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'13,564 and 13,930 crores, 36,075 and 26,127 crore'. Confused about what are these numbers? These are the bank frauds and the amount involved in them in the financial year of FY23 and FY24 as per the RBI report. As these numbers are growing like trees in the Amazon rainforest, experts are looking for a way to safe and secure processes in the banking sector. I can hear what are you trying to say, yes the answer is 'Neo Banking Solutions'.
They are known as the future of banking, by providing advanced features for consumers as well as companies. In this blog, we will learn about what Neo Banks are, their standout features, how they differ from traditional and digital banks, and their popularity in the digital banking sector.
Bill Gates once said, ‘Banking is necessary, Banks are not’. We can connect his quote with this revolutionary banking system. Neo Banks are fully digital, branchless banks that operate entirely online without any physical presence at low cost. They offer banking services exclusively through mobile apps or web platforms. They provide a lot of financial services, including savings accounts, loans, money transfers, debit cards, investment options, and more.
Statista report says the Neobanking market is projected to reach a transaction value of $6.37 trillion in 2024, with an expected annual growth rate (CAGR) of 13.15% from 2024 to 2028, resulting in a total projected value of $10.44 trillion by 2028. Sounds interesting, right? Now let’s see how it differs from traditional banks.
‘The success of any evolving technology is, how it makes it easier to do things’. It also applies in neo banking solutions. Other than a traditional system, it offers more convenient banking for people.
➤ User-friendly UI:
Neo Banks are known for their simple and attractive user interfaces. Their apps are designed to be easy to use, even for people who aren’t very familiar with technology.
➤ Easy Account Management/Creation:
Opening an account with a Neo Bank is usually quick and easy. Customers can often do the whole process online, without needing to fill out forms or visit a bank in person.
➤ Savings Accounts:
Traditional banks often involve lengthy waits and slow processes, but neobanks fasten the experience with their online platforms.
➤ Top Security:
Even though Neo Banks operate online, they make security a priority. They use advanced technology to protect customer funds and personal information from fraud.
➤ Fast Processes/Service:
Neo Banks are famous for their speed. Transactions happen quickly, and customer service is often available right away through in-app chat or other online methods.
➤ Online Bill Pay Services:
Many Neo Banks offer easy online bill payment options, so customers can handle their finances more efficiently.
➤ Credit Cards:
Certain Neobanks even provide high-limit, unsecured credit cards that are dependent on a company's success.
➤ Real-time Insights:
Neo Banks gives customers instant updates on their spending habits, helping them keep track of expenses and make better financial choices.
➤ AI-Powered Financial Insights:
Some Neo Banks use artificial intelligence to provide personalized financial advice based on how customers spend their money.
➤ Personal and Business Loans:
Neobanks offers a variety of loan services, including options for individuals and startups.
➤ Challengers:
New banks offer only digital services and aim to provide a better experience than traditional banks. They don’t have physical branches. For example, Monzo is a challenger bank that operates entirely through its mobile app.
➤ Fintechs:
Technology companies that provide banking services, often by teaming up with traditional banks or getting their banking license. Revolut is a fintech neo-bank that offers a range of financial services like currency exchange and investment options through its app.
➤ Incumbents:
Long-established banks that create their own digital-only or app-based banking services to keep up with new, digital-first banks. HSBC provides modern banking through its mobile app, in addition to its traditional branch services.
➤ Big Tech:
Large tech companies that add banking services to their existing products. They use their large customer base and technology to offer financial services. Apple Pay is a big tech service that allows users to make payments and manage transactions using their devices.
➤ Banking as a Service (BaaS) Providers:
Companies that offer the technology and services needed for other businesses to create their banking products. They provide the backend infrastructure while other companies handle the customer-facing aspects. Synapse is a BaaS provider that helps businesses offer banking services through its technology.
➤ Non-licensed Neo Banks:
Digital banks that don’t have their banking license but work with licensed banks to offer financial services. Chime is an example of a non-licensed neo-bank that collaborates with banks to provide its services through its app.
Neo Banks work entirely online using advanced technology to offer banking services. To set up an account, you just need to download the Neo Bank's app or visit their website. You’ll verify your identity with government IDs and complete a few easy steps.
Once your account is ready, you can manage your money directly through the app or website, such as transferring funds, setting savings goals, and tracking your spending.
With Neo Banking Solutions, you can pay bills, buy things, and transfer money with just a few taps, often faster and more clearly than traditional banks. Even though they operate online, Neo Banks follow the same rules as traditional banks.
After covid-19 breakout, India has seen an increase in the popularity and use of Neo Banks, with top companies making notable strides in the market. Let's check out some of them. Entrepreneurs in fintech can also launch neo-banking solutions like these by partnering with a Neo Banking Solutions Provider.
➤ PhonePe:
PhonePe is a widely used digital wallet and payment service that lets users perform various transactions. You can pay bills, transfer money, top up your mobile, and access a range of other financial services.
➤ MobiKwik:
MobiKwik is a digital wallet and payment solution that enables users to conduct online transactions, recharge phones, settle bills, and shop with affiliated merchants.
➤ RazorpayX:
RazorpayX offers features like managing vendor payments, handling payroll, setting up current accounts, using credit cards, accessing capital, or dealing with forex.
1. Neo Banks provide 24/7 online access to banking services from anywhere, making them very convenient.
2. They usually have lower fees than traditional banks, saving users money.
3. Their easy-to-use apps and real-time financial insights offer a better user experience.
4. They lead in innovation with AI-driven insights, personalized services, and quick transactions.
1. Neo Banks may not offer all the services traditional banks do, like in-person support or a range of loan products.
2. Being entirely online means any tech issues or outages can affect service access.
3. Changes in regulations can affect their operations or limit their services.
4. Without physical branches, users who prefer in-person interactions might find them less convenient.
Last but not least let me note down a report that was submitted by the Finance Minister of India. It says the country recorded about 131 billion UPI transactions in FY24 with PhonePe (a Neo Bank) leading the industry with a 48% share. Now we can see the dominance of Neo Bank Solutions in the future of our banking sector.
Recently RBI banned Paytm payments bank for money laundering and KYC non-compliance issues. As an entrepreneur, or a fintech business owner everyone must learn about the regulations surrounding the industry. Because Warren Buffett used to say, 'Banking is a very good business if you don’t do anything dumb'.
