How Neobanks are creating a huge market share in the banking industry?

neobanks vs traditional banks

We are in a mode of development and constantly working effectively to bring in all the advanced amenities in our nation. Our economy-facing sectors are running on the same pathway. One of the prime industries of our economy, the financial and banking services are striving hard to leverage as much technological advancement as possible. 

There is an emergence of a large number of digital banks, popularly known as Neobanks that are creating a huge space for digital services for fulfilling financial needs. But, are they better than our foundationary traditional banks that are having their existence for decades to centuries. 

In this article, we will limelight the Neobanks in India and will try to bring out the competitive comparison of Neobanks vs traditional banks

What are Neobanks?

Neobanks are the banks that exist digitally, unlike our traditional banks that have a physical presence. They provide you with a list of convenient services with the help of technology. While availing of financial services from the traditional banks, most of the time it needs your physical presence for availing those services. 

Neobanks displays their offering with the help of their websites and applications that are operated online. The users can avail themselves of the financial services anytime and anywhere accessibly. Apart from serving the retail customers, the Neobanks are also making them feasible for businesses by providing them with crucial offerings. Some of their offerings are cash flow management, payments gateway, loans, current account, etc. 

Additionally, Neobanks in India are need of the hour as people are more attracted towards the fast financial solutions than relying on slow traditional ways. The government on the other hand is too supporting the usage of digital mode of banking services

Neobanks VS Traditional banks

Following are the parameters that will help in creating a comparison between Neobanks vs Traditional banks:

Presence: Neobanks are the type of banks that provide several financial services similar to that of traditional banks but their presence is through online mode. That brings in a hassle-free experience for the service users as they can use digital features anytime and anywhere.

On the other hand, traditional banks exist physically and serve the customers who are directly visiting them in their branches. Although, these banks are on a verge of offering digital features as well still most of the operations are conducted through physical mode only. 

Target users: Since technology is the prime foundation of Neobanks so, its targeted users are those people who are tech-savvy. People who are unfamiliar or don't have adequate knowledge about technology usually stay away from such benefits.

Though there is a surge in the number of technology adopters still traditional banks are owning a dominating position in financial services. Compared to the Neobanks the traditional system is more useful for the people who still rely on old ways of banking.   

Convenience: Neobanks in India are apparently more convenient as the users need to make a few clicks and can complete the transaction. Also, all these transactions are more transparent as these are made by the direct user and reduce the chances for mistakes that can occur from the banker's side.

Traditional banks sometimes demand more time from the client's side as the clients who are willing to avail some financial service need to fulfill all the formalities that are aligned by the banks. For example: for depositing money in our savings account you need to fill the savings slip and add the prime details. After that, you need to submit that with the cash counters that may be filled with long queues.

Charges: Since Neobanks exist online so they need not to incur the infrastructure cost and other operating costs. Due to which they transfer less transaction and service costs to their users. That simply makes the transaction and the overall services more cost-friendly.

While traditional banks need to bear the operational charges and the maintenance cost for the assets & inputs they are owning. In turn, they transfer these charges indirectly to the customers by charging more tax and service costs from customers.

Trust & reliability: There is a very thin layer of reliability with most of the services unless it is regulated by a public authority. Neobanks are relatively new to most of the users and it would take time to develop faith over the new financial players who are emerging. 

The traditional banking models on the other hand are more reliable as they are licenced by the government bodies and people are quite familiar with the traditional banking brands for decades.  

Take away

From the article above we derive a clear knowledge about Neobanks in India and the traditional banking model. Also, covered the prime features each of these banking types own and how they are effective to the users with the help of comparison. Neobanks vs traditional banks part helped us in getting an insight into the features of these two financial service providers.