In India, Neo banks pays a significant part for the best few years; it is the Fintech companies disrupting the traditional bank environment.
Financial institutions are building the gap in the conventional banking system with tech-first solutions.
We will see how the neo-banks work and has a relationship with the traditional banks and the pro and cons.
Neo Banks
Neo banks are banks that operate online and do not have physical banks, They provide the services that physical banks provide, but they operate in a digital mode.
The idea of Neo banks began in 2013 and came in highlighted in 2017; known by the name of challenger bank, they are developing as a part of their parent banks that are physically located.
Neo banking experience banking online where the entire offering of services is virtual from the initial client, and the registration is like the basic banking options. It is innovative that involves the fintech and financial sectors.
They work through Artificial Intelligence and machine learning to provide personalized and customized financial services to the customer and lower the operating cost.
| Criteria | Neo banks | Digital Bank | Conventional Bank |
| Regulated by a Bank | Not Regulated by banks | Regulated | Regulated |
| Customer Support | Online | Online | In-person, Online |
| Banking License | None/Partial/Full | Partial | Full |
| Service Platforms | Web service and Mobile Apps | Web service and mobile apps | Physical Establishment |
| Application | Online | Online | In-person |
| Approval Process | Quick | Quick | Manual and time consuming |
Neo Banks different from Traditional banks
Traditional banks like HDFC, ICICI, Kotak, Axis, etc., have a physical presence with ATM outlets and bank branches.
These banks offer digital or net banking services that give them a minor edge over the neo-banks with an online presence.
The Neo banks have a less customer base than traditional banks, neo banks have a long run to raise their scale of business of conventional banks.
Traditional banks have significant deep funds compared to neo banks they lack since most of them are still in the stage of India.
Neo banks have more millennials, Gen Z, and you employees who want the new age Fintech services that traditional banks currently do not provide. However, the older generation, bigger corporations, and legacy companies will likely continue with conventional banking.
Neo banks different from Digital banks
Digital banks are the online subsidiaries of established banking and financial institutions. They have a larger financial institution. Neo banks only operate online and have no offline branches.
Neo Banks Function
The operation of the Neo banks is very different from the traditional or digital bank, which does not have physical branches.
They have the following functions.
- Neo banks offers customer tech-led banking services.
- The banking partner provides access to funds for lending and even offers to hold the customer’s funds.
- The Neo banks take care of the customers as it operates through the app, distributes the product, and ensures customer satisfaction and client servicing.
- Fintech companies generally collaborate with traditional banks to provide new-age banking services on modern, easy-to-navigate apps.
- Neo banks depend upon the customer’s data; they analyze customer behavior and provide better services.
- Neo bank does not offer a fee from the customer for first-time earners.
Benefits of Neo banks
- Low cost
- Speedy Services
- Easy Account Creation
Low Cost: There are no physical branches, credit risk, and the cost of running a new bank is low, resulting in higher revenues, unlike traditional banks.
Speedy Services: The neo bank allows the customer to navigate banks through the app and let the money transfer and lending transactions.
Easy Account Creation: Customers can create an account in a neo bank in only a few steps compared to traditional banks.
Conclusion
In this article is cleared the details about the neo banks. You should have easily understood about the banks and it is easily accessible. Hope this article should have help you.
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