Bill Gates declared in 1994, "Banking is required, but banks are not." Fast forward to 2021, and neobanks are altering the financial environment with their low-cost offerings and technology, putting traditional banking under strong competition.
The financial services business is concentrating on client experience and happiness; there is a gap between what traditional banks give and what customers demand. Neobanks are seeking to fill the void. A neobank relies on a touch with no physical presence and a comprehensive digital offering. It provides a completely digital banking system at a reduced cost due to significant reductions in operating costs. This is due to the fact that there are no physical branches and no labour to staff such branches. International payments, money transfers, and credit loans are just a few of the options available. Some new banks also collaborate with neobank to provide services that enable them to provide both online and offline banking services.
There are about 2000 fintech businesses in India. With the government pushing Indians to adopt a totally cashless economy, Fintechs have played an important part in making this vision a reality. Furthermore, with the Covid-19 outbreak, individuals felt the necessity for contactless banking more than than before. People are increasingly interested in online banking and wallets, as opposed to traditional banking and real currency. The advent of UPI accelerated its acceptance, allowing for transactions of any size. In terms of volume, India has already surpassed China and the United States in 2020, totalling $25.5 billion.
Minimal cost: Because of the bank's extensive digital presence and low regulatory obstacle, products as simple as savings accounts are offered at no cost.
Higher interest rate: Because the entire experience is digital, the low cost structures of neobanks allow them to provide profitable fixed deposits at an appealing interest rate.
Convenience: UI/UX is crucial to a neobank, persuading users to swiftly embrace it. Furthermore, thanks to cutting-edge IT systems and security measures, any fraudulent behaviour may be predicted and stopped at the appropriate moment.
Reduced processing time: Imagine asking for a loan and having it handled in minutes rather than days.
Neobanks bring with them the opportunity to shorten processing times that would normally require days and manual underwriting by bank staff.
Low-cost internet and a tech-savvy youthful population are causing major shifts in how banks are regarded. Emerging fintech businesses that offer exceptional services in multiple areas of India and are making an impact by boosting financial inclusion for the masses are focusing on national marketplaces.
Neobanks eventually evolve into full-fledged banking organisations by providing a range of services ranging from account opening to travel credit card sales.