Last Updated on July 26, 2023
It is rightly said, “Change is the only constant in life.” It is so because technology keeps changing every day, without us getting noticed. So, we present you with a phenomenal innovation known as Neobank. It has taken the banking industry by storm. Due to the competitive advantages, they are disrupting the banking industry!
Want to know about this innovation? Here you go.
What is Neobank?
The number of branches is the deciding factor for banks. But what if the bank has no physical presence at all? That’s where Neobank comes into the picture. They are the core of digital transformations taking place in the country.
It is a digital bank, which provides services like other banks. But here’s a catch. It doesn’t have any physical branch! You can consider them an extension of open banks. After all, why would anyone visit a bank? When they can transact at the click of a button. So, it is only natural that banks shift to digital banking. Neobank takes it to the next level. And eliminate the need for a physical bank.
In India, there are 10 Neobanks at present. ICICI was the pioneer who partnered with Neobanks such as Free, Instant Pay, and Yelo.
How does Neobank work?
Although they are similar to traditional banks, their business model says a different story altogether. Their profit is not limited to the difference in the lending and borrowing rates. As they are entirely online, they can save costs significantly. A study revealed that Neobanks were able to save up to 70% of their expenses. Due to this, the charges are much lower. But this doesn’t end here. The technology used enables them to offer personalized services to their customers.
You should have heard, “Data is the new oil.” Well, we don’t need to justify the statement. Due to their modern platform, the Neobank can collect and analyse data effortlessly. It helps them to make informed and data-driven decisions.
Neobanks are entirely digital. But Reserve Bank of India’s (RBI) regulatory policies do not permit a 100% digitized bank model in India. RBI has put some curbs for the purpose of security to the consumers. Therefore, these types of banks have to partner with a traditional bank.
Why Neobank is the Future?
The continuous technological advancements have led to a drastic change in the banking industry. Nowadays, customers don’t want the hassle of visiting a bank. And they don’t want to store cash physically either. That is why online banking became a hero among them.
The customers prefer their competitive advantages. In the US, 90% of customers are satisfied by Neobank. While the figure was 66% for the top 50 global banks. With the emergence of fintech giants like Paytm, entrepreneurs see immense potential in Neobank. As it overshadows the traditional banks for the following:
Advantages of Neobank
Effortless account opening process
Gone are the days when you have to follow a tedious procedure to open your account. Now, you can open a bank account without stepping a foot outside your home. And it takes just a few minutes to open an account.
You would have noticed the debit card charges getting debited from your account. It is painful to see. Not anymore. Neobank offers a free debit card. You can even freeze the card or change its PIN directly from your phone.
Neobank helps you to transact in the blink of an eye. Also, the transaction details and the available balance appear immediately. It even contains a record of all your transactions in the app only.
Are you one of them who gets frustrated due to technical glitches in net banking? If yes, then Neobank is your stress reliever. Their mobile app is responsive and well-designed to optimize customer interactions. You can also chat with them to solve your queries there and then.
What’s more, you can also make international payments without any additional charges, and that too at current exchange rates. So, you don’t have to face any problem with transactions, as long as you have your debit card.
This feature is the icing on the cake. Besides the above features, Neobank also helps you to manage your expenses and save money. After all, you can’t invest without saving!
The scam in bank accounts has become daily news. Although banks have taken adequate measures, the number of scams is not reducing. But that is not the case with neobank. They have features like 2-factor authentication and Role-Based Access Control. These features make it problematic for scammers and hackers to do their job.
Due to their immense popularity, they are constantly expanding. You will be surprised to know that the global revenue grew 43% annually over the past five years! Pretty enormous, right?
Neobank: Your Business Companion
All the above features relate to the customers. If you are a business owner, don’t worry. Here’s your share of cake:
Ease of business
Business owners are very busy. From arranging money to marketing the products, they have to see it all. On top of that, they have to ensure that they comply with the laws of the land. That is why they get frustrated when they spend hours on complex and buggy software.
So, they consider Neobank as the ‘right hand’ of their business. They simplify and accelerate their financial operations. In simple words, they can easily accept payments, manage their cash flows, and reconcile their transactions.
People rightly say, “Time is money.” By saving time in their financial operations, business owners can prioritize their work. It helps to improve the efficiency of the business, besides saving their valuable time.
Neobank also provides a unified platform to control and analyse their expenses and money. So, it helps them to manage their expenditure and the cash flows. To them, it acts as a mobile-friendly financial manager.
Superior Customer Experience
Imagine yourself to be a customer. Will you prefer interacting with a business that takes a long time to process transactions? Definitely not! Neobank helps the customers in having a superior experience. It not only helps to retain customers but also increases them.
As you know, word of mouth is the most effective marketing technique. Besides, it also helps to manage and track money movements for vendors, customers, and employees.
India is popularly known as the land of laws. A business has to comply with many laws such that the list is endless. What’s more, they can’t afford to violate them. But the majority of the small business cannot afford a Company Secretary either.
But this magnificent technology of Neobank takes into account compliance as well. That is why they help to automate the payroll process entirely. It makes business owners hassle-free.
The majority of banks are providing online banking services. But Neobank takes a step ahead. Their business model is better due to low cost and increased access to data. Due to its competitive advantages, it outweighs traditional banks in many aspects. Hence, it has become a preference among Gen Z customers.
Thanks to RBI, Neobank cannot function independently, unless they satisfy the regulatory requirements. So, they collaborate with a traditional bank. But the time is not far when RBI will realise the true potential and uplift the regulations. So, you can conclude that the future of Neobank will be bright.
Enalo is emerging as a popular neobank for SME and Freelancer in India. The fintech start-up is getting ready to kick start its business banking offerings for SMEs, Startups, and Freelancers. We promise to offer a complete digital banking solution in a box. It offers solutions like a Current Account, Invoicing, Payment Collection using integrated Payment Gateway, Bulk Payouts, Expense Management, Online Store, API Banking and Automated Accounting.