Digital Payments leads to the growth of Neo banking

Today banking business brings a dynamic shift starting from the products offerings to services offerings and built on disruptive technologies are increasingly being placed in the hands of end customers, and the behaviours of banks are changing in terms of customer convenience, transparency, pricing and customer service. As customers' behaviours and expectations change, so do the business and operational models. Gone are the days when we had to visit a bank branch on a working day and stand in a queue to make any transaction.

The advent of technology has completely changed the way of doing banking transactions. Although traditional banks are trying their best to adopt technology, they lag behind the fintech based new generation financial institutions or 'Neo banks'. Neobanks brings various financial services and products which were either scarcely available or came with heavy fees and stringent agreements. Neobanks are digital banks that provide specialized services and optimal customer experiences. They are known as 'Challenger banks' as they offer stiff competition to established players in the financial landscape.

People get confused with Neo banks as digital banks. Both are similar as they offer banking services through smartphones and other devices. But that's where the similarities end. A report says, the global Neo bank market was worth USD 18.6 Bn in 2018 and is expected to accelerate at a CAGR of around 46.5% between 2019 and 2026, generating around USD 394.6 Bn by 2026. The substantial growth potential for Neo banks is driven by their low-cost model for end consumers with no or very low monthly fees on banking services such as minimum balance maintenance, deposits and withdrawals.

Adoption by millennials, micro, small and medium enterprises (MSMEs), and those having sporadic incomes and earnings, embracement of innovative technologies and rising consumerism are some of the catalysts for the success of Neo banks. The high adoption rates and successful business models of Neo banks has piqued the interest of investors. Not only have neo banks made the banking transaction faster, they also offer hosts of other things that make managing finances easy. In India, virtual banking licences are still not granted, though there are foreign national banks offering digital-only products through their Indian subsidiaries.