Neobanks ant the next steps: the illimity case. Read the interview of Carlo Panella on Efma

Carlo Panella, Head of Direct Banking and Chief Operations Officer at illimity, describes how the organization has grown from a PowerPoint presentation just two years ago to a bank with over 600 employees today.

The demographics of neobank users are often surprising; it is not only young people who are signing up, but also older age brackets. What is the standard profile of your target customer? What has been key to your customer acquisition success?

At illimity, we are proud to be not just a neobank, but a new paradigm bank. These are banks with totally new business models and sustainable strategies. Illimity is a fully digital bank - on the cloud, fully modular, and data centric - and able to capitalize on new technology and with no legacy from the past. Illimity also combines the lean and agile nature of neobanks with the depth of offerings of a traditional bank.

This conscious strategy enables us to reach out to all sorts of people, from a wide range of different demographic backgrounds across Italy. Our bank's average customer is 44 years old, and we have a deposit balance 20 times greater than that of the average challenger bank. Our success comes from the breadth of what we offer, the user experience that generates positive word-of-mouth feedback and an advanced digital marketing approach. Our unique IT architecture also offers competitive advantages, and these will become even more visible in 2021 and beyond.

There is sometimes a perception that neobanks are convenient for travel purposes, but people maintain a different primary bank account for most of their banking needs. How do you convince people to use neobanks as their primary bank, where they keep a majority of their money and turn to for all of their financial needs?

I don't think this is really about having to convince anyone to use illimity. The strength and breadth of our services, and the stability of illimity's position speak for themselves. Indeed, in our first full year of activity, we surpassed our net profit goal, reaching €31 million (which corresponds to over 5% return on equity), registered strong revenue growth, and broke into promising new business areas, overseeing the UTP (Unlikely To Pay) portfolio market and setting up our asset management company.

Rather, I think the answer to the question depends on where you stand. We offer not only a payment service, but we have also created a fully digital value proposition that addresses most consumer needs.

While neobanks have shown impressive numbers in terms of customer acquisition, the transition to becoming profitable is proving more challenging. How do you make the necessary leap to becoming profitable while still maintaining the pace of your user acquisition?

Like all start-ups, neobanks have a two-pronged strategy. Firstly, we grow in terms of the number of customers up to a threshold that is deemed relevant and, crucially, sustainable. Once you have reached a sustainable and profitable number in terms of cross-selling, you can start working on the existing customer base in terms of pricing and new offerings.

That's what we're doing, for example, with our joint venture with HYPE, the largest open banking platform in Italy and co-owned by Banca Sella, a bank founded in 1886. HYPE continues to grow in terms of customer numbers, but at the same time is increasing its share of revenues.

The current costs and investments that illimity dedicates to open banking should be converted, thanks also to some of the projects currently being prepared, into a significant contribution to the profits of the Group as a whole.

Being a bank without branches, customers only interact with you digitally. How do you ensure an excellent customer service experience with interactions being 100% digital? Are there certain advantages or challenges compared to banks that need to manage physical spaces?

We take great pride in the quality of the digital experience we offer to our customers. With a younger customer base, it is no surprise that 80% of our log-ins actually come from smartphones. As an example of how we make use of the best fintech solutions, we have utilized artificial intelligence so that if a customer has a query, they can speak into the app, just as they would in a branch, to make the experience more user friendly and inclusive to those new to digital banking. They will then receive instructions and help on their query.

And to give another example, in terms of our text search function, we have created software that works in a similar way to Google, again for ease of use and in line with our customer-centric approach, to help our customers who lead busy lives and are on the go, using the app on their phones.

But we are not an app-only fintech either. Our customers can speak to expert staff in our contact centers, for direct help and with a human voice, whenever they wish.

How do you see your bank evolving in the next five to ten years? And more generally how do you see neobanks competing in the future banking landscape?

The banking sector is changing rapidly. We are even an example of this - two years ago, illimity was not much more than a PowerPoint presentation. Today, we have over 600 employees from many different industries and sectors, and we continue to grow profitably, despite having gone through one of the most economically challenging years in living memory.

In the next few years, banks will increasingly become an 'invisible enabler', embedded in other companies' business models. People will, of course, still need - and, no doubt, want - banks and the diverse products they provide. But the future of banking will extend far beyond the confines of any one bank's app or website to touch almost all of our daily activities. For this reason, the competitive arena may be much wider than it is now.