Neobanking In India Has More Than Doubled Up During Last 2 Years Of Covid 19

Neobanking is a contemporary financial method that is changing both the financial and fintech areas. Neobanks are digitalised banks with no physical branches, offering many pursued administrations contrasted with challenger and customary banks.

As neobanks makes banking very easy from home, it cannot be denied that the sector saw a tremendous growth during the Covid 19 pandemic. Expanded dependence on technology and social distance standards during the pandemic has pushed consumers to embrace digital banking rather than traditional banking to satisfy their monetary necessities.

Dr Jasmin Gupta, Co-founder & CEO, LXME said, "Neobanks can open a savings account in less than 5 mins, which usually used to take 3-5 days earlier. Neobanks can process loans in less than 1-3 hours, which earlier used to take 5-7 days.
Neobanks are able to reach geographies and segments left untapped by the incumbent banks much faster due to their digital nature, and hence we have seen them scale up at 10x speed."

"Neo-banks provide high quality, intuitive user interface which simplifies banking for users. From opening an account to raising service requests, users can do everything in a few clicks thus removing the need to visit bank branch and wait in long queues. Add to that 24*7 customer service and banking becomes very simple for the user.

On the safety side, neo-banks in India work in partnership witht he traditional banks and hence every neo-bank account has 5 lacs of insurance provided by RBI. Further, we use multiple techniques to predict frauds and take actions to prevent them. All this makes sure that user's money is safe and secure", said Swapnil Bhaskar, Head of Strategy, Niyo.

Boom in Neobanking during Covid Pandemic

Neobanking in India has more than doubled up during the last 2 years of Covid, especially 2021 saw the rise of Neobanks offering core banking services like savings, alongwith payments and lending. Today there are 35+ neobanks in the country. The neobanking model that exists in India right now is a partnership model where the neobanks tie up with the licensed banks to offer differentiated banking services to specified target segments such as MSMEs, women, millennials, etc.

"We have also seen very niche use cases coming up focused on teenagers, blue collar workers, gig workers, factory workers, salaried segment, rural segment, farmers, etc. This is what makes neobanks unique as they can offer target segment specific curated banking services to a large unbanked and underbanked population of the country. Niti Aayog has shared a proposal to the regulator for licensing neobanks in July 2022", said Dr Gupta. Covid enabled a long lasting shift towards Digital which is here to stay. Time is right for Neobanks in India to innovate, grow and scale up. The ultimate beneficiary is the end customer who will now get access to superior digital customer service without going through the hassle of visiting branches.

Actually when the pandemic struck, users weren't able to go out of their homes and hence digital banking was how they interacted with banks which made neo-banks all the more important.

Bhaskar said, "All major neo-banks in India launched their products in the past 2 years and have seen phenomenal growth. Niyo alone has 2 Mn+ accounts on NiyoX and Niyo Global products and continue to see significant organic traffic. Considering that neobanks have just started in India, the market is looking at 100+ per cent growth YoY albeit on a low base."

How can Neobanks bring a financial change?

As per World Bank’s Global Findex Report 2021, India is amongst 7 countries home to half the world’s 1.4 billion adults without access to formal banking. Women are more likely unbanked than men. As per NCFE National Centre for Financial Education, only 27 per cent adults are financially literate. Thus financial literacy and financial education are the core issues that Neobanks can solve digitally.

Swapnil Bhaskar said, "Neo-banks help in financial inclusion in two ways.

One by removing all borders. While the reach of bank branches is limited, digital banking crosses all borders. Niyo alone has onboarded users from 16000+ pincodes in India and continue to bring more and more users from Tier2+ cities under the banking fold.

Second by serving the unserved and underserved. Due to high costs of operating branches and limited revenue potential from the blue collared segment, banks in India have not been able to serve them well enough. Neo-banks are completely digital and hence we can serve every type of customer at low marginal costs. Niyo alone, through its Niyo Bharat product, serves 3 Mn+ customers and help them come under the banking fold."

Neobanking is also  turning out to be progressively famous among SME, MSE, and retail clients. Completely digitised account opening, free charge cards, moment installments, e-way bill age, individual budget warning, receipt the board, GST-agreeable invoicing, and bookkeeping incorporation are a portion of key highlights are inducing SME, MSE, and retail clients to pick neobanks over conventional banks and utilise its totally digitalised administrations.

Dr Jasmin Gupta said, "Since Neobanks offer target segment specific products and services, they are able to address the financial needs of these segments wholistically through their customised approach. Neobanks are extremely agile and nimble footed and can adopt and offer newer technologies quickly to their customer base. Thus Neobanks can revolutionise the entire BFSI space through their focused BankingTech, PaymentsTech, LendingTech and Wealthtech solutions. Neobanks provide unique Ecosystem based solutions which is the need of the hour."