Risks of the Neobanks’ Activities in the Conditions of the Economy Digitalization

Abstract

The operation of neobanks, as a new banking concept, is currently gaining great popularity. However, their activities are associated with specific risks that are not characteristic of classic banks. The inefficient risk management can harm not only the banks themselves but also customers as well as the entire banking system. The article aims to identify opportunities and threats in the resistance of neo-banks to risks against the background of companies' digitalization. The current study applied graphic, analytical research methods (determination of specific weight and structure fractions), parameterization methods using the matrix approach and linear functional dependence, and the method of strategic SWOT analysis. The application of advanced digital technologies enables neobanks to enhance their flexibility and ability to quickly adapt to changes in the market. The utilization of artificial intelligence allows neobanks to supply their customers with personalized solutions and services, which can increase customer loyalty and satisfaction. However, neobanks face specific risks that can negatively affect their activities and entail grave problems both for the bank itself and for its customers. The growing use of digital technologies increases the risk of cyber-attacks and unauthorized access to customer financial data. Given the above, neobanks should pay due attention to cyber security and ensure the highest protection of their customers’ data. Operation shortcomings, technical issues, and work breakdowns also present a considerable risk, as they can negatively affect the customer's trust and lead to the loss of business partners and reputation. Therefore, the success of neobanks depends on the ability to effectively manage these specific risks and ensure a high level of security for their financial services. The scientific novelty of the obtained results lies in the proposed parametric model for estimating the integrated neobanks’ risks drawing on the specified component risks. The research findings can be applied to elaborating a framework of project documents for promoting the development of neobanking while designing the neobanks’ risk management policy based on the proposed parametric risk estimation approach. The conducted study is promising in terms of opening up perspectives for future research, in particular as regards the effectiveness of neobanks’ risk management given the digitalization in the economic sphere.