What are neo banks and how they are transforming banking and financial services

By July 27, 2019 Neo Banks

Have you ever thought book shops and DVD rentals would go out of business? Amazon put bookstores and a lot of other stores in various industries out of business. Netflix, Prime Video, Hulu and other OTT companies put blockbuster and other DVD rentals out of business. Currently, there is a new wave of fintech & banking startups that are hoping to put the traditional banks out of business and transform banking.

The old ways of doing banking

These neo banks are nothing but banks that live inside your mobile phone, Alexa, Google Assistant, WhatsApp, SMS. You might say that your current bank already provides you the services you need through their mobile app. But think about it? Before the internet, it was the dark ages. Bank soon started to realize the potential of the internet and decided to extend their offerings on the internet. What did they do? They just put your bank statement behind a username and password. After a while thy offered money transfer in on the internet. Even today a beneficiary has to be activated through the bank branch if you want to transfer money through NEFT or RTGS. After the creation of the smartphone, they did the same in a mobile app. However, all this is for the existing customers of the bank. You neither can open a bank account on the internet nor get a loan on the internet. Why can’t opening bank accounts be liking creating an Instagram account?

They are called neo banks

Neo banks are hoping to do just that. Soon opening a bank account will be as simple as creating an Instagram account. Quite possibly much simpler than that if the banking regulations and laws catch up to the new age. These banks might not have any physical branches. You may never have to step into a bank branch ever again. There might not even be bank branched. These banks might not employ bankers instead, they’d employ programmers, data scientists, researchers. They will provide all of the services provided by a bank through the app and multiple other places using various integrations. You might be able to get a loan with a simple chat on WhatsApp. You might be able to tell your Alexa to transfer money to a friend or invest in a particular stock. You might be able to walk into a store, take what you need and walk out without waiting to checkout. The possibilities are virtually endless.

Who are these people?

Neo banking market is particularly hot in Europe and those companies are rapidly expanding. These are the people to watch out. These new banks are revolutionizing banks and these big corporate banks are not able to do anything about it.

N26 is a German bank headquartered in Berlin, Germany, that offers its services throughout most of the Eurozone and in the UK.

Revolut Ltd is a UK financial technology company that offers banking services including a pre-paid debit card, currency exchange, cryptocurrency exchange, and peer-to-peer payments. The Revolut mobile app supports spending and ATM withdrawals in 120 currencies and sending in 29 currencies directly from the app.

Monzo Bank Limited is a digital, mobile-only bank based in the United Kingdom. Originally operating through a mobile app and a prepaid debit card, in April 2017 their UK banking license restrictions were lifted, enabling them to offer a current account.

Starling Bank is a digital, mobile-only challenger bank based in the United Kingdom, operating current accounts, business banking. Headquartered in London, Starling Bank is a licensed and regulated bank, founded by former Allied Irish Banks COO, Anne Boden, in January 2014.

Would you believe me if say we have neo banks in India?

Yes, we do have neo banks in India. Do you remember this advertisement of DBS Digi Bank featuring Sachin Tendulkar? DBS  Bank is headquartered in Singapore and they started their operations in India very recently. Digi Bank is its platform in which it is providing digital financial solutions through the mobile application. I had created a bank account through the mobile application and successfully received money from a different account. I got an account number & IFSC & MMID from the app which was used to receive money into the account. Although, I was not able to activate this account fully because the address mentioned in my Aadhaar is not in their serviceable area. In order to use my account, I need to update my Aadhaar card. This is the best example of regulations not catching up to technology. 

Conclusion

We here at Jaysel plan to offer financial services through mobile phone, web applications & and various other 3rd party application through integrations. We will also be providing our solutions through SME networks just like I had discussed how financial service providers are using the SME networks to offer their services like Virtual ATM. Access to credit is the primary service we will be offering as it is one of the major variables in transforming lives, creating opportunities and driving a positive change in society. We will be able to provide more financial services to the community once we have enough resources to pull it off. 

Key takeaways

  1. A disruption in the banking industry is needed very much to renew the slow process.
  2. A new generation of banks will be very good competitors to the existing banking corporations.
  3. This disruption will make the banks to develop new systems and update their methods which will lead to a better class of banks that provided better services.
  4. This will bring the much-needed transparency into our financials.

Do you have more to add to the story? Share it in the comments below.

iamvasee

iamvasee

Just a guy sharing his views on the fintech revolution.

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