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With the COVID-19 pandemic, banking customers are wary of visiting branches. This has really given a booster to digital banking and Neobanks.

Neobanks, also known as Challenger banks or smart banks, are digital banks with no brick-and-mortar physical branches. The Fintech, which does not use legacy banking systems or pre-existing infrastructure, can be qualified as a bona fide Neo bank.

For a decade, neobanks are popular in Europe, Japan, US, and Australia. They have started their operations in India in the last couple of years. It will take some time before they become disruptive and transform the banking landscape. As of now, Neobanks, partner with existing banks because they do not have a banking license.

With no backlogs of legacy systems and out-dated business processes, Neobanks are considered highly flexible and adaptive to new technologies. Thanks to zero overheads of physical branches and manpower in those branches, they have an overall lower cost structure and are able to offer attractive interest rates for deposits and loans both.

Cloud-based Neobanks offer –

  • Omnichannel and Immersive customer experience
  • Contextual offerings
  • 24×7 Customer support using chatbots, AI and ML1
  • Scalable infrastructure
  • Highly automated services like auto reconciliation, regulatory compliance-ready reporting
  • Cash flow forecasting with AL and ML-based predictive alerts
  • Meaningful spending insights using AI
  • Open banking compliant API
  • Automated and digital workflow thereby optimizing processing time to a few seconds/minutes
  • ML-based Risk Analyser
  • Innovative features like goals-based savings
  • Niche service like payments, budget, receivables and spend management
  • Interest rate based on social media likes

Normally, Neobanks operates in targeted and un-served segments like neobank

  • Tech-savvy professionals
  • SME
  • Millennials and Gen Z, who are ready to adapt to new technology among others

Some notable Indian players are Open, NiYo, Yono, Kotak 811, PayZello, Instantpay, Yelo, India Post Payment Bank, EzoBank, and Zeta.

These Neobanks are here to stay and only grow in the coming years. They are going to set the futuristic trends in banking and disrupt conventional banking the way Airbnb, Uber, etc has disrupted the traditional models.

 

Author:

Biren Parekh

Vice President & Program Director

Intellect Design