By Anita Suri
Gone are the days when people had to wait for hours in long queues at the banks and deal with massively complex paperwork. The emergence of tech-enabled banking services has changed the financial landscape, expanding the reach of banks. However, despite the significant progress in financial services, around 80% of the population remains underbanked. It deprives them of the opportunities and security of formal financial inclusion. To address this issue, more banks have started partnering with neobanks to increase banking access in tier 3 and tier 4 cities, as well as villages across the country.
Essentially, neobanks are new-age banks that do not have a physical location and only have an online presence. They present a transformative solution to bridge this gap and provide access to banking services for the underserved. These digital-native financial institutions are reshaping the way individuals and businesses interact with their money. With their customer-centric approach, seamless automation, and affordability, neobanks have swiftly gained popularity, offering a good alternative to banking methods that involve visiting the banks.
Neobanks facilitating financial inclusion
As neobanks operate entirely online, they overcome the limitations of physical bank branches. This accessibility is especially beneficial for individuals who may have limited access to physical branches of banks due to geographical or mobility constraints. Neobanks leverage widespread mobile technology, enabling them to reach a broader customer base, including those in remote areas. They offer multi-fold benefits to users.
Seamless banking experience:
Neobanks prioritize delivering a smooth and user-friendly banking experience to their customers. Through innovative mobile apps and online platforms, they offer convenient solutions for various financial activities such as payments, money transfers, lending, and more. Their focus on customer experience allows them to cater to the unique preferences and requirements of each user, enhancing satisfaction and loyalty.
Simplified account opening:
Neobanks offer entirely online account opening processes, eliminating the need for customers to visit physical branches. Users can sign up for an account using their mobile devices or computers. Once approved, individuals can have immediate access to their accounts and start making transactions right away. This encourages more people to take control of their finances, build a credit history, and actively participate in the economy.
Real-time credit score monitoring:
Usually, people can check their credit scores anytime and anywhere through the app. This empowers customers to stay informed about their credit health, understand their financial standing, and take necessary steps to improve their creditworthiness. Timely access to credit scores can be a valuable tool for making informed financial decisions.
Tailored loan and credit card offers:
Neobanks frequently offer exclusive loan and credit card options to their customers. Through personalized lending, they can assess individual creditworthiness more effectively and provide tailored financial products applying like personal loans, home loans, auto loans, gold loans, as well as Kisan credit cards that suit the unique needs of each customer. This personalized approach can result in better loan terms and credit card rewards.
Customer support:
Neobanks prioritize providing round-the-clock customer support to their users. This ensures that customers can receive timely assistance whenever they face issues or have queries related to their accounts or transactions. The availability of customer support through various channels enhances customer satisfaction and instils confidence in the banking experience.
Bridging the gap between banks and remote geographies
According to the guidelines set by RBI, banks hold the authorized license to handle all monetary transactions. While banks have the authority, their physical branches aren’t accessible to everyone. At the same time, neobanks face challenges in navigating the complex Indian regulatory landscape. To optimally navigate the regulatory challenges and ensure financial inclusion, neobanks collaborate with banks to provide consumer banking services. This collaboration ensures compliance and provides customers with a seamless banking experience even beyond the urban belt of the country. Operating within established regulatory frameworks not only instils confidence in consumers but also fosters further growth and acceptance of neobanks in the financial market.
India’s young population is driving the growth of neobanking. According to the NASSCOM, 52% of the country’s population comprised GenZ and millennials, as witnessed in 2021. This demographic is majorly tech-savvy and usually comfortable using digital channels. With the increased convenience of neobanking, there is greater potential for a shift from physical banking models to digital banking services.
Way ahead
Neobanking represents a progressive step toward addressing the challenges of financial inclusion. As these innovative digital banking platforms gain momentum, they have the potential to expand their range of functionalities and services over time. However, to ensure long-term viability, neobanks must demonstrate sustained profitability.
At the same time, they need to continuously innovate and diversify their product offerings while maintaining a keen focus on regulatory compliance. By striking a delicate balance between customer-centric innovation and adherence to regulatory frameworks, neobanks are poised to play a pivotal role in creating a more inclusive and accessible financial ecosystem for all. Moreover, the growing demand for credit in the MSME and retail sectors, and increasing access to the internet, create a favourable environment for neobanks to flourish and extend their services to a broader customer base. By 2027, the neobanking sector will potentially have more than 21 million users.
(The author is Anita Suri, Head – Strategic Relations, Manipal Technologies Limited, and the views expressed in this article are her own)
