Traditional banks are using neobanks to reach out to tech-savvy customers: report

According to a report by management consulting firm Redseer Strategy Consultants, neobanks in India are just getting started and have a lot of room to develop. Personalised experiences, data-driven insights, improved user interfaces and value-added services can all help neobanks cement their position among India’s retail banking clients.

The Indian fintech market – valued at $31 billion in 2021 – is the world’s third-largest fintech ecosystem after the United States and China and primed for more disruption with the emergence of neobanks.

According to the report, collaboration benefits both, giving neobanks a stronger footing and traditional banks access to young, tech-inclined customers.

It said neobanks should acquire primary bank accounts to scale and gain a bigger presence. White-collar salary accounts with a lifetime value of 10X appear to be an addressable market and the best route ahead, it added.

What are neobanks?

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Neobanks bridge the gap between the services that traditional banks offer and the evolving expectations of customers in the digital age.

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The Reserve Bank of India (RBI) currently prohibits banks in India from becoming totally digital. Neobanks thus cannot get bank licences and must rely on bank partners to provide services.

Jupiter, Fi, Niyo, and RazorpayX collaborate with established banks. OneBanc Technologies, an AI-driven neobanking firm, recently collaborated with Visa to issue India’s first debit and credit card without a magnetic strip. Federal Bank has launched more than 300,000 accounts with neo-banking partners.

Similarly, Niyo Global, a fintech company, has launched a digital savings account in collaboration with SBM Bank India and Visa. ICICI Bank has also partnered with Niyo to offer prepaid cards to customers who operate micro, small, and medium businesses (MSMEs).