Evolution of Neobanks in the Financial Industry

Neobanks bridge the gap between traditional banks' services and clients' changing expectations in the digital age. They are transforming the face of technology and may one day supplant traditional banks.

 

Many people can confuse neobanks with digital banks. Both are similar in that they provide financial services via cellphones and other devices. But that is where the similarities end.

 

How have neobanks evolved? 

 

Neobanks have emerged as formidable participants in the financial services industry, using cutting-edge fintech innovations to reimagine traditional banking.

 

Neobanks, which were once positioned as digital-only alternatives, have evolved beyond convenience to provide personalized user-centric services that appeal to tech-savvy customers. Their agile operations, strong security measures, and seamless integration of fintech solutions differentiate them in the competitive field.

 

Neobanks, which embrace concepts such as open banking and AI-driven data, have transformed the user experience, making banking more accessible and transparent.

 

As they spread globally, neobanks are leading the charge to promote financial inclusion and challenge traditional banking institutions. Their evolution represents a paradigm change in the sector, demonstrating the revolutionary power of digital banking for the modern customer.

 

A non-banking service provider may now access every aspect of the banking value chain, including what clients can and should expect in terms of banking services, thanks to its technological expertise and flexible and lean business strategy. Under these approaches, retail and small and medium-sized organization (SME) banking services are predominantly offered over the internet or other electronic means rather than physical branches. 

 

These non-banking service providers, known as neobanks, are challenging traditional banks' current status by providing lower-cost models as well as hyper-distinctive customer-centric service and experiences. Unlike traditional banks, neobanks are not bound by legacy systems, tightly integrated value chains, complex administrative structures, or stringent regulatory standards. Though non banks do not have their own bank licenses in India.

 

Also Read | What is a Neobank? How is a Neo bank different from a traditional bank?

 

India’s Top Neobanks

 

Though the initial neo-banks to operate in India were geared at corporate firms and users, numerous fintech companies have introduced them to the retail market with the goal of serving retail customers. So, without further ado, these are India's top neobanks.

 

1. Jupiter

 

Jupiter is a bank designed to provide modern digital customers with financial services that stay up with their needs. Jupiter, founded by fintech veteran Jitendra Gupta, allows consumers to quickly register bank accounts. They can also set their savings to auto-pilot mode in pots. They can also receive real-time analytics and a detailed breakdown of their spending.

 

Jupiter claims to offer zero balance account facilities and rapid help to its customers. Furthermore, it allows users to earn points on each transaction, equivalent to 1% of their debit card and UPI purchase amount.

 

2. FI Money 

 

FI Money is a forerunner in the neobank revolution, offering customers cutting-edge financial tools and services. FI Money, a leading fintech startup, has shaken up the traditional banking sector with its novel approach to personal finance. This neobank encourages financial literacy and autonomy among its users by emphasizing Financial Independence (FI).

 

One of FI Money's most significant features is its user-friendly mobile app, which offers quick access to a variety of financial services. The app offers a full platform for customers to manage their money on the go, from setting up an account in minutes to managing investments, budgeting, and tracking expenditure. This user-friendly design, together with robust security measures, ensures a safe and efficient banking experience.

 

3. ZikZuk

 

ZikZuk is an Indian SME neo banking business launched in 2020 by Raj N with the goal of promoting the growth of Indian SMEs. Among its products and services, ZikZuk provides founderscard, a credit card that enables business founders/entrepreneurs with the best credit scores by offering a variety of attractive perks. Furthermore, ZikZuk assists the firm founders in obtaining unsecured credit to meet their immediate capital requirements.

 

Entrepreneurs can use ZikZak to easily handle their business finances. ZikZuk also offers connected banking.

 

4. Niyo 

 

Niyo is a pioneering neobank that has taken the financial world by storm, propelling it to the forefront of digital banking. Niyo has emerged as a go-to platform for consumers seeking greater control over their finances by combining cutting-edge technology with a customer-centric mindset.

 

The seamless user experience is the heart of Niyo's appeal. The platform offers a wide range of financial services that are accessible via a single, easy mobile app. Niyo provides a wide range of financial options to fulfill a variety of needs, such as immediate savings accounts, foreign travel cards, and mutual fund investments.

 

5. Finin 

 

Finin, a modern netbanking firm formed in 2019, aims to introduce "a new approach to banking." The first consumer-facing neobank provides easy account opening and management with a full app. Finin, which is powered by cutting-edge Artificial Intelligence technology, also provides customers with insightful insights into how to enhance their finances. The company was just acquired by Open on December 14, 2021, which will provide value to Open and its network of SMEs.

 

Advantages of neobanks over traditional banks

 

The banking industry is changing rapidly. Products and services supplied and built on disruptive technologies are rapidly being placed in the hands of end users, and bank behavior is changing in terms of consumer convenience, transparency, pricing, and service. The business and operational models evolve in tandem with the changing behaviors and expectations of customers.

 

Listed below are some of the major advantages of neobanks over traditional banks 

 

1. Customer experience

 

Neobanks do not provide revolutionary banking services. Their services are comparable to those of traditional banks, but with a significantly upgraded and tailored customer experience. Neobanks have significantly leaner business models and superior technologies than traditional banks, allowing for greater ease and efficacy in services such as seamless account creation, round-the-clock customer service supported by chatbots, near-real-time cross-border payments, and automated accounting, budgeting, and treasury services enabled by artificial intelligence (AI) and machine learning.

 

2. Automated services

 

In addition to primary banking services, neobanks provide automated and near real-time accounting and reconciliation services for bookkeeping, balance sheets, profit and loss statements, and taxation services such as GST-compliant invoicing, tax payments record keeping, and reconciliation on mobile platforms at reasonable rates.

 

3. Deep insights

 

Most neobanks offer dashboard solutions with greatly upgraded interfaces and simple-to-understand and important insights for services like payments, payables and receivables, and bank statements. It is advantageous for organizations with large expenditures and an appropriate number of people to receive such insights, since it reduces expenditure while increasing productivity and revenue.

 

4. Transparency

 

Neobanks attempt to provide real-time warnings and explanations of all charges and penalties incurred by customers.Most neo banks offer simple APIs for integrating banking into the accounting and payment systems.

 

Also Read | What is Internet banking? Advantages and Disadvantages

 

Wrapping Up

 

Neobanks continue to disrupt the traditional banking sector, and the future of finance is swiftly changing.

 

Neobanks are altering the financial environment by embracing cutting-edge technology like artificial intelligence and blockchain. These digital innovators are posing new challenges to existing banks while also opening the road for open banking and financial inclusion efforts.

 

Neobanks' smooth user experience, flexible operations, and innovative offerings have resulted in higher adoption rates among consumers worldwide. As legal frameworks evolve to accommodate these fintech start-ups, neo-banks are set to transform banking and promote additional improvements in digital banking, mobile payments, and fintech security.

Also Read | How Banks Are Fighting Financial Crime