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What Is Neo Banking And How Does A Neo Bank Work?

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What Is Neo Banking And How Does A Neo Bank Work?

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Over the years, my experiences with banking have evolved - just like banking, in general, has evolved. Neo banking in India - a fairly new concept - is looking to bring changes to this ecosystem. Gone are the days when I had to visit a bank branch to get a Demand Draft prepared to pay my college fee. Now I can transfer all sorts of fees and payments online, and most of my banking transactions are carried out digitally.

I remember how my grandfather accompanied my sister and me to the nearest bank branch and introduced us to the concept of savings with banks. Sure, we had learned those concepts at school earlier, but actually visiting a bank branch and opening a savings account carried immense significance and was incredibly empowering. 

So drastic has the degree of change been in India's banking landscape that we now have digital banks and Neo banks. There are quite a few differences between neobanks and traditional banks, but the ones you’ll see the most are that Neo Banks are not strictly speaking banks, they offer a host of financial services. Like e-tailing companies, Neo banks in India provide their services only in the digital space. This allows them to operate on a low-cost model. 

If you have a savings account with a Neo bank in India, you will be able to transfer money to and from the account, earn interest on the amount in the account, make online payments through the account, etc. 

Neo banks in India are still very much in their nascent stage. With the increasing emphasis on the benefits of digitalisation, Neo banks are certainly one giant leap toward the future, signifying an approach to delivering and using financial services that is swift, cost-effective, and highly accessible. 

What is a Neo Bank?

To keep it simple, a neo bank is a digital only and mobile-first bank. In India, service providers partner up with traditional banks to create a digital banking platform to give customers seamless banking on the go. Neo banks work best for tech savvy and cashless individuals who are comfortable with a digital only bank. From online payments to saving and investing, neo banks are generally feature packed and super convenient.

How do Neo Banks Work? 

Before we begin, let’s explore the meaning of a neobank in India. Neobanks are generally digital banks which work completely online. They don’t have physical branches and all you’d need from the bank is on an app. Currently, RBI regulations recognise that neo banks aren’t actual banks. While they can ease banking services by taking them online, the banking will be operated through a traditional recognised bank. 

Neo Banks in India offer various essential financial services digitally. If you plan on availing their services, there is no tangible office that you can visit. You have to open an account online and digitally avail of their financial services. 

Once you open an account with a Neo bank, you can use their mobile app to carry out various transactions, ranging from bill payments to online purchases and money transfers to savings management. 

Since Neo banks are a relatively recent phenomenon, it is natural for customers to have curiosity and confusion as to their workings. Although it is easier for people who are used to online banking to comprehend the conceptual framework of Neo banking, it may be challenging for those who are used to associating a bank with a tangible branch. 

The operations of Neo banks in India are driven by technology, most prominently Artificial Intelligence Technology. Since Neo banks do not have any physical branches, their entire service framework revolves around leveraging technology to provide high-quality and highly customised banking services to their customers. 

Neo banks in India have not yet been permitted by the Reserve Bank of India (RBI) to hold a banking license. Therefore, they are, strictly speaking, platforms that offer financial services through their banking partners who hold a banking license. One of the key cogs in the machinery of Neo banks is their focus on innovation. 

Neo banks are constantly looking to evolve and better utilise technology to offer a seamless experience to customers. The absence of having a physical office to provide their services gives them the added advantage of low operational costs.

Gaining Customer Trust - An Uphill Climb for Neo banks

The stars of Neo banks in India look promising and brimming with potential. However, the biggest challenge for these platforms is gaining customers' trust. Understandably, most customers may find it difficult to trust an unfamiliar entity over banking names they have known for years. 

However, the top Neo banks in India have time and technology on their side. Owing to their low-cost and customer-centric operation models, these platforms can gradually build a customer base. However, offering financial services against those with decades of brand equity and customer trust is an uphill climb that will require time and quality service delivery.

Join the Neo banking revolution with Fi

If you’re looking to avail digital financial services, you can open an account with Fi. Fi is all about simplicity, making financial services simple through our mobile app. We aim to help you 'know your money, grow your money, and organise your funds'.

Your Fi digital savings account comes with a VISA debit card. You can make payments using UPI, NEFT, IMPS, debit card, and QR code scanning. What’s more, your deposits up to Rs. 5 lakhs shall be insured. And most importantly, your data with us is in the safest hands possible.

So what are you waiting for? Hop on to manage money at your fingertips with  Fi. Not only will you be engaging in an ecosystem driven by the power and brilliance of the latest technology, but you will also get a chance to be a part of something different and innovative!

Frequently Asked Questions:

Here are some Frequently Asked Questions About Neo Banks in India.

1) What is the meaning of Neo bank?

A Neo bank is an entity that provides banking services to customers. Since Neo banks in India have not yet been issued banking licenses by the Reserve Bank of India, they offer services in collaboration with a licensed bank.

2) Can Neo banks accept deposits?

No, Neo banks in India cannot accept deposits or offer any loans on their own. The activities of accepting deposits and lending are reserved for entities with a banking license. Since Neo banks do not have a banking license, they can neither accept deposits nor issue loans on their books.

3) How do Neo banks work?

Neo banks offer several financial services digitally through collaborations with licensed banks in the country. They leverage technology, innovation, and a low-cost operational model to provide high-quality and personalised services to customers.

Time to switch to Fi. Smart banking and only that.
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