#FinancialBytes: What are neobanks? Here's all you need to know

As mentioned earlier, a neobank is a type of financial technology firm that provides digital banking/financial services. Neobanks have no branches as they are not physically present at any specific location; they exist completely online.

Some of the services offered by neobanks include savings and current accounts, payments and funds transfer services, loans for individuals and businesses, expense management and budgeting tools, etc.

Simply put, neobanks are banks that operate completely on digital and mobile platforms.

There are two types of neobanks: those having their own banking licenses and others that partner with traditional banks/financial organizations to provide services.

They reach out to their customers through online or mobile applications and typically adopt Artificial Intelligence and Machine Learning capabilities to enhance the level of services they offer.

Compared to traditional banks, neobanks come with a number of advantages. They are easy to work with and customers can find all the products and services in one place.

Neobanks offer a better customer experience with user-friendly interfaces, more convenience, hassle-free payments, more transparency, easier loan approvals, low-cost or inexpensive products/services, and automated and near real-time accounting and reconciliation services.

As per the rules of the Reserve Bank of India (RBI), virtual banking licenses aren't issued in the country.

So, neobanks that are operating in India are currently outsourcing their banking responsibilities to banks or financial institutions that have the required licenses and are also forming partnerships with traditional banks. Some neobanks are offering improved services on behalf of existing banks as well.