Intro to article
Neo banks are banks that operate and provide banking services entirely and exclusively online. They operate online entirely without any physical presence.
They are the answer to the problems that the banking industry struggles with today, as they aim to provide a fast, easy and seamless banking experience. With the increasing recognition and rapid adaptation, Neo banks have marked the beginning of a new era in the Fintech industry.
At present, the neo bank landscape can be classified into three broad categories:
- The first type features that non-licensed FinTech that has partnered with a traditional bank. In this type, FinTech utilizes a wrapper around the various services and products of its partner bank.
- The second type is when a traditional bank launches its digital-only initiative in the form of neo banks.
- The third and last type is the neo bank that has digital banking licenses. However, this type of neo banks exists only in those countries that permit stand-alone digital entities.
According to Business Insider Intelligence global neo banks count 39 million users today, and this number is expected to surge to 98 million by 2024, with the actual number of accounts being roughly twice the number the users.
Neo banks are the next new phase of banking and it is important to understand it from inside and out in order to make the most out of all that it has to offer.
NEO BANKS VS TRADITIONAL BANKS
While traditional banks date back to almost decades ago, Neo banks are a very recent addition to the banking and fintech industry. The fundamental difference that exists between the two is the location.
Traditional banks serve through their physical standing and could cover several locations by setting up branches, whereas Neo banks (or digital banks) operate completely online without any branches.
However, traditional banks too cater to customers online through their websites and apps which are known as digital banks.
Different neo banks have different levels of services that they can offer due to the different type of license it may have or rather lack having. Their traditional counterparts have full bank licenses to offer every service.
Neo banks rely on technology for their functioning thus making the approval process of banking automatic and faster, as otherwise, each request has to be handled manually which makes it lengthy and time-consuming in the case of traditional banks.
PROMINENT NEO BANKS IN INDIA
Owing to the multifarious benefits of neo banks, there seems to be a promising rise in the number of neo banks in India. Few notable ones are as follows:
FREO: FREO is the first credit-led neo bank designed to cater to the target audience in India and South East Asia.
FREO’s vision is to bring consumers freedom from non-digital financial services and provide simple, intuitive, and smart ways for people to access credit and manage money with ease on their phones. [FREO]
RazorpayX: Neo model-based financial service platform helps business owners and finance teams automate the manual, repetitive financial task and provide insights into money flow. It aims at easing all types of pay-outs including:
- Refunds for customers.
- Salary pay-outs with automated statutory payments such as PF and TDS.
- Vendor pay-outs with automated TDS payments.
Bharat ATM: With an ever-increasing user-base, Bharat ATM has been successfully delivering banking solutions that one could need right from opening a bank account, sending or withdrawing cash with zero charges, easy loans and investment options with high returns.
Bharat ATM highly prioritizes its user’s privacy and security. This platform is one of the top players in the Fintech field as they focus on providing a transparent, delightful & hassle-free neo banking experience.
WHY SHOULD YOU CHOOSE NEO BANK
- Faster functioning: Neo bank provide the fastest way of completing all your bank transactions as every action is a fingertip away. The process is made much faster as the data is directly fed into the smartphone and is less time-consuming as it is not impacted by the availability of the employee.
- Easy international payments: Payments at an international level require an international debit card upgrade. But in the case of neo banks, there is no need for such up-gradation and international payments can be made hassle-free.
- Advanced security: Neo banks assure a greater sense of security despite the usual fear of the general public when it comes to making online monetary transactions, as these banks employee 2FA (2-factor authorization), biometric authentication, RBAC (Role-Based Access Control), encryption technologies, and other security measures to secure consumer data.
- Records accountability: All the accounts and the related transactions are automatically updated into the system which ensures transparency. There would be digital receipts maintained which might be useful for future reference and clarity.
- Low cost: Neo banks are free from operational and major labour costs as they don’t own any physical branches. This is a major advantage as it allows them to allocate their funds towards better technological enhancements. This also the reason behind only a little or no fees charged by them.
- Convenience: With every action being digital, there is no requirement for visiting any of the branches of the bank to carry out the activities. Customers can easily use the banking services through their smartphones.
- Customer orientation: Neo banks have given great importance towards running apps with responsive, crisp, and easy to operate interface to ensure that comfort is not compromised, if not enhanced. User-friendliness is one of the strongest fortes of Neo banks and they are known to provide highly customized and personalized services. The customers can even get their issues resolved faster as the AI is equipped with all the necessary data to assist the customers or get the customers in contact with the responsible personnel immediately.
FUTURE OF NEO BANKS
Neo banks are redefining conventional banking. Although, with the uncertainty of events and time, a bank that is ready to serve despite time and/or locational constraints is a much-needed step in the right direction.
This can be supported by the data that states that online banking is used by 68% of Indian consumers (as of September 2020), in the post-COVID-19 world, 48 percent of respondents expect to use contactless payments.
Neo banking in India has scope for significant growth as MSMEs in the nation can avail the services offered by them on a large scale. With the help of the digital inclusion initiative, neo banks can even tap the underbanked population of India.
Currently, Neo bank operations are subjected to certain limitations in the Indian ecosystem. If the right bugs of this Neo banking model are fixed and the model is tailored according to the Indian needs, the future looks rather promising for Neo banks and all the possibilities that it opens up for the world of banking