Neo Bank
An Introduction
Neobank are online banks that don’t have any physical locations. Neo bank is totally online rather than having a physical presence at a given place. Neobanking refers to a broad range of financial service providers that primarily target tech-savvy clients.
A neobank is essentially a fintech company that offers services like payments, debit cards, money transfers, lending, and other digital and mobile-first products. Neobanks bridge the gap between traditional banking services and shifting customer expectations.
They accomplish this through providing tailored experiences, utilising data-driven insights, and providing value-added services. The first distinction to make is that neo banking is not to be confused with digital banking.
Neo Bank Services
What one should know about them
In terms of business models, neo bank services can follow one of the three paths or approaches:
- Traditional banks that are launching digital projects of their own.
- Fintech companies that collaborate with traditional banks and provide a mobile/web interface for their partners’ products but are not licenced.
- Neo banks, which are licenced financial institutions that operate separately from traditional banks. This is typically is the case with digital banking licences in countries that allow it.
In India, freestanding licenced neo banks have yet to be approved.
According to FIA Global a leading provider of business correspondent services, the neo bank services generally include –
- Checking and saving accounts,
- Payment and money transfer services
- Financial education tools that include budgeting help.
To mitigate their risk, most neobanks offer limited or no credit, which helps them keep costs down. Some neobanks, on the other hand, work with partner banks and credit unions to provide loans to individuals and businesses.
