10 Main Reasons To Open a Neobank Account
Introduction
Welcome to the Future of Banking! and it’s called Neobanking.
Neobanks are revolutionising the world of financial services by providing a seamless and customer-centric banking experience by leveraging technology, through artificial intelligence and machine learning They are breaking the traditional banking mold, offering innovative and personalised solutions to their customers.
I strongly recommend that you should open a Neobank account. Whether you are a tech-savvy millennial or a busy professional, neo-banks are designed for you. These banks prioritize convenience, affordability, and accessibility. From opening an account in minutes to accessing real-time data, they are redefining how banking is done. However, before opening an account, you need to know more about this type of banking system.
In this blog post, I have mentioned the 10 main reasons to open a Neobank Account including their definition, function, and services they offer. Through this blog, I will also walk you through the application process and highlight the key features of The Top 10 Neobanks in India.
Table of Contents
What is a Neobank
A Neobank is a digital bank that offers services to its customers through a digital platform such as Mobile apps or web platforms. It does not have a physical branch at any location.
Neobank
Neobank offer an amalgamation of digital services to their customers such as
- Opening and operating a bank account digitally
- Payment Gateways
- Payment Banks
- Small ticket loans
- Ledger support
- Credit cards with add-on features and benefits
- Asset management
- Peer-to-peer lending
- Alternative Credit scoring
- White label solutions to non-retail customers like MSMEs
Neobank vs Traditional Bank
| PARAMETERS | NEOBANKS | TRADITIONAL BANKS |
|---|---|---|
| Structure | Neobanks are 100 % Digitalised financial service providers. They use Mobile apps and Web platforms to offer their banking services | Traditional banks are old and well established financial entities having a long-standing financial reputation They offer a variety of banking services through their network of branches to their sizable clientele built historically. |
| License | Most Neobanks don’t have a banking license. They are not directly regulated by RBI but are answerable to apex banks for their operations. They need to partner with a banking institution to offer services | Traditional Banks possess Banking Licences and are regulated by The Reserve Bank of India. They can provide a range of financial services, such as credit cards, loans, mortgages, current and savings accounts, and loans directly to their customers |
| Location | Neobanks doesn’t have a physical presence. They operate 100 % online through digital platforms | Traditional Banks operate through a network of branches located physically in major cities and towns. They even serve rural and far-flung areas where digital penetration is low or negligible. This gives them a wider base of operations. |
| Costs | Neobanks don’t have a physical presence as such their overhead costs are low. This helps them to offer higher interest rates on deposits and charge lower fees for their banking services | For Traditional Banks, maintenance of Brick and Mortar branches comes at a high overhead cost. Also, a large workforce increases operating costs. |
| Application of Technology and Artificial Intelligence | Neobanks leverage technology to provide quicker, more practical , and seamless – customer-friendly services. Banking procedures are automated using Artificial intelligence and machine learning | Traditional banks are conventional in nature. Because of their rigid regulations and procedures, they are slow to adapting Technology . As such, they sometimes struggle to adjust to their customer's preferences. This is particularly true for Public sector banks in India |
| Client Support and Customer Experience | Neobanks frequently offer high-value customer experience via live chatbot support through a 24 x 7 helpline. | Traditional banks being physically present provide in-person client care, but they are unable to provide the same level of accessibility due to their historical limitations in embracing and updating technology |
Neobank - Advantages And Disadvantages
Advantages :
- Customer Service through Digital Technology: Neobanks offer services that are highly personalised in nature. Having AI-enabled technology at their disposal, they offer automated Account creation, Digital Payment services, Budgeting, and expense tracking, Automated Bill payments, Investments, and foreign exchange transactions with real-time notifications and tracking and credit and loan approvals digitally.
- Automation of Services: In addition to providing primary banking services, Neobanks offers at affordable cost AI-enabled mobile platform-based automatic and near real-time accounting and reconciliation services for bookkeeping, trading, and Profit and Loss accounts, balance sheets, GST- compliant Invoices, balance sheets, and bank reconciliation statements.
- Transparency: Neobanks offer more transparency in pricing with fewer hidden fees. If any charges or penalties are imposed on a customer, they get real-time notifications and explanations. This builds a trust factor unmatched by legacy banks.
- Application and Integration of APIs: Neobanks integrate APIs with the banking system enabling seamless communication between the customers and the bank’s server systems. This API interface ensures seamless linking of different accounts, automates KYC at the backend and, also ensures automated account opening, card issuance, and fraud management on its platforms
- Dashboard Solutions: They offer dashboard solutions with highly advanced interfaces. Neo Banking Dashboard provides customers with an overview of all critical transactions and an account summary of bank accounts Customers can stay updated on their account balance, the status of deposited cheques, and other helpful information
Disadvantages :
- No Physical Contact: Neobanks have no physical branches, As such customers are not in direct contact with any bank official. This makes customer-bank relationships pretty impersonal lacking a human touch.
- Limited Services: Since Neobanks does not have a Banking license, they cannot accept deposits and lend to customers directly. This is a major limitation
- Security: They operate on a 100 % digital model. Although they use 256-bit encryption and are fully GDPR compliant, they are still susceptible to security breaches like running the risk of theft or loss of confidential data.
- Lack of Operations with cash: Neobanks cannot offer services like cash deposits due to the non-existence of physical branches.
- Cash Withdrawal Fees: Neobanks don’t always have their ATMs. So, they partner with banks that provide cash withdrawals but if you use an ATM out of the network, this can lead to higher fees being charged on usage.
How to open a Neobank account
The process of opening a Neobank account is pretty simple. Here is a general step-by-step guide to opening an account in a Neobank in India
- Download and Install the desired banking app
- Open the app and click on “Continue”
- Click on the option “ Allow “
- Enter your mobile number linked with your Aadhar Number
- Click on “Continue” and verify your mobile number
- Once verified, find the page that finds an option to continue
- Click continue and enter your Pan number
- Enter the Aadhar number for e-KYC
- You will be prompted to enter an OTP for verification of e-KYC
- Enter the OTP received on your Registered Mobile Number (RMN)
- Once verified, select the option to upload a self-video
- Enter Father’s name, mother’s name, and E-Mail
- Select occupation, marital status, and Annual income ( If Any )
- Select “Add Nominee”-optional
- Verify all particulars entered and click continue
- Create a new “MPIN” of your choice and verify. Once verified, Tap “Done”
Now, it will take a few minutes and your account will be opened. The above steps are basic and general in nature. Please refer to respective banking apps for details about account opening steps and procedures.
Neobank Credit Card
Neobanks offer credit cards that can be either virtual or physical depending on the type of card one chooses. A virtual card is a card that exists online and can be used for online transactions only as compared to a physical card which can be used for offline transactions as well.
Neobank credit cards offer certain advantages over traditional credit cards such as lower annual fees, lower interest rates and late payment fees. They also offer higher rewards and cashbacks on various categories of spending such as travel, dining, entertainment, online shipping etc
Neobank for Students
A student can also maintain a Neobank savings account . Such an account offers many benefits such as Lower or no fees, user-friendly interfaces through intuitive mobile apps, convenient accessibility, and personalised financial tools to track their expenses and save more. Some of the Neobanks that cater to students in India are Akudo, Family, Walrus etc
Top 10 Neobanks In India
The Top 10 Neobanks in India are
| Name of Neobank | Founder | Banking Partner | Zero Balance Account | Savings Interest Rate |
|---|---|---|---|---|
| Jupiter Money | Jitendra Gupta | Federal Bank | Yes | 3.05% |
| FI Money | Sumit Gwalani, Sujith Narayanan | Federal Bank | Yes | 3.05% |
| Niyo X | Vinay Bagri | Equitus Small Finance Bank | Yes | 3.5% |
| Kotak 811 | Uday Kotak | Kotak Mahindra Bank | Yes | 4% |
| Razorpay | Harsheel Mathur | ICICI Bank and RBL Bank | Yes | NA |
| Instapay | Shailendra Agarwal | ICICI Bank | Yes | NA |
| Fam Pay | Sambhav Jain | IDFC Bank | Yes | NA |
| Axis Asap | UTI , LIC , GIC and others | Axis Bank | Yes | 7.10% |
| INDIE | S.P. Hinduja | IndusInd Bank | Yes | 6.75% |
| Freo | Anuj Kacker, Kunal Verma | Equitus Small Finance Bank | Yes | 3.5% |
Top 10 Neobanks in India Key Features
Jupiter Neobank
Key Features :
- Account hosted on Federal Bank ensuring bank-grade security
- ISO and PCI-Compliant
- Money insured up to ₹5,00,000 by DICGC
- 100 % Digital process for opening Savings Account
- Zero Minimum Balance
- Savings Interest at 3.05% per annum for <5 Lakhs ( End of the Day Balance )
Fi Neobank
Key Features :
- Account hosted on Federal Bank ensuring bank-grade security
- No Minimum Balance
- Money insured up to ₹5,00,000
- No Hidden Fees
- Withdraw from any ATM
- Savings Interest at 3.05% per annum for <5 Lakhs ( End of the Day Balance )
Niyo Neobank
Key Features :
- Account hosted on Equitas Small Finance Bank ensuring bank-grade security
- 2-in-1 savings + investment account
- Zero Forex Charges on International spends
- Lifetime zero balance account
- Referral awards and exclusive discounts on leading brands
- Savings Interest at 3.5% per annum up to ₹1 lakh and 5.25% above ₹1 lakh and up to ₹5 lakhs
Kotak 811
Key Features :
- Account hosted on Kotak Mahindra Bank ensuring bank-grade security
- No Minimum Balance
- Benefits of zero contact and video-KYC
- New Virtual Debit card without paying additional charges
- Free online Money transfer through IMPS, NEFT and UPI
- Savings Interest at 4% per annum
Razorpay
Key Features :
- Online Payment Portal
- Instant and Real-Time payments
- Two-factor security authentication
- E-Commerce software integration
- Acceptance of different types of Credit and Debit Cards
- Multicurrency payment processing
InstaPay
Key Features :
- Next Generation Smart Current Account
- Online Payment Portal
- Instant and Real-Time payments
- 2- factor Authentication ( Pin, OTP and Biometrics)
- Acceptance of different types of Credit and Debit Cards
- Multicurrency payment processing
Fampay
Key Features :
- One account for all your spends
- Online Payment Portal
- Instant and Real-Time payments
- Payments can be processed without a bank account
- Scan and pay anywhere through a customised UPI id
- Acceptance of different types of Credit and Debit Cards
Axis Asap
Key Features :
- Account hosted on Axis Bank ensuring bank-grade security
- Instant Account Opening in 3 Steps
- Zero Balance Account
- Virtual Debit card
- Mobile and Internet banking
- Savings Interest at 7.10% per annum for deposits<₹1 Crore for a minimum tenure of 1 year and above.
INDIE
Key Features :
- Account hosted on IndusInd Bank ensuring bank-grade security
- No Minimum Balance
- New Age Digital Banking
- Flexible Line of Credit
- Access to MoneyMate for tracking and managing expenses
- Interest up to 6.75% per annum with Savings account
Freo Neobank
Key Features :
- 100 % Digital
- Zero balance Savings Account
- 5,00,000 Deposit Insurance
- Virtual Debit Card
- Access to Money tap
- Savings Interest at 3.5% per annum up to ₹1 Lakh and 5.25% Above ₹1 lakh to ₹5 lakhs (End of the Day Balance)
Neobank Market Size In India
Neobanks have registered an impressive growth in the last few years . Their emergence has been a major highlight in the financial sector particularly aft in the post-covid era as they continue to disrupt traditional banks by offering value-added services.
Transaction value in the Neobanking market is expected to reach USD 76.99 billion in 2023. Transaction value is expected to show an annual growth rate of 19.21% (CAGR 2023-27) resulting in a total projected amount of USD 155.50 billion by 2027
Source : Statista Market Insights
Conclusion
Neobanks are bridging the gap between traditional services offered by legacy banks and the ever-evolving expectations of the new tech-savvy generation. Through Artificial Intelligence based Smartphone mobile apps and Web based platforms they are providing customers personalised and curated value-added services without burdening them with added or hidden costs. In short, it is smart and seamless banking on smartphones.
They have a massive opportunity for upheaval and upending the rules of the game by reaching out to retail customers/MSMEs across demographics they can penetrate underbanked rural and semi-urban landscapes. By leveraging the increasing penetration of smartphones, they can ensure greater financial inclusion of the masses.
However, all these must come together by following the rules set by the policymakers i.e.Reserve Bank of India. The apex bank also needs to look into how this new-age banking can provide better services at low cost and easy access to credit at large. Neobanks are here to stay and the sky is the limit. If Indian policymakers play their cards well, then Neobanks can revolutionise the way banking is done and undertaken in India.
FAQ
Are Neobanks Fintech Companies?
Neobanks are Fintech ( Financial Technology ) institutions that offer financial services through mobile apps and web platforms by leveraging Artificial intelligence AI and machine learning
Are Neobanks Licensed?
Neobanks do not have a banking licence. They have to partner a legacy traditional bank to offer their financial services.
Are Neobanks approved by RBI?
Neobanks are not directly approved by Reserve bank Of India but their operations are indirectly controlled by the apex bank
Are Neobanks safe and trustworthy?
Neobanks work in partnership with a Bank licensed and regulated by RBI. Hence, they tend to be as safe as other institutions offering financial services.
Is my money and personal information safe in Neobank?
Money deposited in a neobank is as safe and secure as any other traditional bank. Neobanks tend to have a strong focus on safety and security as they are 100% digital platforms
Can Neobanks accept Deposits?
Neobanks cannot accept deposits and lend directly as they do not have a banking license and are not regulated by RBI