The advent of neo banking has changed the banking environment within a very short period. NeoBanks simply refers to a digital bank or a FinTech firm that has no physical branch of its own at any specified geographical location as do the commercial banks have. They neither have a bank license of their own nor are they required to comply with any of the banking regulations. Customers of NeoBanks conduct all financial transactions online such as mobile deposits, payment transfers, mobile budgeting tools, checking of statements without there being any brick-and-mortar building.
Puzzled, are you?
This gen-next Fintech application has caused disruption and changed how the traditional banking system has been conducted over the years. All transactions that you make are recorded online and intimation of the same are sent via emails and text messages. Having taken the world by a storm, these NeoBanks are the financial technology services which provide financial solutions for payments, transfers, lending, and such other financial services
Getting to the basics
NeoBanks are in a way our next-gen banking system where the customer experience is unlike a traditional banking setup. While all the transactions are recorded online and on a real-time basis, the amount spent and the spending patterns are plotted. Some of the key players in the NeoBanking segment include T-Mobile, DigiBank (India) by DBS, Fino Payments Bank, Paytm, Open, Yono, etc.
Digital banking vs Neo banking
Digital banks and neo banks are often used mutually, but are not quite the same. While digital banking is the online platform of the existing regulated bank, a neo bank operates on its own without being a subsidiary or a banking platform for any established bank. In other words, they operate independently or in partnership with the traditional banks, as a result of which they also comply with the stipulated regulations.
The ease of operation has led to a smooth transition from the traditional banking system to the NeoBanking system. To understand better, here are a list of pros and cons-
-Zero balance Savings Account online
-No hassle of visiting banks for any formalities
-Facilities such as Fixed Deposits, Recurring Deposits, Remittance services, etc.
-Low-cost structure with no monthly fees, withdrawal costs
-Tracking of spending patterns
-Intuitive budgeting, investment, and money-tracking tools
-Shows Balance and Financial position on a real-time basis
-Intuitive budgeting and money tracking tools
-Accessible to all
-Chances of overspending without there being any tab on the money spent
-A narrow range of services offered as there are no advancement of loans for buying homes, cars, home mortgages, etc
-Operational shortcomings due to inexperience and novelty
Boon for Small and medium enterprises
SME’s and micro-businesses can especially benefit as there is a growing acceptance of NeoBanks in our Banking Ecosystem.
- Several of the accounting functions, namely accounting, budgeting, taxation, reconciliation of statements on a real-time basis can take place at very minimal costs.
- A lot of the banking formalities, visits can be done away with as transactions can take place online.
- Automated services for GST compilation, invoicing, tax payments and record-keeping can take place right at the click of a button
Where to and how far?
The growth of the FinTech Sector during 2017-18 has piqued interest from investors, venture capitalists, and corporates leading to their investment at a very nascent stage. To put things in a nutshell, the use of superior technology and integration with several of the online tools has made it possible for users to operate from anywhere and everywhere. Businesses especially SME’s where significant costs are incurred, opting for NeoBanking can prove to be beneficial in ways more than one. Reduction of costs and overheads, saving on time, energy and manpower are some of the reasons why one would want to focus on NeoBanking in the future.