In news– The Reserve Bank of India (RBI) is taking a hard look at the neobank business model where fintechs plug into a conventional bank’s network and become customer-facing banking service providers.
What is a Neobank?
- A neobank is a digital bank that does not have any branches.
- Instead of having a physical presence at a set location, neobanking is entirely online.
- A broad collection of financial service providers, who primarily target tech-savvy customers, comes under the umbrella of neobanking.
- Basically, a neobank is a fintech firm that provides digital and mobile-first services like payments, debit cards, money transfers, lending, and more.
- While traditional banks continue to struggle with bringing their legacy-based infrastructure into the digital age, neobanks leverage its modern digital platforms to analyse customer data and make data-driven decisions.
- Neobanks can also afford to slash customer fees by a significant amount since they don’t have to bear the expenses of running physical locations.
- Since Neobanks don’t have a physical office in neighbourhoods, consumers can create their accounts from their mobile devices from the comfort of their home and due to their technology-driven KYC process, the account can be ready in just a couple of minutes.
- By using an app Neobanks provide services via its mobile application.
- In India, neobanks don’t have a bank license of their own.
- Instead, they count on bank partners that are regulated to provide bank-licensed services.
- The likes of Jupiter, Fi, Niyo, and RazorpayX are currently working in partnerships with traditional banks.
- Currently, the RBI does not allow banks to be fully digital in India.
- As the third largest fintech ecosystem in the world after the US and China, the Indian fintech market is poised for further disruption with the emergence of neobanks.