How Neo Banks Are Using Technology To Improve The Banking Experience

By Sarvjeet Virk, Co-founder & MD, Finvasia

It is evident that the rate of adoption of technology, along with internet usage is one of the highest in India. Rapid digital transformation has impacted virtually all sectors, and currently, there is a profound transformation prevalent in India’s banking sector. This can be attributed to the rise of Neo-Banks in India. These digital-first financial institutions are revolutionising money management. They are also challenging traditional models with technology-driven enhancements in customer experience, superior accessibility, and promoting overall financial inclusion.

India has one of the world’s largest unbanked populations which can be attributed to the age-old banking methods. Indian banking has transformed and come a long way, starting from physical, walk-in banking systems, to offering net-baking once they were connected with computerized core-baking platforms, to offering apps to manage most banking transactions. These were the initial stepping-stones which formed the 1st and 2nd wave of banking digitalization. The next wave saw the consolidation of different legacy stacks, which were built decades ago and gave rise to digital only or neo banks. Addressing issues like customer service, hidden charges, and a major lack of convenience, neo-banks leverage digital technologies. They eliminate the need for physical branches and providing seamless banking services through smartphones and the internet. Reports suggest that about 26% of India’s population is currently using digital-only banks. However, this percentage is expected to rise to a staggering 46% by 2027. As more neo-bank platforms emerge, it will be interesting to see the improvements they make to the current banking experience.

Data-Driven Insights: Neo Banks’ Impact On Customer Experience
Neo-banks spearhead a paradigm shift in the financial industry. By leveraging a data-driven approach, neo-banks personalise financial services and customer interactions. Virtual assistants and AI chatbots used by neo-banks provide quick support and tailored offerings.

Revolutionising Financial Inclusion: Expanding Access To Banking Services

Neo-banks transcend urban centers, reaching rural and remote areas underserved by traditional banks. By leveraging technology, they eliminate geographical barriers and extend banking services to millions who were excluded from the formal banking system. Some of the key benefits of using neo-banks include a superior digital experience and negligible operating costs. Customers can also avail of quick account opening, transfer, reconciliations, accessing transaction history. Neo-banks also offer multiple products like lending, insurance, payments, invoicing, etc.

Harnessing Technology For Security And Transparency
Neo-banks prioritise customer data and financial information security. They employ robust cybersecurity measures, including multi-factor authentication and data encryption. Real-time updates on transactions and account balances foster trust and confidence.

Unveiling the Future of Banking: Neo Banks at the Forefront
Neo-banks help bring in disruptions to reshape the banking industry with their innovative, inclusive, and customer-centric approach to financial services. As technology advances, neo-banks will play a prominent role in shaping India’s financial landscape. The use of AI and its application holds the key to help neo-banks become the preferred choice over traditional banks or other digitally abled banking solutions. Currently, the market is rampant with ‘one customer pain-point, one solution’ type of neo-banking apps. A more holistic solution is needed which will drive widespread acceptance. And here is where AI will unlock its potential. As more transactional as well as financial data gets collected, various predictive and Generative AI use cases can be leverage to build customized products for broader financial inclusion.

However, despite being quite ahead in their digital capabilities, neo-banks are yet to gain credibility in the Indian market. For this, collaboration between emerging neo-banks and established financial institutions can be beneficial. It can also lead to innovation in digital banking.

Neo-banks empower millions of Indians by bridging the gap between the unbanked and the formal banking system. Their innovations transform banking, making it more accessible, secure, and customer-centric. Neo-banks are expected to continue to play an increasingly important role in the landscape of banking, in India and across the world.

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