Neobanks -The next evolution of Banking

08 November 2022

Basics
  • Neobank is a digital bank without any branches.
  • A kind of a Fintech firm that provides digital and mobile-first financial solutions, payments and money transfers, money lending and more.
  • Neobanks don’t have a bank license of their own but they depend on bank partners to provide bank licensed services.
  • Neobanks are making an attempt to fill the gap between what customers get from traditional bank and what they want
  • Neobanks leverage technology and artificial intelligence to offer personalised services to customers while minimising operating costs.
  • Since customers are moving away from physical banks and physical cash to online banking and wallets, Neobanks can easily sustain themselves and turn out to be profitable.
  • Since Neobanks are completely online, the customers fees are slashed by a significant amount and they also provide personalized services to their customers.
Advantages
  1. Starting from account creation to transferring payments, everything will be managed through your phone.
  2. You can use your Neobankcard to make purchases or transact while you are abroad, with current exchange rates.
  3. Their interface is user-friendly, highly responsive and well-designed to suit the needs of a customer.
  4. The apps are designed in such a way that all the transactions are updated instantly which helps you manage your finances in a much better and informed manner.
Disadvantages
  1. RBI doesn’t recognise Neo-bank till date and hence customers may not have any legal recourse or standard mechanism in case of any issues.
  2. Customers don’t have access to in-person assistance due to no physical branch.
  3. Neobanks generally offer limited services than traditional banks.
How do Neo-bank Make Money:
  1. Major chunk of profits for Neobanks may be generated from interchange fees paid by businesses when Neobank’s card is used.
  2. Neobanks benefits from interest charges on deposits and account opening.
  3. A part of their earnings are from interest on ATM fees.

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