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What Is Neo Bank, and What Are The Services They Offer?

What is a Neo Bank? 

It is a bank that operates 100 percent in digital mode and uses apps and online platforms to offer support to its customers instead of providing banking and financial services from physical branches. 

The rapid growth of Starling and Monzo lies in the fact that they have launched beta products and decided to operate with an e-Money license. The purpose of an e-Money license is to ensure that the customers’ deposits are not used for other purposes like lending out and so on. The FCA usually authorizes the license and ring fences deposits of customers. 

Many neo banks are evolving and seeing success. Many have also applied for a license for functioning in a full-fledged manner. Many Neo Banks like Tandem on Harrods Bank has acquired full licenses. More about Neo Bank India and its financial services and modus operandi is in the paragraphs below. 

Neo Banking platform – Know about Neo Banks in India

In India, Neo Bank does not have a license of their own, but they partner with other banks to offer their licensed services. This is because RBI or Reserve Bank of India does not support the idea of the banks becoming 100% digital. 

RBI’s unwavering approach has prioritized the bank’s physical presence and supported the presence of a hybrid model of banking with physical and digital modes operating simultaneously. 

On the one hand, the neo banks do not have the adequate funds or customer support base to override the traditional banks. However, they have one element that keeps them abreast: innovation. The Neo Banks can extend to their customers’ services that are much more prompt than traditional banks, usually partnering with conventional physical banks. 

According to a report provided by a fintech research company, as of 2020, Neobanks in India raised as much as $230 million. 

What are the challenges faced by Neo Banks in India?

By the year 2026, the size of the global neo banking market is expected to attain the $333.4 billion mark, with a CAGR of the compound annual growth rate of 47.1%. 

However, Neo Banks have their pros and cons. The secret of their success lies in the fact that they can offer successful solutions to a particular segment of customers, and by adopting the right technological know-how and business strategy and work culture, they can go a long way in the future. 

Pros of Neo Banks

The advantages they offer include the following-

The cost of digital banking is low the fact that their worth is low and there are fewer regulations to abide by the price is low. Products are not expensive, and there is no maintenance fee every month. 

  • Convenience 

All banking services offered are through the apps, at least the majority of the services at least. 

  • Speed and promptness

These banks will allow you to set up accounts fast and carry out the requests that are put forward. For instance, if you are applying for a loan, the application process can be skipped. 

  • Cons of Neo bank

These are the following drawbacks-

  • Regulatory hiccups

Since the RBI does not recognize neo banks officially, customers may not get legal recourse. 

  • Limited services

Compared to traditional banks, neo banks have lesser services to offer to their customers. 

  • Impersonal 

In-person assistance is not possible since neo banks do not operate physically, and customers do not get that personal touch in banking services. 

List of Neo Banks in India

Check out the list of Neo Banks in India below-

  1. RazorpayX – Was launched in 2018
  2. Jupiter – Was launched in 2019
  3. Niyo – Was launched in 2015
  4. Open Neo Bank – Was launched in 2017
  5. EpiFi – Was launched in 2019

Also Read: FOIR In Banking: Avoid Loan Rejection

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Daniyel Chatterjee
Daniyel Chatterjee
Daniyel Chatterjee is a Young Researcher in the field of Data Science & Analytics having research experience of more than 8 years. He has a Masters in Computer Engineering and currently serves as an Editorial Assistant in IGI Global, United States of America. Daniyel also holds honorary positions in the Associate Member of Institute of Research Engineers and Doctors, International Association of Computer Science and Information Technology, International Association of Engineers, Society of Digital Information and Wireless Communications.

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