Neo Banking

Introduction

The banking system has been rapidly evolving when fintech has set its foot in the financial space. The operations and transactions have become much quicker than ever before. With just a tap, one can view their bank accounts and transact at the comfort of their home.

This is not the case with the traditional banking system, as it involves a lot of paperwork, documentation, and verification. Yet, these banking models have also incorporated the art of innovative technology, enabling the world to explore banking with a distinct eye. Now, what’s the difference between traditional banking models equipped with technology and digital banking models? Are neo banks anywhere close to the digital banking models?

Define Neo Banking

Neo banking is an online banking model that only operates digitally. Unlike the traditional banks, there’s no offline presence for the neo banks. If you are a digital savvy customer, then neo banking brings every financial service to your table.

The high-end technological attributes of neo banking makes it a unique business model as opposed to other banking models. Neo banks emerged to challenge the infrastructure of traditional banking. They use artificial intelligence and innovative technologies to deliver the banking services to the customers.

How does the neo banking system work?

The functionality of neo banking is entirely different from digital and mobile banking. The aforementioned banking models are backed by a main channel, whereas neo banks run wholly online. There’s no physical set up offices for neo banks like traditional banks that simultaneously operate digitally as well.

Neo banks use technology and AI models as their online support system to function and communicate with the customers. These banks are not licensed and RBI doesn't support financial services to be fully digital due to security and transparency reasons. So, these banks partner with other banking institutions to get the necessary services done.

The best part of digital models is that the processes won’t get stuck anywhere. Since the smart device users have been increasing rapidly over the past few years, the neo banking model has the upper hand in the financial horizon.

Characteristics of Neo banks

To become a Neo Bank user, all you need is a smartphone or any technological device and internet connection. The rest falls in place as and when you start diving into it. Some of the key features of neo banks are shared below.

• User friendly and convenient − Today, everyone has a smartphone and internet as well. As Neo banks are fintech models that only conduct their business operations online, it’s easy and convenient for the customers to use. You can get all financial products and services at one place. Customers don’t need to wait for long periods to get application approvals, which is in the case with traditional banking models. You can control, view, and order everything via the banking app.

• Easy processing − When it comes to the traditional banking approach, one process eats up a lot of time, where neo banking finishes the same in minutes. Say, you want to open a bank account, the turnaround time for this process could be 1-2 days. But the same process will be done in a matter of minutes with neo banking. Here, you can have all the information at your fingertips.

• One-stop solution − Whether you want to apply for a loan or credit card or open a new bank account, neo banking delivers it all with ease. It acts as a one-stop solution for all your banking needs.

• Amazing offers − Apart from regular banking services, neo banking brings amazing deals to the customers’ table. They won’t charge any fee for opening new accounts as well. They offer financial services at the least cost possible.

Pros of Neo banking

The operational cost to run a neo bank is comparatively lower than a traditional bank. There’s no physical presence for these banks as they are designed only for online banking purposes. Here are some of the advantages of neo banking.

• Swift and transparent − Neo banks enables you to carry out all your daily transactions and other banking activities like transferring funds, easy access to your accounts, lend money with a single tap, and much more. All these can be navigated and managed via a mobile app.

• No physical setup required − Neo banks does not need any physical location to set up backend or frontend infrastructure. This saves ample funds and overhead costs to the bank, which are given to users in the form of deals, cashbacks, and discounts.

• 24/7 availability − In traditional banking, the bank availability is limited to a period but whereas neo banking is available all the time. One can conduct their transactions anytime round the clock without any hassle. The AI bots take care of customer queries, keeping the customer engaged to the services offered by the neo banks.

• Secured and Safety − Unlike the traditional banking, neo banking instill upgraded and innovative tools into their systems, resulting in high-end safety and security of the accounts.

Cons of Neo Banking

• No personal support − Customer is always a king in every business and industry. Since banking business model deals with public’s money, customer expect face-to-face interaction and full transparency. In some financial cases, customers have to visit the bank to get it sorted. But woefully, neo banking does not have in person services. Apart from that, there are other class of people such as middle age and senior citizens who prefer personal conversations over digital interactions. The former mode builds a proper relationship with the banker, whereas, that’s not possible in the latter.

• Trust issues − Traditional banks are set up at various physical locations along with necessary infrastructure. It has gained popularity, confidence, and trust in people by offering diverse banking and financial services all these years, even to date. This is not witnessed in neo banking because it does not have any physical presence. In the earlier stages, people want to experience the operating features in real-time before jumping into online banking and financial services.

• No proper structure − Neo banking does not function under any authority or body like traditional banks. They don’t have any legal framework to operate accordingly. Due to lack of proper structure, there’s a higher chance of losing money upon bankruptcy.

Conclusion

Neo banking is simply an internet banking model that operates only digitally. Through this banking system, one can technically operate all regular banking transactions such as lending and depositing, withdrawing funds, etc. But what these banks lack is the physical presence, which frets most of the people to opt this banking system. Yet, its round the clock availability, swiftness and high-end security is what makes it standout from other banking methods.

FAQs

Q1)What makes users steer towards neo banks while traditional banks are still functional?

Ans)Neo banking is a state-of-art banking platform that enables users to run all financial transactions online itself. There’s no need to go the extra mile to get the job done. It’s safe and convenient banking method, especially for tech-savvy users. As they are able to save so much on physical set and other expenses, they deliver those gains to the users in the form of discounts, cashbacks, and other rewards.