Neobanks- New revolution in the banking industry
Neobanks offer the whole banking experience,and have all the possible features and qualities of a traditional bank, minus the physical branches. They are financial technology based, and greatly emphasise on the maximum ease and convenience that banking could possibly offer.
They are different from the digital banking atmosphere because while digital banking is a subsidiary of the physical branches, neobanks exist on their own, and have considerable autonomy and control over their day to day functions. They do not have a banking license of their own, and therefore have to rely on partnerships with traditional banks for licences based services, which in no way impacts thro autonomy.
Neobanks are the new revolution in the banking industry because they have an edge over physical traditional banks in the sense that they are aware of the shortcomings in traditional banking, and therefore can better enable their system to provide a solution to those problems, making themselves more efficient and reliable.
One of the features that neobanks offers is virtual cards. These are temporary card numbers, similar to your usual bank cards, that allow you to make transactions in the neobanking space. Virtual cards were introduced to make transaction safer and more secure owing to the fact that this card number expires after every transaction. The user is supposed to generate a new one for each of the subsequent transactions.
United Kingdom is the pioneer of neobanks and has enabled one of the most successful startups like Fidor (a German Bank), Revolut and Monzo (UK banks) to obtain licences from the government and begin their operations as fully-fledged neobanks. Very few countries grant banking licences to neobanks but the situation is bound to get better.
The Indian government does not have policies set in place yet that would give neobanks banking licences and therefore they have to exist in partnerships with traditional banks. One of Asia’s first neobanks is Open, which was founded back in 2017. It offers many services such as invoicing, simplified payment gateways, expense management, automated accounting and bookkeeping, etc. Its main traditional banking partner is ICICI bank, along with 11 others.
Looking at the impact Covid-19 had on the banking industry and on the economy as a whole, and how swiftly companies have tried to shift their operations to the online mode, the neobanking sector is bound to experience a boom, with hopes of ease in Indian policies in granting banking licences.