Neo Banking has emerged as the next big segment amid the ongoing COVID-19 pandemic. Over the past 18 months, according to The Digital Fifth Indian Fintech Funding Report 2020, open banking has witnessed some positive movement in India. This is evident in investor interest into this segment.
The report states that business models such as Neo Banking Platforms are being built around open banking and as such, more than seven deals have taken place. Neobanks are classified as a type of financial technology, a fintech solution. Its typical services are mobile apps, payment cards, current account, loans, savings, and money transfers, as well as analytics to improve spending behaviors. Neobanks appeal to the technologically savvy, young or unbanked populations who would benefit from low-entry financial solutions than more bureaucratic and established banks. Simply stated, neobanks are usually more convenient for those not comfortable with long-established banks.
Globally, as per Bloomberg, neobanks are essentially 100 per cent digital banks, which offer services ranging from accounts, credits and payments without theburden of a physical network. They are regarded as as a more nimble version of old-fashioned banking. Moreover, this open banking movement in the financial services industry, in which fully digital banks known as neobanks or challenger banks have emerged, has led to new banking options that compete directly with legal institutions. And it has to be stated that neobanks are open for business around the world and serving the markets in need of new banking models and access the most.
The Digital Fifth, India’s first Fintech consulting and advisory firm, report points out that post-COVID, banks and fintechs will be looking to collaborate more around open banking to drive customer acquisition for servicing and developing innovations across financial services. Open banking will also push for Application Programming Interfaces (APIs) platform led business model to power companies to access APIs from these players and build new businesses with a quick turnaround time, it said and gave an example of Setu and YAP having found a good response from investors.