Neobanks, the new digital-only entrants in the fintech space, have been taking the industry by storm not only in India but across the world.
A neobank is a type of digital bank that does not have any physical presence. They entirely operate online and offer digital or mobile-only financial services to customers.
Here is everything you need to know about neobanks.
What exactly are neobanks?
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.
How do neobanks actually work?
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.
What are the advantages of neobanks?
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.
What about neobanks in India?
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.
Popular neobanks operating in the country
There are a number of neobanks that are currently operating in India, offering digital banking and other financial services to various types of clients. Some of the popular neobanks in the country include NiYO, PayZello, Yelo, InstantPay, and Open among others.