Since the evolution of the human race, Finance, Economics and Banking have significantly developed. From quasi banks and grain loans of Babylonia to the establishment of modern banks – humankind has thrived in the progress of the banking sector.
However, the question here is, has the banking sector progressed since the 19th Century? Of course, technology has transformed the way banks function. But, over the years, legacy systems or Core Banking Solutions (CBS) have undergone cycles of change, to meet a wide range of requirements. Due to the complexity, switching to newer systems isn’t an easy task for the financial giants.
The Dawn of Neobanks:
While the bigger players in the financial sector have been struggling to keep up with the pace of digitization, another set of players called “Neobanks” have emerged in the fintech space. ‘Neobanks’ are 100% digital banks which offer services ranging from accounts, credits and payments without the burden of a physical network. Eg, Revolut, Monzo, Xinja etc.
Some of its key features are:
- Mobile App controlled without any storefront
- Free Debit Card with control over an App
- User-friendly interface consumer-centric
- AI-Based smart and real-time reporting
- Low-cost structure
What is so ‘Neo’ about them?
The branchless approach to banking reduces its operating costs significantly. Thus, enabling them to provide better and hassle-free services to their customers.
Some of the top-notch services offered by neobanks globally are:
- Digital Onboarding/Account Opening: Neobanks offer simple and fast online account opening in just a few clicks on their smartphone.
- Branchless Banking: All financial requirements of a customer are fulfilled digitally eliminating the need to visit a bank branch.
- International Payments/Remittances: They offer fee-less usage of their debit card in foreign countries at live exchange rates.
- Money Tracking/Account Aggregation: These banks provide an interface that helps users to spend, save, and manage their money.
- Lending/Credit Products: Neobanks can provide credit products at lower charges and interest rates compared to traditional banks due to their lower operating cost.
In addition to these banking services, some Neobanks also provide value-added services – Payment processing, invoicing and accounting support, investment/wealth management support, data analytics, etc. Neobanks have been succeeding in the international market such as the UK, Europe & the US for quite some time. They are now being recognized in developing countries such as India also.
Now, bouncing back to our question earlier, though the banking sector has progressed the digital wave has created a need for a revolution in the field. With the rise of neobanks, a revolution has already been set ablaze.