Neobanks are nothing but digital banks that do not have physical operating branches. They provide services offered by traditional financial institutions using their net banking systems. So, in simpler words, if you have a CUB account or Citibank account then such banks will be having an offline presence and online presence in the form of CUB netbanking and Citibank netbanking, respectively. However, neobanks will not be having any offline presence, their presence only will be online. They have leveraged technology and AI (artificial intelligence) to provide you with customized or personalized services while minimizing their operating expenses.
In our country, Neobanks do not have any bank license, however, they are dependent on the financial institutions and partner with them to provide license services as RBI (Reserve Bank of India) has not till now permitted banks to operate 100 per cent digitally.
Neobanks – Operational architecture
Regulated
Indian Neobanks completely are fintech that is not regulated directly by the Reserve Bank of India (RBI). They partner with NBFCs and banks to offer their financial services through digital podiums.
Branches
Neobanks have no physical presence in India. They communicate with customers through digital mode. However, customers can still simply access physical branches of the partner financial institutions in the case of any issues or find a resolution to a problem.
Scope of the services
The services provided by the Neobanks are – bank account opening, applying for credit or loan facilities, insurance services, prepaid card services, etc. Neobanks, which serve MSME sector, offer solutions such as invoices preparation, expenditure management and payment management for vendors.
Permissibility
Neobanks in our country does not come with any kind of restriction on operations.
Compliance
Neobanks is not directly subjected to any RBI compliance. The tie-up with the regulated entities is basically governed by the Reserve Bank of India’s outsourcing, business correspondent guidelines, and master directions on digital payment controls. Guidelines apply to partnering regulated entities as well as applicability is based on the type of services provided by neobanks.
What are the benefits of using Neobanks?
- This is a simplified online procedure for opening accounts as well as customer onboarding.
- Neobanks provide a 360-degree view with the assistance of unified dashboards. This assists in offering key insights to customers on bank statements, due bills, etc.
- Neobanks come with a transparent fee and charges policy i.e., they do not impose any kind of hidden fees or charges on you.
- To enhance your engagement, Neobanks offer various other services like curated e-commerce, automated accounting, and tax filing.
- Neobanks’ services and products are protected by security and technological infrastructure.
What are the examples of India’s topmost Neobanks?
- Razorpay X
This was introduced in the year 2018. They provide services for online merchants and business owners to automate repetitive financial activities as well as manual tasks and offer money flow insights. They simplify payouts, providing credit solutions, and offer ledger support on business current accounts.
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Jupiter
This was introduced in the year 2019. They provide services like savings accounts, cash withdrawals, money transfers and lastly NFC prepaid cards. They provide a dashboard for monitoring your transactions and viewing your balances.
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Niyo
This was introduced in the year 2015. They provide zero balance accounts with distinct facilities like salary advance, accidental insurance, tax saver cards and forex cards, which assist you to track as well as claiming employee benefits.
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Open
This was introduced in the year 2017. Neobank is for startups and businesses and provides services such as deposit accounts, money transfers, debit cards, invoice management and offline and online provision for purchases.
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EpiFi
This was introduced in the year 2019. This provides digital banking services like prepaid cards, saving accounts, bill payments and money transfers. This assists in saving and allows you to earn interest on the same. Also, it gives you an insight into your transactions and budget.
The market size of the Neobanks globally is expected to increase to 333.4 billion USD by 2026. Neobanks have gained massive momentum and hold great potential to disrupt the financial and banking sectors. So, you see the banking business is changing swiftly. The provision of net banking and the features available by the financial institutions soon will be more to match the competition provided to the traditional banks by neobanks. For instance, suppose you hold a CUB account, so your CUB netbanking with time is expected to witness the inclusion of more benefits and features to make banking activities even more simple to give competition to neobanks.
Services and products rendered and the on-built disruptive technologies increasing are being countered as per the demands of the target audience and the banking behaviour slowly is changing to provide higher consumer convenience, transparency in pricing and better customer service. Thus, as the customers’ expectations and behaviour change, so is the operational and business models.
The convenience of operating and opening accounts, transfers, seamless payments, remittance solutions and various alternative means for evaluating credibility are a few of the crucial features that are basically attractive to micro & small companies as well as unbanked and underbanked customers like gig economy employees and freelancers. Neobanks have offered such segments access to various financial services as well as products, which were available scarcely or came with high-end fees and strict agreements or rules and regulations.
Neobanks vs digital banks
Neobanks and digital banks are not very much the same, even though they come across to be as solutions based on a mobile-first approach. While the terms are used mutually, note that digital banks often are online subsidiaries of a regulated and established financial player present in the banking field or umbworld. On the contrary, neobanks, entirely exist online with zero physical presence, in partnership with banks or independently. This allows, the neobanks to navigate as well as comply with the regulatory environment. So, neobanks, you see is the future. This is one of the rapidly growing digital technologies, owing to the experience, swiftness, and transparency they provide over traditional banks.
