NeoBank: Neo is short for new. These are modern banks that are only available online and have no physical locations. They offer digital financial solutions that are optimized for mobile devices, including lending, money transfers, and payments.
Customers are able to deposit and withdraw funds from them. They provide investment facilities, debit cards, and other services. Even lending and credit services are offered by them.
To offer financial services, the majority of neobanks collaborate with banks that hold banking licenses, as they are unable to function independently.
Key takeaways about neobanks
- A neobank is a financial tech firm that usually partners with a bank to provide federally insured bank accounts.
- Neobanks tend to have lower fees and more competitive rates than traditional banks.
- Since they provide internet-only banking services, in-person customer support isn’t available.
Merits of Neo Banks
1. Lower Charges
Neobanks don’t have physical branches, so they can avoid paying for things like infrastructure, rent, electricity, and other costs that eat into the profits of traditional banks.
Customers pay higher interest rates and fewer fees as a result of these savings. It also implies that neobanks have greater financial and human resources at their disposal to improve their clients’ banking experiences.
2. Ease of Use
Opening an account at a traditional bank is a tedious and time-consuming process. There are paperwork to complete and wait periods. Certain banks will even come to the customer’s house to confirm their address in addition to requiring them to visit the physical branch.
All of the information in a neobank is digital. While lounging on their couches at home, users can create accounts on their mobile phones. It only takes a few minutes to use the account.
Users can use their laptop or mobile device to perform tasks like checking a check that usually need to be done in person at a branch. This feature’s ease of use has grown in importance, particularly in the post-COVID world where people value comfort and safety at home.
3. Smoother UI
Increasing customer satisfaction with digital platforms was financial institutions’ primary strategic goal in 2018.
The goal of Neobank apps is to enhance online banking. Neo-apps are easy to use, strong, and visually appealing. Traditional financial institutions have been compelled to create their own digital products in order to stay up to date.
However, because traditional brick-and-mortar banks are not digital-first, their apps are hindered by lags and glitches. They are neobanks.
The greatest talent available can be hired by neobanks to create some of the fintech industry’s smoothest, most elegant banking experiences.
4. Lesser Restrictions
Neobanks are not real banks; the RBI does not regulate them, nor do they hold any banking licenses. They thus have a little bit more autonomy than conventional banking establishments. They are able to maintain low costs because they are not bound by the regulations and policies of legacy banks.
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Should I make the switch?
- How tech-savvy are you?
- Are you experimental, or do you prefer the tried-and-tested route?
Neobanking is for those who are adventurous and tech aware and want to get a head start in a rapidly expanding sunrise sector. Modern banking is novel. Though it is still in its early phases, it has the potential to completely transform the antiquated financial services sector.
These days, a lot of people are adopting digital payments; even roadside vendors selling tender coconuts have QR codes for payments! Neobanks are not the only ones spearheading this revolution!
The rise of digital payments in post-pandemic India is examined in our most recent report. The report states that there were over a billion online payment transactions in 2021—more than twice as many as there were in 2020.
Considering these numbers, we see that neobanks have tons of potential in India. With the government promoting UPI infrastructure and pushing for more businesses to adopt technology, it is only a matter of time before neobanks become mainstream.
Neobanking and Fintech
Neobanks are merely a small portion of the vast fintech industry. Any aspect of finance that has benefited from technological advancements is collectively referred to as fintech, or financial technology. Fintech is the umbrella term for any technology used in the financial industry, including demat accounts, ATMs, and instant online money transfers. Fin tech includes even computer programs created to assist with finance.
Fintech is the standard these days. It seems absurd to even consider making the trip to the bank to transfer money. Technology is advancing so quickly in the finance industry that it should come as no surprise that banking is rapidly going fully digital.
Hundreds of companies identify as “fintech firms”; these are companies that create computer systems, software, and apps for banking, investing, and lending
Top Fintech Businesses in India
- Paytm: Paytm is one of India’s leading digital payment platforms. It offers a range of services, including mobile wallets, online payment solutions, and e-commerce services.
- PhonePe: PhonePe is a popular digital wallet and payment platform. It allows users to make payments, transfer funds, recharge mobiles, and pay utility bills, among other services.
- RazorpayX: RazorpayX is a full-stack financial suite designed to support businesses with their banking needs. It has a product for everything a business might need – vendor payments, payroll, current accounts, credit cards, capital, forex, and so much more.
- PolicyBazaar: PolicyBazaar is an online insurance aggregator that helps users compare and purchase insurance policies. It offers a wide range of insurance products, including life insurance, health insurance, motor insurance, and more.
- MobiKwik: MobiKwik is a digital wallet and payment platform that allows users to make online transactions, recharge mobiles, pay bills, and shop at partnered merchants.
Neobanking for Businesses
We collaborated with the International Data Corporation (IDC) earlier this year to learn more about the difficulties Small and Medium Enterprises (SMEs) encounter as a result of their reliance on antiquated financial systems.
We discovered that SMEs that rely on outdated systems lose, on average, INR 67 lakh annually. Companies that use traditional systems frequently have to perform banking tasks by hand, which increases the possibility of mistakes, rework, and needless delays.
Businesses would greatly benefit from making the switch to neobanking, especially SMEs.
Neobanks are a component of the broader fintech revolution that is currently transforming the financial industry.
Founders can optimize all facets of their financial operations with all-in-one financial suites like RazorpayX.
- Save time, reduce manual effort and eliminate errors with instant payouts
- One single, powerful dashboard for all your money management needs
- Intelligent invoice generation for vendor payments
- Smooth integrations with all major accounting platforms
And more where that came from. Your business is in the future – it’s up to you to ensure your banking is, too.
Read also:5 Finance Innovations in 2023 you should know
Neobanks may work for some
If you’re looking for banking convenience and prefer doing most of your financial tasks online, a neobank could be a good choice. You could save on fees and even earn interest. But a neobank account is best for people whose accounts are mostly on autopilot and who don’t need to deposit cash, send wire transfers or use expanded account services.
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