What is Neo Bank? How Neo banks are different from regular bank?

• The Neo Banks are virtual banks that are operated online. Neo bank is completely digital instead of being physical. Neo banking provides a complete experience of digital banking through mobile applications.
• Neo banks offer solutions in ways that conventional banks do not, with the key objective of providing a smooth customer experience. They are cheaper, quicker, and can leverage a single network with the entire financial portfolio.
• It’s no secret that conventional banks are at the frontline of increasing rivalry from many digital world areas. Neo banks are expanding exponentially, leveraging state-of the-art technologies to win over consumers who expect financial services that are easier, quicker, and more efficient. Neo-banks have been the next big thing in fintech

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5 main segments of Neo Bank :

• They run on targeted customer segments that are not the concerns of legacy banks, such as SMEs, tech-savvy millennials, and low-wage classes.
• Lower fees/charges and fast retention of customers.
• Built with technologies from the cloud.
• Specialised financial systems, such as payments, expenditures, receivables, and control of expenses.
• Neo banks also focus on forex cards, credit cards, cash processing, cost management, corporate banking services, and loan products globally.

Global Size of Neo Bank:

• According to Zion Market Research, worldwide, the neo-bank sector was worth $18.6 billion in 2018 and was projected to grow at, A CAGR (compounded annual growth rate) of 46.5% between 2019 and 2026, generating about $394 billion by 2026.
• The major players in this segment are InstantPay, Niyo, Open, and RazorpayX.

Customer Service :

• The customer service of Neo Banks depends on a mix of chatbots and AI to provide flexible, automated, online support. In contrast, conventional banks rely on customer support in person or by telephone. Since neo banks are fully digital, a customer opens up a large window of benefits.

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Neo Banks in India

• There are 10 neo banks in India currently, and a couple of more are in the process of entering the market. ICICI Bank took the lead in the segment and partnered with three neo banks: Free, Instant Pay, and Yelo.
• There are two types of neobanks. One is where the Neobank doesn’t have a banking license themselves and instead partner up with a traditional bank to provide their products, While in the second scenario the neobanks obtain banking licenses themselves to operate fully on their own.
• Currently in India, neobanks are not allowed to hold customer deposits and neither virtual license is being granted by the RBI since it still maintains its stand on the need for physical presence as per its 2014 guidelines, Leaving them with the only option to partner with a traditional bank.