What is Neobanking and what are the advantages of Neo banking. How Neo banking is the future and is different from traditional banking.
What is Neobanking?
Neobanks gained prominence in 2017, and their emergence posed a challenge to traditional banks. They are essentially digital banks that offer features and services similar to traditional banks. They are assisting customers in utilizing the benefits of the banking system digitally. Neobanks use technology and artificial intelligence to function.
They have not gained complete freedom in India because the RBI does not allow banks to be 100 percent digital. They don’t even have physical branches. Perhaps in the near future, Neobanks will completely replace traditional banks in India.
How Neobank works in India?
Because they compete with India’s traditional banks, Neobanks are also known as challenger banks. They make use of financial technology, also known as FinTech.
Currently, Neobanks in India are unable to obtain their own license. As a result, they must rely on other bank partners to operate and function.
The workings of a Neobank in India are evolving and expanding on a daily basis. With the advent of digitalization, Neobanks in India have the potential to become the primary banking system. People who are aware of their advantages are already utilizing them for their banking needs.
Few points that might help us to understand the Workings of a Neobank in India:
- In India, the banking system of neobanks is not autonomous.
- They run the system on a digital platform, such as a website or an app.
- Because they are digital platforms, many employers are not required to complete the tasks.
- The procedure is similar to that of a traditional bank, but it is digital.
Advantages of a Neobank in India
There is no doubt that digitalization has provided many benefits to Indian citizens. The digitization of the banking system is one such relief that many customers have experienced in today’s fast-paced environment. For developing countries like India, a digital bank in the form of Neobanks was required.
With the increased use of the internet, so has the use of internet-accessible banking systems. In the year 2019, the total number of internet users in India was approximately 625 million; in 2020, the data increased to 740 million users; and in 2021, the total number of internet users was approximately 840 million.
Let’s have a brief look at the Benefits of a Neobank in India:
- They offer affordable services. Neobanks do not charge monthly fees, and accounts can be opened for free.
- Your money is guaranteed to be safe and secure. There is no risk of theft because the cash is also digital.
- It saves time and is a simple process. Unlike traditional banks, Neobanks in India do not require you to wait in long lines. Everything happens in one place, so you don’t have to keep changing the counters.
- There is no need to carry cash with you at all times. You can keep your money in your digital bank and carry it with you wherever you go.
- Transactions are now simpler than ever. You can send and receive money at any time and from any location.
- They provide the advantages of a personal management system and fund assurance.
Aside from all of the advantages, they fall short in a few areas. Customers do not receive physical assistance, which may make it inaccessible to those who do not understand technology. They do, however, provide far superior services than a traditional bank. They are unable to provide all of the services of a traditional bank.
Top 10 Neobanks In India 2022
As we have already discussed the growth of Neobanks in India, we will now look at a list of already established and well-known Top 10 Neobanks in India 2022.
|Jupiter – founded in 2019||Niyo – founded in 2016|
|Fi Money – founded in 2019||OcareNeo – founded in 2015|
|ZikZuk – founded in 2020||Open – founded in 2017|
|Finin – founded in 2019||Kotak 811 – founded in 2016|
|InstantPay – founded in 2013||RazorpayX – founded in 2013|
Apart from these banks, many other Neobanks in India are loved by the customers and are growing every year.
Here are some examples of Neobanking:
- Razorpay X
- Jupiter Neobanking
- FI Money
Difference between Neobanks and Traditional Banks
The most significant distinction between Neobanks and Traditional Banks is that Neobanks are digital banks. These digital banks provide a limited range of products and services. Only 5 years of existence was insufficient to instill complete trust in its users. However, with campaigns such as Digital India, their potential is expanding.
Putting it all together to understand the differences between a Neobank and a Traditional Bank:
|Traditional Banks in India||Neobanks in India|
|They have physical appearance and branches.||They don’t have any physical branch. They have websites and mobile apps.|
|Connections with customers are face-to-face.||No physical connections and contacts. Every assistance is done digitally.|
|RBI approved licenses of all banking institutions.||RBI doesn’t approve 100% licensing of digital banks, hence their license is partial.|
|A very long and complicated process for everything.||An easy and quick procedure for bank account opening, transactions, and other processes.|
|Fees for services are high.||Service fees are low as compared to traditional banks.|
|They target everyone from general people to big businessmen.||They usually target small and medium business owners and the fast-paced youth.|
Traditional Banks Vs Neobanks: Which is better?
In terms of services, both types of banks are efficient in their operations. In Fact, both types appear to complement one another.
When it comes to user experience and preferences, it is determined by generation, perspectives, and needs. The younger generation has less time, and with the advancement of technology, we expect everything to be simple and quick. While previous generations believed in trusted processes and security.
According to a report, the number of Neobank customers in India has increased significantly, from approximately 7 million in 2018 to more than 20 million in 2019.
However, it is true that in order to survive, everything must evolve with time. In that case, the Neobanks in India stand a good chance of taking over the country in the coming years. Furthermore, the type of business you own may assist you in determining which bank type is the best for you.
Which is the first Neobank in India?
Freo is the first Neobank in India.
What does Neobank stands for?
Neo-banks are online-just monetary innovation (fintech) organizations that work only digitally or by means of mobile application. Basically, neo-banks are advanced banks with next to no physically branches.
Are Neobank safe?
Yes, Neobanking is as safe as Traditional banking.
Are Neobanks regulated?
Neobanks and the greater part of their product offering are not directly managed in India. In any case, they are dependent upon indirect regulations (through their associations with regulated entities), guaranteeing that their product offerings are in adherence to the administrative standards.
What are the advantages of Neobanks?
Low costs: Fewer regulations and the absence of credit risk allows neobanks to keep their costs low. Products are typically inexpensive, with no monthly maintenance fees.
Convenience: These banks offer customers the majority (if not all) of banking services through an app.