The rise of Neo-banks, also known as digital banks or challenger banks, has disrupted the traditional banking industry. These banks offer a modern, convenient, and cost-effective alternative to conventional banks, thanks to their advanced use of technology, particularly cloud computing and fintech in banking and finance.
To succeed in this evolving industry, professionals need to deeply understand these topics, making an MBA in Fintech an excellent option for those seeking to advance their careers in MBA.
Table of Contents
- 1 What Is a Neo-Bank?
- 2 How Neo-Banks Work
- 3 How Do Neo-Banks Differ From Traditional Banks?
- 4 How Do Neo-Banks Differ From Online Banks?
- 5 What Should Customers Consider Before Depositing Money in Neo-Banks?
- 6 Pros of Neo-Banks
- 7 Cons of Neo-Banks
What Is a Neo-Bank?
Neo banks are the latest iteration of banks, designed to be mobile-first and fully computerised. Traditional banks and service providers in India have joined forces to create digital banking platforms allowing customers to bank via mobile devices.
Neo banks are ideal for tech-savvy individuals who prefer digital banking. They offer numerous features and a user-friendly interface for everything from online payments to saving and investing.
Although still in their early stages in India, neo-banks represent a cost-effective, accessible, and efficient method of delivering financial services in the digital age.
How Neo-Banks Work
Most neo-banks are not chartered, unlike traditional banks, but partnerships between neo-banks and chartered banks are widespread. Your deposits may be protected if your bank is affiliated with a chartered institution.
Most neo-banks provide early deposit access and low or no-charge structures to serve all customers, whether they need financial assistance. Its strategy is entirely digital, and it includes user-friendly websites and intuitive mobile apps.
Neo-banks work to provide the ease, flexibility, and transparency that today's banking customers are increasingly looking for.
How Do Neo-Banks Differ From Traditional Banks?
Neo-banks differ from conventional banks in numerous ways, the most obvious of which is the absence of physical branches.
Neo-bank users use an app or website to deposit checks or send money instead of going to a physical location to complete banking activities.
Neo-banks naturally offer a modern, technologically advanced experience because technology businesses manage them. Several Neo-bank clients take advantage of extra privileges and perks like cheap or no fees, better interest rates, or early access to salary funds.
How Do Neo-Banks Differ From Online Banks?
Although both organisations let consumers create financial accounts and manage money online, neo-banks and online banks are sometimes mistaken for one another. However, there are significant distinctions between these two institutions.
Online banks generally move offline banking services online by digitising the conventional online banking experience. Neo-banks, in contrast, are managed by fintech firms and provide services similar to those of banks but not actual banks.
What Should Customers Consider Before Depositing Money in Neo-Banks?
Neo-banks are more similar to technology firms with banking partners than traditional banks.
- Neo-banks are fintech firms that the RBI indirectly governs. Customers risk facing legal repercussions because the RBI does not recognise neo-banks as "banks" in the event of a problem.
- Neo-banks only provide some of the services provided by banks and only offer a few items, such as savings accounts, minor loans, debit cards, etc.
- Clients may need access to a personal banker and must conduct all banking on their mobile devices.
Pros of Neo-Banks
Neo-banks, also known as digital banks or challenger banks, offer several benefits to consumers, including:
Neo-banks enable customers to handle most of their banking needs online or via a computer app, around the clock, without needing to go to a branch. High-rated apps from some top neo-banks may be found in app stores.
Applying for a neo-bank account might be more straightforward than a conventional institution. For instance, certain neo-banks don't look at banking history, so if you've previously had accounts cancelled, your account is more likely to be authorised.
Lower fees, competitive rates
Neo-bank providers, like internet banks, don't have to spend to maintain branches, and some providers pass the savings to clients. Low or no monthly service fees and the opportunity to earn high-interest rates are two ways the savings might be realised.
But be sure you are familiar with the provider's rules. Some neo-banks charge a fee for premium services, while others require a certain amount of monthly transactions to receive the most effective interest rates.
Before registering, examine the offer to see if it aligns with your spending patterns and financial objectives.
Better rates, easy account opening
Neo-banks often offer better rates on savings accounts and loans than traditional banks, as well as faster and more convenient account opening processes, allowing customers to open accounts and use their services within minutes.
These benefits make Neo-banks an attractive alternative for consumers seeking a more modern and cost-effective banking experience.
Cons of Neo-Banks
While Neo-banks have several benefits, there are also some potential drawbacks to consider, including:
Limited customer service
No branches mean little personal assistance. Several companies provide customer care over the phone or via social media. Moreover, they might offer online chat.
For simple banking queries, those alternatives can be helpful. But, if your account is blocked or closed due to fraud suspicion, you might have trouble contacting someone who can help you fix the issue.
Fewer account services
Although many neo-banks lack broader banking alternatives, such as the capacity to send wire transfers or conveniently take cash deposits, they do provide some digital banking services. They might also offer fewer accounts.
As indicated, a neo-bank might give a checking account but not provide loans, certificates of deposit, or other investment opportunities.
Neo-banks don’t have long track records. Many have opened only within the last few years, and they could fail, like any other startup.
Due to needing physical branches, Neo-Banks' success in the fintech sector rests on developing client trust and offering top-notch customer service through digital channels. Understanding cloud computing and fintech in banking and finance is crucial for anyone in this industry.
Imarticus Learning's MBA in Fintech by KL University is a program that covers these critical topics, preparing professionals to excel in the fast-paced fintech industry.
With a practical emphasis on real-world applications, the programme gives the practical experience and expertise required to meet the opportunities and difficulties presented by the developing fintech sector.