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What is a Neo Bank and how is it different from a regular bank?

What is a Neo Bank and how is it different from a regular bank?

Neo banks are virtual banks. They are the  banks that are only operable online. The bank is not physical but is completely digital. 

Neo Banking is a technique to provide a complete banking experience but through digital platforms like a mobile application. 

Neo Banks: Facts-

Neo banks provide solutions in ways that conventional banks cannot do. They have a key objective of providing a smooth customer experience

  1. These banks are cheaper and quicker. 
  2. Neo banks have the ability to leverage a single network with the complete financial portfolio. 
  3. In short, Neo bank is a kind of digital bank with no branches. 
  4. Neobanks can be called fintech firms providing digital and mobile-first financial solutions payments along with money transfers, money lending, and more.
  5. Neo banks do not have a license of their own but they have banking partners to provide licensed services. 
  6. Conventional banks are at the frontline of increasing rivalry from the digital world. With neo banks expanding so quickly, their state of art technologies are winning over customers who wish the financial services to be easier for them. 

Neo Bank: Main Segments 

  1. They run on target customer segments that main conventional banks do not do. SMEs, tech savvy people and low wage classes are their targets. 
  2. They have lowered the fee or charges so that customers are retained well and fast. 
  3. The banks use the technologies from the cloud.
  4. These are specialised financial systems like payments, expenditures, receivables and control of expenses.
  5. These banks are also focusing on forex cards, credit cards, cash processing, cost management and corporate banking services and loan products.

Consumer Services of Neo Banks:

  1. The customer service of neo banks is based on artificial intelligence. For example chatbots and other such support provide automated online support. 
  2. In contrast to this conventional banks use telephonic or email services or contact face to face with the customers 
  3. Neo banks being digital completely provide for a large window of benefits. 

Benefits of Neo Banks 

  1. They provide trouble free banking on easier basis
  2. They provide a soothing user interface. Customers don’t have to work through a glitchy netbanking site anymore.
  3. They are highly responsive and well-designed to suit the needs of a customer. 
  4. They provide innovation first attitude to their customers and come with an advanced security level
  5. They have many mechanisms to provide client support

Significance of Neo Banks

In recent years there has been a massive drift in the finance industry. With more than 2000 fintech players in the country, digital payments are much endorsed now.

Consumers are moving away from physical banks and physical cash. They are inclining more towards online banking and wallets. 

Situation in India:

In India there are 10 neo banks at present. ICICI took lead and partnered with three of them namely- Free, Instant Pay and Yelo. 

Neo Banks have been divided into licensed and non licensed. Non licensed banks tie up with a traditional bank and provide their products while the licensed banks obtain their licenses and work on their own.

Currently in India neo banks are not allowed to hold customer deposits and they are not even being granted virtual license by the RBI since it maintains the stand on the need of physical availability as per its 2014 guidelines.

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FAQ

What is the major difference between a neo bank and a conventional bank?

Neo banks are only online whereas conventional banks are both digital and physical

What are the advantages of Neo Banks?

Neo banks are advantageous as they have a seamless online presence and provide hassle fee banking services at all times

What is the specialty of Neo Bank?

Neo banks are completely digital, there are no physical banks branches of neo banks

Is there Neo bank in India?

Yes there are 10 neo banks in India like Yelo, Instant Pay, Free etc

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