Are you ready, Neo?
Is it just me or do you also feel that the world of finance, particularly the banking sector seems like a rabbit hole, as described by Morpheus in The Matrix? With multiple nuances, sub-layers, red-tapism, it seems impossible to comprehend the workings of this industry.
Given the number of bank-related scandals that have taken place in India and the world over, the level of trust we place in these institutions has deteriorated at an accelerated pace. To resolve some of these banking issues, there has been a spate of developments to regain consumers’ faith in the banking fraternity.
So Neo (for those who aren’t cinephiles – Keanu Reeves), you have two options:
To give some color around Neobanks: They are fintech firms that are 100% digital-only and have no physical presence. They leverage emerging technologies to bring the world of banking to your phones. However, they are different as compared to the digital banks, whereby the latter are often a digital division of an already established, regulated, and traditional bank. Neobanks, however, seek to cater to the tech-savvy consumers who are comfortable in managing their money using a mobile app.
Unfortunately, the Reserve Bank of India (‘RBI’) has not allowed 100% digital bank models in India, thereby restricting these fintech companies to have banking licenses. To circumvent this problem, they have partnered with traditional banks, allowing them to navigate and comply with all the necessary regulatory requirements.
Although you may wonder why would an established bank agree to partner with a newbie, right? Simple – since it is difficult for traditional banks to change their legacy systems, they tie-up with Neobanks who offer better solutions to consumers by using AI (Artificial Intelligence) and ML (Machine Learning), thereby enabling them to acquire new customers seamlessly. It is not surprising that while several traditional banks have tried launching their own digital arms, the user interface and experience is no match to that being provided by these sophisticated fintech companies.
But why Neobanks? The benefits of using the services of a Neobank is that it provides the best of both worlds – a conventional bank’s trust, protection, and security, in addition to the agility, creativity, and seamless comfort as that of a fintech. In the last decade, we have witnessed fintech companies launching their own wallets for ease of payments, thereby eliminating the usage of physical wallets, cards, and mostly cash. With customers getting more comfortable going online to conduct their banking tasks accentuated by the need to maintain social distancing because of the pandemic, increasing advancement of technology, neo-banking is here to stay!
The Neobank market is expected to explode in terms of earnings growth as well, from a meager $19 billion in 2018 to a whopping $395 billion by 2026, according to Zion Market Research.
Karte kya hai, aka Services –
Neobanks offer a wide variety of services –
To give you an example of the powerful tech behind Neobanks – imagine they transferring salary credited to your account to a liquid fund, and when your payment is due or you have some pre-planned investments (SIPs), the money gets credited back to your account, but this time with some additional gains? They use AI and ML to provide personalized and customized services to best suit your needs and requirements.
Neobanks rely on a data-driven approach to make better decisions since these days it is much simpler for these companies to acquire information and thereafter analyze the same, to better understand their users’ behavior online.
The services mentioned above are related to a consumer-front neobank. However, these companies also cater to businesses, such as SMEs. Neobanks such as Niyo, RazorpayX, Open, etc among others are paving the way for the wave of next-gen banking services in India. These fintech start-ups are giving age-old banks a serious run for their money, merely because they are attempting to bridge the gap between what the customer wants and what they are getting – convenience. We are living in the era of convenience – shopping, movies, work from home (albeit recently), gig market-place offerings from firms like UrbanCompany, etc., so why should we have to go and wait at banks to solve our problems? Thus, Neobanks.
You must be wondering what is the point of this article? Well, truth be told, I stumbled upon this topic by mistake but felt compelled to research a little about it. Interest aaya, toh socha share kar lu! You know how they say “Pyaar baatne se badhta hai!” Similarly, knowledge and information baatne se badhta hai.
But on a serious note, for those who are fed up with the conventional banking system, and are looking for a better way to make financial decisions, do give Neobanks a shot. Naturally, I am not implying that you make a primary account with a Neobank, but transferring a small sum just to see how it affects your life isn’t a big ask, right?
So, what (the hell) are you waiting for? Pop that RED pill already!
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of any agency, organization, employer, or any company. Fintuned Co. LLP shall not be held responsible in any manner whatsover, for any decision/action taken by readers on the basis of the content mentioned in the article. Readers are requested to exercise their best judgement before taking any decision/action. Fintuned Co. LLP shall also not be held responsible for any copyright infringement committed by the author in the process of writing and/or publishing this article and in the event any such offence is found, cooperate with necessary authorities to take remedial action
Thank you Yuva members for organising such a fun and informative lecture. We enjoyed it a lot. Meeting and learning from Mihir Sir was really an amazing experience. And this is not only our feeling but all the students enjoyed his lecture very much and look forward to many such events.