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What’s so neo about Neo Banking, the new buzzword doing the rounds?

Tech-savvy millennials prefer online wallets to physical cash and mobile-based financial solutions for seamless transactions. Add to that ‘neo banking’, a term and idea that’s fast gaining momentum. Are you ready for this next big digital disruption?

neo banks

Bill Gates once said “Banking is necessary, banks are not.” It could well be that Gates was talking about neo banks. Neo banks have gained the attention of the media, and FinTech entrepreneurs and customers looking out for a unified portal for all money-related matters. These are neither online wallets linked to your banks nor are they the internet or mobile banking that’s offered by physical banks. It is also not apps that merely allow paying credit card bills, buying insurance policies, or investing in mutual funds (think CRED, PolicyBazaar or Groww). Neo banks are digital but ‘virtual’ banks that have no physical location or branches. These include NiYO, RazorPayX, MoneyHop, and many others.

Neo banks can either be licensed, or partner with existing banks to offer services like customer deposits or other transactions if they don’t have banking licenses to operate completely on their own. Some banks also start their own neo bank services.

neo banks

Gaurav Agrawal, product manager at MoneyHop, India’s first cross-border neo bank says, “Banking in India has so far been a utility, and user experience has not been given due consideration. The traditional banking system still provides fragmented payment solutions, uses legacy infrastructure, lacks transparency, and good customer service with a deluge of ambiguous and inefficient processes. Neo banks, sometimes also called Challenger Banks, are trying to bridge that gap. These banks provide digital, experience-rich, integrated and mobile-first banking solutions.”

Why choose Neo banks?

A typical neo bank account comes with an app you need to download and a card. The app empowers you in ways by which you don’t literally need to visit a branch. In addition, these apps come loaded with advanced and smart features and provide great user experience. Typically, neo banks are of interest to those who do not have time to make branch visits, largely do web-based banking, or operate through multiple different platforms to meet their banking needs.

neo banks

These neo bank apps aim at:

  1. Quick and easy account creation/maintenance that can give you a hassle-free experience
  2. Fast and flexible payouts that accelerates fluidity
  3. Real-time tracking with balance update, expense overview, etc. and this can further help you in managing finances, investing, and setting savings goals
  4. Providing a single integrated platform that meets all sorts of banking needs of the customer be it saving, investing, borrowing or spending
  5. A unified portal with smart reporting which tracks all your money movement
  6. A single platform that helps service providers as well to analyse data and give you personalised services
  7. Mostly based on mobile platform, service providers bank upon innovative technology and user-friendly interface to be most responsive to its customers

What are the problems with neo banking?

For starters, there is regulatory concerns, and therefore a narrow range of product offerings due to these compliances not being in place. Winning customer trust is a common challenge as well, especially in the starting phase since neo banks operate on a branchless banking model.

All images: Courtesy Getty Images 

Yashi Das

Das is a writer and social media enthusiast who loves talking about investment and personal finance related subjects.