NeoBanks: New Kid On The Block

Banking business is changing rapidly with the financial landscape of India shifting towards providing enhanced customer experience. Over time, Indian demographics have changed drastically with youth, especially millennials fast filling the workforce. Needless to say, there has been a sea change financial behaviour, which has impacted businesses to revise their operation model accordingly. However, since the change has been gradual, a gap has developed from what traditional banks offer to what modern customers expect.  

Neobank, a type of direct bank is making an attempt to fill this gap. It is an umbrella of financial service providers catering to modern tech-savvy customers. Neobanks are fintech firms providing digital and mobile-first financial solutions services. These include payments and money transfers as well as lending through online platforms and apps.

In 2018, the business sector accounted for a large chunk of the global market revenue of neobanks along with the growth in acceptance towards digital payments across organisations at their primary stages.

Unlike traditional banks, neobanks operate on a separate business model, more innovative in nature.

A financial technology solution, neobanks are driven by data to arrive at a decision-making process. These platforms are also tech-led, which makes collection and analysation of data and understanding customer behaviour within the neobanking ecosystem easy. Since they are completely online, there is no physical location, thereby reducing customers’ cost. Neobanks also offer personalised services, which will help the digital lending space to grow into $100 billion by 2023.

However, what are the advantages of these neobanks? How will customers benefit?

Here’s a look:

•    Hassle-free creation and transactions

The hassles everyone faces while creating an account in a traditional bank is quite daunting. While processes might have simplified, certain glitches still remain. With neobanks, one can even do away with those. It not only takes a few simple steps to create an account. Also, with neobanking cards international transactions are a cakewalk with current exchange rates.

•    User-friendly interface

Since the purpose of neobanks is providing phenomenal customer experience,  their apps are highly user-friendly. The ease of use is what makes the app such a hit among users.

•    Smart reporting

Transactions made via neobanks are immediate with transaction details populating instantly. It provides customers an up-to-date balance on the account, any time. The neo-app also shares an overview of expenses, along with a savings goal that can be customised to best suit requirements. This helps in managing finances in a more structured and informed manner.

•    Keeping pace with gig economy

With the advent of the startup sector and gig economy, the idea of pooled resources is by no means a novel concept; arrival of the digital space as a means for freelancers to connect with customers is a rapidly evolving. The major drivers of gig economy is increasing adoption of P2P sharing, increasing digitisation rates with increased smartphone penetration, and rising cost of living. Emerging markets are projected to represent a greater portion of the global gig economy with their increasing digital banking access and smartphone penetration in developing markets like India, Brazil, and Indonesia.

•    In-depth insights

Most neobanks offer dashboard solutions with highly enhanced interfaces and an ease in understanding the insights for services such as payments, payables and receivables and bank statements. They are striving to provide real-time notifications and explanations of any charges or penalties incurred by the customer.

As a result, the attribution and offerings like ease of access, cost-effectiveness, multiple banking and financial functionalities under one umbrella, and personalisation, drive neobanks globally. The way neobanks handle vital impediments in terms of regulation and compliance of data and cybersecurity, seamless API integration and exploration of products and services, will determine its growth in a sustainable manner.

Neobanks is one of the core financial tools providing niche solutions targeting blue-collared professionals with measures designed to detangle the challenges of banking and other financial services.

The author is the Founder of Avail Finance