When we hear the word bank we instantly picture brick and mortar buildings, occupied by assistants and bankers. With digitalisation becoming universal, where almost everything is just a click away, neobanks come into the picture for consumer banking needs. What are neobanks and are they the future of the consumer banking world? Read on to find out.
What are Neobanks?
Neobanks are fintech firms or financial institutions offering financial services like payments, money transfers, and many more. They are also referred to as Challenger Banks or Open Banks. You could say they are digital banks without any physical branches. They leverage AI technology to streamline online and mobile banking. By adopting the latest technology, they are able to meet customer demands and provide excellent customer service. Neobanks are a hot ticket in both developed markets like the US, and Europe and emerging markets like China, India, and South East Asia.
History of Neobanks
The concept of neobanking emerged years ago between 2013-2015. Some of the first players started up in the UK and Germany like Monzo, Revolut, and N26. Some of the well-known neobanks are Monzo, Revolut, N26, and Chime. In India, top neobanks include Niyo, Razorpay, and Jupiter.
Services They Provide
Neobanks provide many services just like a traditional bank. Some neobanks partner with traditional banks to provide banking services online. Others that have their license provide full-fledged banking services such as checking accounts, saving accounts, credit and debit cards, cryptocurrencies, money transfers, currency exchanges, etc. They also cater to small and medium businesses and the process is much easier as compared to a traditional bank.
Neobanks vs Digital Banks
Neobanks and Digital Banks are two different institutions, with the only similarity being they provide online services for banking. Digital banks are an extension of a traditional bank, with the sole purpose of providing digital and mobile services. Neobanks are purely online, with no physical branches. All the services are available online without any human or face-to-face interaction.
Market Scenario of Neobanks
The global neobanking market is expanding and is expected to hit $333.4 billion by 2026. Grand view research reports that the global neobanking market size was valued at $47.39 billion in 2021 and is expected to grow at an annual average rate of 53.4% until 2030, reaching a value of $2.05 trillion. The Indian neobanking market was valued at $3.42 billion as of FY 22, expected to reach $11.65 billion by FY 25.
Neobanks serve as a bridge between traditional banks and evolving customer expectations. It mostly appeals to tech-savvy customers who prefer hassle-free banking procedures. They are changing the face of fintech and paving the way for a new system of banking. While some may prefer traditional banks over neobanks, both have their pros and cons. Society is ever-changing and the need for accessibility and speed has become the need of the hour, neobanks fit just right into the digital era.
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