Neo-bank: Your own bespoke Digital Finance Manager!!
Change is inevitable and whenever it has been of progressive nature, it remained instrumental in redefining the future.The Neo Banks harbinger such a change.
The year 2016 witnessed the first launch of Neo banks in Europe which can be defined as quasi banks that operate using cloud-based technology with no “brick-n-mortar” presence, unlike traditional banks or other regulated Financial Institutions. The ecosystem of Neo Banks thrives with dynamic participation by third parties which includes Banks, NBFCs, Account Aggregators, Loan Service Providers (LSP) and the Governments, with whom the Neosfoster a collaboration in the form of a plug -n-play model via their Open Application Programming Interfaces (API).
The concept of neo banking revolves around leveraging the lending process for retail and institutional clients in an equitable manner that promises fastest service speed (can be measured in minutes)in analysing, processing and disbursal of the loan. The desired speed is achieved by analysingthe historical cashflow trend reflected by the borrower’s bank accounts with AI based analytical platforms at the lenders’ end. If the analysis results into a positive feedback, the same platforms can immediately generate loan offers to the borrower on behalf of the respective lenders. The borrower may, then, choose the most suitable offer and get the funds in his accountby providing his online consent. Thus, the entire process gets through a singular in-app interface support system installed on borrower’s mobile, making it paperless and ruling out human interference that, otherwise, would have taken endless wait time for the borrower to even know about the status of the loan application that may stand a chance of rejection due to human intervention at lender’s end, in terms of decision making.
Neo Banks are not always all about lending activities. They do offer plethora of other financial services includingvirtual saving accounts, payment cards, accounting & taxation services, accounts receivable management, budgeting and investmentadvisory through the integrated cellular app, almost at no extra cost.The reason behind this indulgence is fairly straight forward. This gives them an edge to acquire larger customer base with easy penetration as theyexactly know the pain points and the remediation too. This knowledge is not gained in a year or two but through years of business relationships with unitary focus on each of such relationships. This also makes the Neos desirable & worthy to work with for the Traditional Banks if they wish to remain in the race of survival of the fittest.
Neo banks are fastly snatching thelimelight but not before facingtheir share of rejections. Though they are the future, the scepticism of the older generationsrefuses to pave the way forward towards embracing the neo-banking as theycontinue to reel under their own prejudices though the Millennials, Gen Z & Gen Alpha, the newer generations, are entirely in sync with Neos. PWC report confirms this division of opinion as it states that 50% to 60% of the population, comprising of older generations,still prefers traditional banks over the new age banks, the Neo Banks!!The older generations should deal with their rejective thought process which is mostly driven by the lack of understanding and unwillingness to move out of the soon-to-be-disintegrated comfort zone, if they don’t want to feel technologically handicap in the coming times. There is no second thought process when it comes to sustainability factor of the Neo Banks. They are here to stay and will change the banking skyline for better by specializing in their chosen niche segment, whether it is a SME or a Street Vendor or a Local Shopkeeper or an Education Institute. The list can be endless.