Neobanks, also known as challenger banks, are fintech firms that operate exclusively in the digital space. Unlike traditional banks, they do not have physical branches. Neobanks specialize in providing mobile and online banking services through apps, software, and other technologies. Some Benefits: Convenience: Neobanks offer a user-friendly experience with quick account setup. Tech-Driven: They leverage technology for efficient services. Targeted Products: Neobanks specialize in specific financial products.

1. Neobanks and the
next banking
revolution
By Dhruv narang

2. NEO Banks
Neo banks, also known as digital banks, operate
exclusively online without physical branches. They
offer financial services like traditional banks but
often with lower fees and streamlined processes.
Popular examples include RazorpayX, Jupiter etc.

3. Features:
● Customer centrictity.
● Mobile first approach.
● UI-UX design to create lucrative and user-friendly tools.
● Gamification of customer engagement.
● Hyper-personalisation.
● Real-time notification.
● In-app virtual assistants and chatbots for 24*7
● Goal setting for spend and save.
● Spending and budgeting analytics.
● Third-party tool integration.
● Technology and AI to offer personalized financial
services to customers.

4. License
Virtual banking licenses not yet granted in India
by RBI. This means neo banks cannot operate
independently and must partner with traditional
banks.
Traditional banks are still important. The Reserve
Bank of India (RBI) prioritizes physical bank
presence, so neo banks need to work with existing
banks to offer their services.

5. Traditional
Vs
Digital
Vs
Neo Banks

7. NEO Banks are focusing on:
1. Gen Z
2. Millennials
3. Young Employees
Because Traditional Banks Have:
1. Network, Branches
2. Trust
3. Deep Pocket and Funds
“According to a recent study, 49% of
millennials and 53% of Gen Z customers use
neobanks for their banking needs”

8. Largest Neo Bank in India is:
As of year 2022, State Bank of
India's digital arm Yono had
around 54 million active users, the
highest in the neo-banking sector.
Instant pay followed with 10 million
users.

9. How Neo Banks Earn Money?
1. Interchange Fees: Major income source from merchant fees on card
transactions.
2. Loans & Credit Cards:Interest income from lending products.
3. Subscription Fees: Premium accounts with extra features for a monthly fee.
4. Transaction Fees: Charges for specific actions like international transfers or out-
of-network ATMs.
5. Partnerships: Referral fees or commissions from collaborations with other
providers.
6. Data Monetization: Anonymized customer data insights sold to businesses
(ethically).
Note: Revenue mix varies between Neo Banks based on their model and regulations.

10. Why Neo Banks are in loss?
High Customer Acquisition Costs: Neo-banks rely heavily on digital marketing and partnerships to attract
customers, which can be expensive. Coupled with a competitive landscape, these costs eat into their margins.
Limited Product Portfolio: Most neo-banks offer basic banking services like savings accounts, debit cards, and
payments. Expanding into more profitable segments like loans and investments requires regulatory approvals
and infrastructure buildup, further straining their resources.
Building Brand Trust: As newcomers, neo-banks need to establish themselves as safe and reliable alternatives
to traditional banks. This involves investing in security measures, customer support, and brand awareness
campaigns, which can be financially draining.
Regulatory Uncertainties: The Indian regulatory landscape for neo-banks is still evolving, with new guidelines
and frameworks emerging periodically. This creates uncertainty and hampers their ability to plan and scale
their operations.

12. Thank You