Neobank – Technological advancement in Banking

 This article explains Neobank, its Pros and cons, What are the risks involved and are fundamentals of Neo Banks. Should you consider it or not? This article uses one neobank “Jupiter Money” an Indian Neobank and another traditional bank without referring to any particular banks. Jupiter Money will be only used as a reference and this article has nothing to do with Jupiter. Every time this article mentions Jupiter please consider it as a Neobank.

Jupiter Money a Neobank started by Jitender Gupta (FYI)

What are Neobanks?

Digitization and technology are taking over. UPI has made that stronger. There used to be a time when we made payments through cheques and bank transfers. Because of UPIs millions of dollars are being transferred digitally. Only through a UPI address and a mobile number. The requirement of technology and looking at the volume of transactions digitally being made, there arises a requirement for digitization in the banking sector.

Neobank is a digital-only bank and doesn’t have a physical branch. As there are no physical branches, not many people employed and no physical infrastructure needed the costs of maintaining it will obviously reduce. It can provide a better experience to users because it is digital-only. No standing in queues, no writing cheques, no discussions with bank staff and no arguments.

Security

As a need for a safe and secure platform, there is still no license to run 100% digital banks. So, the requirement set to start a Neobank is to partner with an existing traditional bank. Jupiter is tied up with Federal Bank which is one of the Largest Indian traditional banks.

What is the benefit of having a Neobank when you have a traditional bank?

If you have a bank account with a traditional bank, the procedure wouldn’t have been great opening an account for sure. It is a painful process still. Lengthy procedures, documentation, compliances and Minimum balances. Some might feel it secure as there is a physical structure. If you are a new-age consumer you might not like the process. You are a digital generation and you would want a technological process. Opening a bank account at Neobank is seamless, and such a joyful experience.

Customer support

Noting much to talk about the experience of customer support at traditional banks, we know it. Other than hearing “Your call is important to us. Please hold on” nothing feels great. If the call was important you wouldn’t be holding the phone for ever. On the other hand, because they have a very different technological approach and customer support is the only area where they can create a difference, customer support is at a completely different level. Instant chat support, direct connection with the agent, everything is happening thru the app so there is no physical interaction. This is a game-changer.

Unless you experience technological advancement in any area you will be stuck with traditional ways in the name of security.

Tracking and analysis

Using debit cards, UPI, and cheques you have no idea what’s happening with your money. There should be clarity on where your money is going and how it is being spent. That’s the first step in budgeting your money. That’s where you can understand how much money is being spent on your needs, wants and investments? Neobank makes that super easy.

A neo bank can categorize your spending under different areas. Food, entertainment, rent, shopping, bills and health. End of the month you have a clear understating on your spending habit. You don’t need to maintain a separate app or diary.

Using and tracking other bank accounts with existing bank account

With Traditional banks, this is not possible. You can only track one account at one point. For multiple bank account holders, it is a pain. Neobanks solve that. You can link all your bank accounts and manage them together. You have the visibility of all your accounts. Such a powerful thing to have.

Meeting your financial goals

Banks make money by accepting deposits and lending that money as loans on an interest basis. Interest is the income for banks. Deposits fetch much lower interest than loans. The difference of interest in these is the profit that a bank makes. We get e-mails or other communications from banks saying “Live your dreams” by investing in deposits with us. Whose dreams are lived up to? Banks? For sure. It is told because “banks make money with your money”.

Neobanks don’t do it, their cost structure is completely different. Nothing physical to maintain. They can allow you to actually work towards your financial goals. In Neobanks you can divert smaller parts of your money into different areas. Investments, spending and savings. Disciplined approach to maintaining your money. That’s very progressive.

Reward structure

On transfers and debit card uses you don’t get much in return with Traditional banks but Neobanks offer great rewards. For every spending on Neobanks, you will get rewards that you can use in real life. Powerful. That will save money.

Technology

That’s the biggest difference. Using a traditional bank app is tiresome. Bugs, loopholes but still it works for them because of the trust they have gained over time. If you are a new-age customer, you wouldn’t like that. Having a Neobank account gives you the right to ride on technology. What a startup or a tech bank can do with technology, a traditional bank can never. That’s a meaningful difference between these two.

Banking platform

If you want everything to be done on a single app and you are a tech-savvy person, you will like the experience at neobanks.

It is for sure that, after the introduction of Neobanks the physical banks will have to face a cutthroat competition and consumers are going to love the Neobanks. ATM numbers have gone down due to UPIs and Neobanks will take over much from the traditional banks.

Money Management

Traditional banks will not give you many options or insights to manage your money, but Neobanks give you a lot of insights, tools and ability to manage your money. They help you become financially prudent.

All good things come with a cost.

The other side of neobanks

Neobanks could be risky and this is something we need to consider until the govt starts backing them. They don’t have a banker’s license yet. Every Neo bank has to be attached to a traditional bank. They are now only the banking partners and not independent banks. They give a completely new experience thru technology. Neobanks are still attached to traditional banks and that makes them trustworthy. The traditional banks have done their due diligence, and have given the right to run a Neobank with their existing infrastructure.

If you have an account with the traditional bank you can surely complement having a Neobank account. With time a lot of developments are going to take place and Neobanks will get more attention than traditional banks.

Neobanks as of now are restricted in the services they offer and are looking forward to building that trust and starting working independently to provide more services. The best thing to do is to have accounts with both so that you can enjoy a variety of services combining both banks.

Conclusion

Traditional banks have gained trust with time and Neobanks need to prove themselves to gain that trust. Being new age technologically advanced banks Neobanks are going to be the game changers In the future. A combination of these two can provide you with a lot of happy experiences in banking. 

You can read more about Neobanks here 

Neo Banks in The US

• ·         Skrill, United Kingdom
• ·         Bank Mobile, United States
• ·         Majority, United States
• ·         Upgrade. United States
• ·         Sofi. United States
• ·         Atmos. United States
• ·         Monzo. United Kingdom
• ·         Aspiration. United States

Thank you!