Neo-banks and digital banks are the modern solutions that are changing the way banks operate.
Traditional banking, which has been the go-to for hundreds of years now, has not been able to keep up with today’s tech-savvy customers. That’s where evolution of E-banking in India started.
Long waiting times, security issues, and fixed working hours are a few of the problems plaguing legacy financial institutions today.
So, now it’s time to know the difference between neo banks and traditional banks, and get shifted to neo banks.
Now the fintech world has come up with solutions to possible problems with the help of technological advancements. Many neo banks in India are working on bringing these technological advancements. Traditional banks are trying to keep up with the advancements by offering online services through digital or internet banking.
Although the range of services offered by Neo and digital banks are the same, they differ in various ways. Let us look at neo-banks and how they differ from internet banking.
What are Neo Banks?
The word “Neo” means new. Neo-banks are new-age banks with no physical location or branches and are entirely present online.
They provide digital, mobile-first financial solutions for payments, money transfers, lending, and more. They allow customers to make deposits and withdraw money in some clicks.
They offer debit cards, investment facilities, and more. They even provide credit and lending services. Additionally, they offer budget tracking and real-time spending insights using AI technology.
Neo-banks offer financial services through their banking partners who hold a banking licence.
With the concept exploding for convenience and advancements, new banks are joining hands to become big players.
Some of the best neo banks in India include Fi Money, Jupiter, Freo, Genie Money, Razorpay, etc.
What is a Digital Bank?
Digital Banking is electronic banking services provided by any licensed bank.
They use a website, applications, or other digital channels for the execution of financial, banking, and other transactions through electronic devices or equipment.
Presently, there are 11 public sector banks, 12 private sector banks, and one small finance bank participating in the digital banking program.
They provide digital banking, internet banking facilities, such as the opening of savings accounts, balance-check, printing passbooks, transfer of funds, mutual funds, investment in fixed deposits, recurring deposits, loan applications, stop-payment instructions for checks issued, applications for credit and debit cards, and tax and bill payment and nominations.
How are Neo Banks different from Digital Banks?
Neo Banks are different from digital banks because Neo banks do not have any physical branches or locations to avail the banking services. These Neo banks exist only online, whereas digital banks are licensed banks with various physical branches across the country.
Another prevalent difference is that digital banks are regulated by the Reserve Bank of India (RBI), whereas neo banks are not regulated by RBI, which gives them an edge over digital banks in quickly adopting new technologies.
Neo banks in India also offer a more streamlined and customer-centric experience than digital banks. They also tend to be very innovative. They offer features such as in-app budgeting tools and real-time spending insights that traditional banks simply do not offer.
A major neo banking vs. digital banking fact is that Neo banks are reshaping traditional banking systems by enhancing the banking experience using Artificial Intelligence (AI) and other technologies.
What are the Benefits of Neo Banking?
Neobanks have significantly leaner business models and superior technologies at their disposal compared to traditional banks, providing ease and efficacy in services, such as seamless account creation, round-the-clock customer service supported by chatbots, and near real-time cross-border payments.
They provide artificial intelligence (AI) and machine learning (ML) enabled automated accounting, budgeting, and treasury services.
Other key benefits of the Neo banks in India include the following:
- The low-cost structure for customers is due to no monthly fees and zero withdrawal costs.
- Higher interest rates on savings and fixed deposits than traditional banks.
- Fast account opening and real-time services for payments, deposits, etc.
- High-security features such as locking and freezing at any time through the app.
- Personalized offers and discounts.
- Real-time spending insights and budget tracking option.
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