Neobanks vs other banks: What are the benefits of these new-age lenders?

With the advent of the digital age, a lot of banking services have become available online. While consumers are thoroughly enjoying internet banking and other digital services, many of them are experiencing difficulties, with waiting times for transactions, security and customer service being some of the major issues. In this scenario, neobanks are fast becoming popular with people. These new-age banks work entirely online and provide fast, digital-first solutions for any kind of financial issue. They also offer a cheaper alternative to traditional lenders in the country. RazorpayX, EpiFi, Niyo and Open are some of the major neobanks functioning in India.

How do neobanks work?

Neobanks use artificial intelligence and technology to offer personalised services. They allow facilities like fund transfer, withdrawal, investment and other financial services online. Unlike the digital services offered by traditional banks, neobanks are fully online only. They do not have any physical branches, which helps them minimise operating costs. In India, these lenders rely on bank partners to provide licensed services as the Reserve Bank of India has not yet allowed 100 percent digital banks in the country.

What advantages do neobanks offer?

Neobanks offer the following advantages over traditional banks:

• Lower costs: Since these lenders operate exclusively online, they offer their services at a lower cost.
• Better service: Neobanks offer round-the-clock financial services and customer service. They also tailor their services to the needs of the consumer.
• Smoother user interface: Since they operate in a digital-first mode, neobanks have a much smoother user interface to provide quick services to account holders.
• Less restrictions: Since these banks are not regulated by the RBI, they operate with less restrictions.

Can neobanks replace traditional banks?

As innovative and fascinating as they sound, neobanks have a long way to go before they can replace brick-and-mortar lenders. They cannot cater to the section of the population which is not tech savvy or does not have internet. Furthermore, they have yet to build trust. Since these banks are not regulated by the RBI, many people are wary of opening an account in them.

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