From Branches to Bytes: Understanding the Neo banking Transformation

Unlike traditional banks, which rely on a physical infrastructure, neo banks provide services typical of banks such as payments, savings, loans, and investments, primarily through mobile applications and internet interface, and with much lower overhead.

- By Om Prakash Prasad Senior Manager (Finance) General Insurance Corporation of India

The development of neo banks has been accelerated by factors such as increased penetration of mobile phones, open banking, and changing consumer behaviours about being available 24/7.

Abstract

Neo banking is revolutionising the banking industry, offering all digital banking characteristics of convenience, cost, and user experience. The shift towards neo banking results from increasing mobile penetration, open banking, and changing consumer expectations, and it caters to digital consumer behavioural patterns through innovative production methods. While they face regulatory restrictions, cybersecurity risks, competition from traditional banks, and profitability concerns, they hold strong potential for financial inclusion and market disruption. Strategic growth will require trust-building, inclusive finance, data-driven personalisation, and strategic partnerships. As a key evolution in fintech, neo banking is poised to redefine the future of banking and customer engagement.

1. Introduction and Evolution of Neo Banking

Over the last decade, the banking environment worldwide has been transformed due to the intersection of financial services with technology. Neo banks, or digital-only banks, are an emerging trend in banking and are appealing to a new kind of banking consumer who values convenience, transparency, and customisation over relationship banking.

Unlike traditional banks, which rely on a physical infrastructure, neo banks provide services typical of banks such as payments, savings, loans, and investments, primarily through mobile applications and internet interface, and with much lower overhead. The development of neo banks has been accelerated by factors such as increased penetration of mobile phones, open banking, and changing consumer behaviours about being available 24/7.