Venture capital firms have paid close attention to and made major investments in neobanks. Given a worldwide economic slump, they raised over $12 billion in 2021. From two hundred and fifty in 2020 to three hundred and thirty-three in 2021, the amount of digital-only financial institutions has increased. One cannot help but question how neobanks will emerge. What caused the neobanks to expand at such a breakneck pace? What worldwide factors will shape the neobanks’ fate?
Neobanks – defining India’s future
In terms of value and volume, internet banking customers in India have climbed by 13% to 92%, respectively. However, according to the Global Findex Dataset, 80 percent of India’s population is still significantly underbanked, indicating the country’s unrealized potential for smartphone neo-banking operations. Neo-banks have the potential to become a one-stop store for all financial and banking requirements – both retail and corporate.
In India, Neobanks earned $90 million in 2019. People are becoming more accustomed to digital banking services and, as a result, favor them over the others. Although the RBI does not provide licenses to virtual financial institutions, they work with physical, financial institutions and allow consumers to access their services. The number of neobanks in India has increased dramatically in the previous three years, and this trend is expected to continue in the next years.
New participants
Day after day, new players enter the neobanking business. The majority of them are developing a micro-niche company model. New entrants are increasingly focusing on ultra-niche market groups like the LGBTQ community, craftspeople, and teens. Neobanks are implementing cutting-edge technology, forcing the banking industry to redefine itself in order to best satisfy their clients and enhance customer loyalty.
The essential differentiation is an improved client experience!
Consumers that choose fintech above traditional banks want a superior customer service and are willing to try something new. According to studies, neobanks were more responsive and sympathetic throughout the epidemic than traditional banks. Furthermore, technological improvements have only pushed financial services closer to clients. Neobanks have been working hard to digitally deliver superior banking services to gain their consumers’ confidence. Physical contact with clients is not the sole method of establishing trust.
What factors will affect the survival of neobanks?
Without a doubt, neobanks will mature to the stage where they may be viewed as a viable alternative to regular banks. Nevertheless, one cannot dispute that neobanks will be traditional banks’ partners who earn from helping the underprivileged.
Neo-banks are a reasonable evolution from the traditional banking system. And with the epidemic accelerating the need to shift digital, a future with a “digital-only” banking system will soon come to reality.
Conclusion Clients will have a plethora of options for selecting a banking service for themselves in the coming. And the number of alternatives will only grow. While it may appear that banking institutions are struggling to keep up with neobanks, this is not the reality. Neobanks will use their ties with banks to provide financial support for new markets. In the next years, there will be an inflow of new inventive neobanks aimed at certain target sectors.