalties and reputational damage.
Routefusion integrates robust compliance features directly into its API, helping neobanks meet regulatory requirements without additional overhead. These features include
End-to-End Compliance Management: Routefusion’s platform is equipped with advanced compliance management tools that streamline the process of meeting regulatory requirements across various jurisdictions. By integrating automated compliance checks and regular updates on regulatory changes, Routefusion ensures that neobanks remain compliant with minimal manual intervention and reduces the need for significant resources.
Robust AML and KYC Solutions: To help neobanks comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, Routefusion offers sophisticated identity verification and transaction monitoring systems. This not only enhances security but also ensures that neobanks can meet stringent regulatory standards without overwhelming their internal resources.
PSD2 and Open Banking Compliance: Routefusion supports neobanks in regions governed by the Payment Services Directive 2 (PSD2) with a unified API that facilitates third-party access to customer account information and payment initiation services. This API is designed to maintain data privacy and security, helping neobanks seamlessly implement open banking requirements and enhance their service offerings without compromising on compliance.
Cross-Border Payments and FX Compliance: For neobanks operating internationally, Routefusion simplifies cross-border payments by offering solutions that ensure compliance with foreign exchange controls, sanctions regimes, and international payment standards. Their sophisticated payment infrastructure supports seamless cross-border transactions, allowing neobanks to expand their reach globally while adhering to diverse regulatory frameworks.
Proactive Regulatory Updates and Adaptation: Staying abreast of regulatory changes is crucial for compliance. Routefusion continuously monitors the regulatory landscape and provides timely updates and insights to its clients. This proactive approach ensures that neobanks can quickly adapt their compliance programs to reflect new laws, guidelines, and enforcement actions, mitigating the risk of non-compliance penalties and reputational damage.
Digital-only banks are particularly vulnerable to cyber threats and fraud. Addressing these challenges requires neobanks to invest in advanced fraud detection and prevention technologies, such as machine learning algorithms, behavioral analytics, and biometric authentication, to adapt to evolving fraud threats effectively. Additionally, fostering a culture of security awareness among employees and customers and establishing robust incident response protocols are essential for mitigating fraud risks and safeguarding the integrity of neobank operations.
Identity Verification: Verifying the identities of customers in a digital environment without physical documents can be challenging. Neobanks must develop robust identity verification processes that rely on a combination of biometric authentication, document verification, and behavioral analytics to detect and prevent identity theft and account takeover fraud.
Transaction Monitoring: Neobanks must monitor customer transactions in real-time to detect unusual patterns indicative of fraudulent activity. However, distinguishing between legitimate and fraudulent transactions in a high-volume environment requires sophisticated fraud detection algorithms capable of analyzing vast amounts of data and identifying subtle anomalies without generating false positives.
New and Emerging Threats: Fraudsters continually evolve their tactics to circumvent detection measures, making it challenging for neobanks to stay ahead of emerging fraud threats. Neobanks must continuously monitor for new attack vectors, such as account cloning, SIM swapping, or synthetic identity fraud, and adapt their fraud prevention strategies accordingly.
Balancing Security and User Experience: Implementing stringent security measures to prevent fraud can sometimes introduce friction into the user experience, leading to customer frustration and abandonment. Neobanks must balance robust security protocols and seamless user interactions to minimize fraud risk without compromising convenience.
Mobile Banking Vulnerabilities: Neobanks rely heavily on mobile banking apps for customer interactions, making them susceptible to mobile-specific fraud threats such as malware, phishing attacks, and mobile device hijacking. To mitigate mobile banking risks effectively, neobanks must implement multi-layered security measures, including secure app design, encryption, and device authentication.
Third-Party Risks: Neobanks often integrate with third-party service providers for various functionalities such as payment processing, customer support, or data analytics. These integrations can introduce additional security vulnerabilities and increase the risk of fraud through supply chain attacks or data breaches, so integrating with the right partner like Routefsuion is mission-critical.
Routefusion employs advanced security protocols and real-time monitoring to detect and prevent fraudulent activities. The API includes:
Real-Time Fraud Detection: Routefusion's API utilizes machine learning algorithms to identify and flag suspicious transactions in real-time, allowing neobanks to act swiftly to prevent fraud.
Data Encryption: All transactions are encrypted, ensuring the highest level of security for sensitive customer data.
Advanced Fraud Detection and Prevention: Routefusion leverages cutting-edge technologies to safeguard digital-only banks from cyber threats and fraud. By integrating machine learning algorithms, Routefusion enables neobanks to detect and adapt to evolving fraud patterns with greater accuracy.
Robust Identity Verification: To tackle the challenge of verifying identities in a digital environment, Routefusion employs a multi-faceted approach. Their identity verification process combines biometric authentication, advanced document verification, and behavioral analytics. This comprehensive strategy helps neobanks to prevent identity theft and account takeover fraud, ensuring that only legitimate customers can access banking services.
Real-Time Transaction Monitoring: Routefusion provides sophisticated transaction monitoring solutions that analyze vast amounts of data in real-time. Utilizing state-of-the-art fraud detection algorithms, Routefusion distinguishes between legitimate and fraudulent transactions with high precision, reducing false positives and enabling quick response to potential threats.
Adaptation to New and Emerging Threats: Routefusion remains at the forefront of fraud prevention by continuously updating its security measures to counteract emerging fraud tactics
Balancing Security and User Experience: Routefusion understands the importance of balancing robust security protocols with a seamless user experience. By implementing user-friendly authentication methods and minimizing friction during security checks, Routefusion ensures that neobanks can provide secure yet convenient services to their customers, reducing the risk of customer frustration and abandonment.
Multi-Layered Mobile Banking Security: Given the reliance on mobile banking apps, Routefusion integrates multi-layered security measures to protect against mobile-specific threats. Secure app design, encryption, and device authentication are key elements of their approach, providing comprehensive protection against malware, phishing attacks, and mobile device hijacking. This ensures that mobile banking interactions remain safe and secure.
Managing Third-Party Risks: Routefusion recognizes the importance of secure integrations with third-party service providers. They rigorously vet their partners and implement stringent security protocols to mitigate risks associated with supply chain attacks or data breaches. By choosing Routefusion, neobanks can be confident in the security of their third-party integrations, ensuring a resilient and secure operational environment.
In summary, Routefusion offers a comprehensive suite of solutions that enable neobanks to protect their operations, enhance customer trust, and maintain a competitive edge in the industry.
Neobanks often need to integrate various payment services and gateways to provide a comprehensive financial ecosystem; managing multiple integrations can be complex, time-consuming, and prone to errors.
Integration with Legacy Systems: Neobanks often need to integrate with legacy banking systems, which may be outdated and can lead to compatibility issues, data inconsistencies, and delays in processing payments.
Scalability: As neobanks grow their customer base, they must ensure that their payment processing infrastructure can scale efficiently to handle increasing transaction volumes without compromising performance or reliability.
Compliance with Regulatory Standards: Neobanks must comply with various regulatory standards governing payment processing, such as PSD2 in Europe or ACH rules in the United States. Compliance requires robust security measures, data protection protocols, and transaction monitoring systems.
User Experience: Neobanks must prioritize user experience in payment processing, ensuring that transactions are seamless, intuitive, and secure across various channels and devices. This requires investing in user-friendly interfaces, fast transaction processing, and responsive customer support.
API Integration: Neobanks often rely on APIs to integrate with third-party services, such as payment gateways, merchant processors, and financial aggregators. Ensuring smooth API integration requires standardized protocols, robust authentication mechanisms, and comprehensive documentation.
Payment Infrastructure Costs: Building and maintaining payment processing infrastructure can be costly for neobanks, especially if they need to invest in proprietary technology or partner with third-party vendors. Managing payment infrastructure costs while delivering competitive pricing and value-added services is a significant challenge.
Routefusion’s unified API simplifies the integration of various payment services, providing a seamless experience for both neobanks and their customers. Key benefits include:
Single Integration Point: Neobanks can access a wide range of payment services through a single API, reducing the complexity and time associated with multiple integrations.
Scalability: As neobanks expand their services, Routefusion’s API can easily scale to accommodate additional payment functionalities and volumes.
Payment Processing & Integration: Routefusion simplifies the complex task of integrating various payment services and gateways by providing a unified platform that supports multiple payment methods. This reduces the need for neobanks to manage numerous individual integrations, significantly lowering the risk of errors and saving time.
Integration with Legacy Systems: Routefusion offers advanced integration capabilities that enable neobanks to connect with legacy banking systems smoothly. Their platform is designed to handle the complexities of outdated systems, ensuring compatibility and minimizing data inconsistencies.
Scalability: As neobanks expand their customer base, Routefusion ensures their payment processing infrastructure can scale effectively. Their platform is built to handle high transaction volumes without compromising performance or reliability.
Compliance with Regulatory Standards: Routefusion helps neobanks comply with various regulatory standards, such as PSD2 in Europe and ACH rules in the United States. Their platform incorporates robust security measures, data protection protocols, and transaction monitoring systems to avoid legal pitfalls and maintain regulatory compliance effortlessly.
User Experience: Routefusion prioritizes user experience in payment processing by offering solutions that ensure transactions are seamless, intuitive, and secure across multiple channels and devices. Their platform features user-friendly interfaces, fast transaction processing, and responsive customer support. Clients get a dedicated slack channel to help answer their questions in real-time. Routefusion also offers customer support in the U.S., U.K. and LATAM.
API Integration: Routefusion excels in API integration, providing standardized protocols, robust authentication mechanisms, and comprehensive documentation. This facilitates smooth integration with third-party services, such as payment gateways, merchant processors, and financial aggregators.
Payment Infrastructure Costs: Routefusion offers a cost-effective solution for building and maintaining payment processing infrastructure. By leveraging their platform, neobanks can avoid the high costs associated with proprietary technology and reduce dependency on multiple third-party vendors. Routefusion’s competitive pricing and value-added services help neobanks manage infrastructure costs efficiently while delivering superior service to their customers.
In summary, Routefusion provides a robust, scalable, and cost-effective platform that addresses the diverse challenges faced by neobanks in payment processing and integration, enabling neobanks to operate efficiently and grow sustainably.
