What are Neobanks?

Banks have been an integral part of every economy that has ever grown, because these institutions help stimulate the economy using loans and help with daily transactions using various means like cheques, wire transfers, etc.

But many traditional banks take up a lot of time to process many of the transactions they are there to help with. Plus, they take a considerable amount of fees to do so. Also, visits to the physical branches of these banks are many a time very time-consuming and repetitive.

Due to the fast growth of tech over the last few years, most of our work now gets done in minutes to hours. But sending our own money to someone can still take up a number of days. So the fintech world devised a solution to tackle these problems: neobanks.

Neo-banks are entirely online-based digital banking platforms. In other words, they do not have a physical presence at all. Customers can easily sign up for accounts on their website/App and use their services.

Since there are no physical locations to pay for, the fixed cost for them is low and they can offer low-cost services to customers. These neobanks have apps through which they claim most services can be completed in a matter of minutes.

But in India, RBI requires physical presence in order for you to get a banking license. So these neobanks don’t act as the banks themselves, instead, they rely on partners to offer the financial products/services. What neobanks offer on their own is the technology, which can obviously keep improving. The most popular ones in India are Jupiter Neobanka and Niyo Neobank.

There are shortcomings too: since there are no physical branches, you as a customer cannot have a personal relationship with your bank. And complete digital presence means in case of a cyber attack, all of your data might be in trouble.

So would you trust a neobank over traditional banks right now to take benefit of the speed and low cost? Or wait for regulation to get stronger to ensure safety? Anyways, thanks for reading! And while that’s it for this article, you can more articles from me here. And do let me know if you want a specific topic covered! Subscribe for free to receive more posts like this every day!