Finance

EXPLAINED: How the rise of Neo Banking is benefitting the banking system

Updated : December 29, 2020 10:10 AM IST

Neo banks offer solutions in ways that conventional banks do not, with the key objective of providing a smooth customer experience.

The Neo Banks are virtual banks that are operated online. A bank that's completely digital instead of being physical. Neo banking provides a complete experience of digital banking through mobile applications.

Neo banks offer solutions in ways that conventional banks do not, with the key objective of providing a smooth customer experience. They are cheaper, quicker, and can leverage a single network with the entire financial portfolio.

It's no secret that conventional banks are at the frontline of increasing rivalry from many digital world areas. Neo banks are expanding exponentially, leveraging state-of-the-art technologies to win over consumers who expect financial services that are easier, quicker, and more efficient. Neo-banks have been the next big thing in fintech in recent years.

Neo banks have the following five segments:

They run on targeted customer segments that are not the concerns of legacy banks, such as SMEs, tech-savvy millennials, and low-wage classes.
Higher running expenses and expenditures in the capital when there are no actual divisions.
Higher fees/charges and fast retention of customers.
Built with technologies from the cloud.
Specialised financial systems, such as payments, expenditures, receivables, and control of expenses.
Neo banks also focus on forex cards, credit cards, cash processing, cost management, corporate banking services, and loan products globally.

The customer service of Neo Banks depends on a mix of chatbots and AI to provide flexible, automated, online support. In contrast, conventional banks rely on customer support in person or by telephone. Since neo banks are fully digital, a customer opens up a large window of benefits.

Reasons why neo banks are the need of the hour

Hassle-free banking services

In a conventional bank, everybody understands and has been through the pain of opening an account. Of course, this approach has become more straightforward, but still, the rigidity is not gone. Creating an account with new banks eliminates this tediousness.

Neo bank, as mentioned, is a fully digital bank, removing the likelihood of a storefront. So, without going anywhere, users can create an account. Neo bank is entirely mobile-friendly, making this process simple, and the account is ready in a very short period.

Soothing user interface

Neo Banking is all about customer experience, as mentioned above. This customer-oriented banking facility offers an interface that is highly user-friendly and easy to understand and run. Neo banking apps are responsive, crisp, and consumers need them to be well crafted.

Innovation-first attitude

Traditional banking has to follow a creative mentality instead of merely keeping track of the ever-evolving modern landscape. The industry will expand immensely by prioritising innovative technologies, from educating senior executives to hiring digital-first experts.

Advanced security level

When it comes to digital purchases, security is and always will be the most worrying aspect. 2FA (2-factor authorisation), biometric authentication, RBAC (Role-Based Access Control), encryption technologies, and other security measures to secure consumer data, are introduced by the Neo bank program.

Supporting Clients

Neo banks provide their clients with round-the-clock customer service by leveraging chatbots and robo-advisors that provide automated advice based on their purchase history. Artificial Intelligence (AI) based algorithms allow neo-banks to unobtrusively tap emerging consumer demands and deliver personalised solutions that better suit their needs.

The neo banking path ahead

New-age fintech, technology firms, and non-banking entrants have begun to expand sustainably with competition mounting among conventional banks. Neo banks, however, manage critical impediments in terms of laws, legislation, and enforcement. Sight, cyber defence, API integration, and innovative software and services are the essential elements of their performance.

By offering a comprehensive solution for all banking needs, these banks have widely opened the doors to smooth incorporation into APIs. This is a crucial time for banks and financial institutions to benefit from technological expansion and transform the old-fashioned operational structure of banking with the new-gen neo banks.

Neo banks are now growing in India and disrupting conventional banking models. Their prominence has grown in a comparatively short period, becoming the future of banking. In turning India digital and providing customers with a comprehensive, analytical-oriented, and all-in-one kind of banking experience, neo banks will play a key role.

—Kapil Rana is the Founder & Chairman of HostBooks Ltd. Views are personal

EXPLAINED: How the rise of Neo Banking is benefitting the banking system

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