The Rise Of Neo Banking In The Fintech World

Fintech start-ups and companies have now come up with a convenient, hassle-free new age banking experience by launching the neo-banks. The usage of robotics, machine learning, and artificial intelligence has helped fintech companies to offer a wide range of solutions to the problems faced by the customers of traditional banks.

What Is Neo Bank?

The bank which operates without having any physical branch network, that is, the banking business which is carried out in the online-only model, is referred to as neo banking. Typically, neo banks offer a wide range of services like traditional banks. From opening accounts to assessing the creditworthiness of an individual or an enterprise, neo banks facilitate almost everything.

Many times, neo-banks and digital banks are used interchangeably. However, it is important to note that even though both the type of banks offer digital services only, the digital bank is generally an online-only partner or a subsidiary of a traditional bank. On the other hand, neo-bank is an independent financial technology company carrying out is business without any physical branch.

The concept of neo-banks has become an attraction for tech-savvy people who prefer managing their money through mobile phones or tablets as neo-banks offer higher interest rates and lower fees.

What are the Advantages of Neo-Banking?

1. Simple Account-Opening Procedure:?Even though the procedure to open a traditional bank account is less complex than before, there is enough paperwork and form filling required to open a bank account, and some banks even ask the customers to visit the nearest bank branch to open a deposit account. With neo-banks, the process is hassle-free and there is no question of customers visiting any branch to open an account, as it doesn’t exist! The account can be opened on a mobile phone in two to three steps.
2. Fewer costs:?Neo-banks save a lot of resources as there are no physical branches to take care of. Hence, there is no fee levied on withdrawals or any kind of annual or monthly maintenance charge?
3. Simple and User-Friendly Interface:?With superior technologies, neo-banks provide an enhanced customer experience. The applications and websites are very responsive, unlike that of the traditional banks where the net-banking websites are often filled with glitches and the mobile applications lag many times
4. A boon for MSMEs:?The process of disbursals to vendors and other stakeholders is long, tiresome, and sometimes a bit tedious. Neo-banks bring in simplicity; demystify the entire process by reducing the manual efforts required, and by providing unified platforms to monitor the money movement. Not only this, other services such as taxation, budgeting, and accounting to MSMEs are also rendered at low costs??

The Future of Neo-Banking in India and the World:

Neo-banks are at the forefront to revolutionize the financial services space, globally.

• Between 2016-2020, the neo-banking market has registered a CAGR of 50.6%
• By the end of 2020, the neo-banking market is projected to reach $50.2 million?
• The regions of Indo-Pacific and Europe are poised to provide excellent business opportunities for neo-banks if regulatory relaxations are provided by central bankers
• China is predicted to be the best country for the neo-banking business to thrive by 2025

Source: Razorpay

In 2019, digital transactions have grown by 383% in India; 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 (Source: PR Newswire). These numbers only suggest that neo-banks have a great potential to grow in India, similar to this the same opportunities lies in all of the developing nations out there; however, it is also important to understand the approach of neo-banks towards managing the hindrance concerning regulatory norms, data security, and API integration.??