Demystifying Neobanking: Everything you should know about it

In recent times, ‘neobanking’ has risen to prominence in the FinTech industry by taking up the mantle of its effectiveness to deliver solutions tailor-made for MSMEs in the digital era. So, what exactly is it, and why has it become so popular?

A branchless banking experience

Simply put, neobanking is an umbrella of financial solutions concentrating all its activities on digital platforms. As such, it is paperless – right from the time of its initial, rapid onboarding to any time it is used for conducting transactions and settlements. It offers customers a seamless online banking experience. They can access their finances along with an array of features geared towards helping them manage their business more efficiently.

Eliminating the burden of legacy infrastructure

Traditional banks have massive outreach and capital, but where they lack is offering their customers a seamless and unified experience. Neobanks have partnered with many of these traditional banks to engineer platforms that keep the customers in control at all times: 24X7 access to one’s finances is complemented by the lowering of processing fees in the absence of legacy infrastructure.

Symbiotic relationship with existing banking systems

Even as neo-banks bring about a revolution in the FinTech industry and boost the digital economy of India, their biggest advantage is the fact that they have moulded their appeal into the existing banking systems of the country.

By partnering up with traditional banks, they get the support they require for carrying out essential operations. In return, they drive up these institutions’ sales of current accounts. Along with acquisition, Neo Banks act as the biggest engagement hooks for the existing Merchant base for the Bank customers. The Start Ups & Young SME population have a higher affinity for using technology to accomplish essential tasks. Neo-banks offer them an appealing and efficient alternative to traditional banking. This integrates more resources into the banking ecosphere.

Thus, it is safe to say that neo-banks have manufactured a unique situation where they are driving the industry towards change while helping them grow in the existing climate as well.

Providing merchant-centric tools

In addition to managing one’s Bank account, most neo-banks offer the perfect suite of features complementing one’s business finances. Integrated payment gateway, Collection & Pay-outs via Virtual Accounts, forecasting tools with high accuracy, e-invoicing & Billing, automated accounting, digital payroll, Vendor & Customer management are just some of the essential features offered to entrepreneurs to make their lives easier.

Massive growth has been forecasted

In 2021, the global market size value of neo-banking stands at $47.1 billion. According to Grand View Research, the forecast CAGR for the sector has been estimated at 47.7 percent, with its global market value predicted to be $722.9 billion at the end of the same period.

Suffice to say, neo-banking is the forbearer of change in the finance industry. It is also expected to grow at a massive rate, considering its rapidly increasing appeal to the rapidly growing younger generations. Its full-stack solutions for the MSMEs are soon going to be irreplaceable, and partnering with a neobank sooner than later is the smartest choice one can make in today’s digital economy.