How neobanking platforms can add value in your financial life

KEY HIGHLIGHTS

• Neobanking platforms are like traditional banks with a fintech overlay
• These platforms tie up with traditional banks to offer you customised digital services
• Neobanks are either SME-focussed or retail consumer-focussed
• Niyo is the only retail neobanking platform currently live; it started operations in 2016
• Finin, Jupitor, epiFi, Yelo and PayZello are either in beta stage or about to launch services
• If you are internet-savvy, you may consider neobanks as your secondary bank account

You cancelled an order on Swiggy or Amazon for which you had already paid. The money has to come to your account in two-three days, but let's face it. You won't remember to follow up on it. What if your bank proactively notifies you if the refund has happened or not? Sure, you'd like it. Similarly, what if your bank moves your salary to a liquid fund as it gets credited to your account and after a couple of days when you have bills to pay or investments to make, it's back with some returns? Or, what if all your tax deductible transactions are at one place and you can easily send all documents to your CA in one click?

These are the services that neobanking platforms claim to offer. Essentially, neobanks are like traditional banks, but with a strong digital touch and customised solutions. They do not have direct banking licences by the RBI. They tie up with traditional banks to provide banking services licenced to them, but with digital tools. "All neobanking players should be addressed as neobanking platforms as the word 'bank' can only be used for a registered bank," says Anish Achuthan, Co-founder, Open, an SME-focussed neobanking platform.

New-age banking

In India, there are two kinds of neobanking platforms - one, consumer-facing and another for businesses. "Consumer banks focus on targeted services, so beyond your fixed deposits and debit and credit cards, they give you tailor made solutions based on your transaction history. Business neobanks, on the other hand, provide software solutions to  help you with payables and receivables, so services like tax filing, payrolls, and expense management become easier, which traditional banks don't offer. Neobanks allow you to use such customised digital solutions bundled into a bank account," says Harshil Mathur, CEO & co-founder, Razorpay, an AI-driven neo-banking platform.

The neobanking journey in India started out with Open in 2016 for small businesses to go digital. Now, even YouTubers and freelancers are registering on its platform as businesses. On the consumer side, Bengaluru-based Niyo started operations in the same year, but targeting blue-collar workers, taking the B2B2C route. Currently, no other neobanking platform except Niyo has fully gone live in the country. Others such as Finin, Jupitor, epiFi, Yelo and PayZello are either in the beta stage or just about to launch operations.

"Recently, many banks have also come up with their own digital platforms like Kotak's 811 and SBI's Yono, but most of the times the mobile apps of the banks are rebranded as neobanks and not enough thought is put into them to provide a complete user experience. This is not neobanking," says Achuthan of Open.

A peek into the gamut of services that Niyo offers will tell you the true scope of neobanking. Niyo has partnered with IDFC First Bank to offer digital banking services to retail customers.

"Our aim is to make the retail banking experience smart, secure, transparent and a lot more fun than what is available today from traditional banks. A customer can open a NIYO-IDFC Bank account instantly anywhere with our hassle free, paperless onboarding process and get free platinum card delivered to their doorstep," says Vinay Bagri, Co-founder & CEO, Niyo. For cash withdrawal, you can walk into any ATM of any bank in India. "You don't have to worry about any extra charges."

Niyo also offers direct mutual fund investments with no commission and goal-based savings plans. Besides, when you make a cross-border payment -- whether international trips or online purchases on international websites -- you can save up to 3 per cent by spending via Niyo-IDFC international debit card. "This card is accepted in over 150 countries with no forex mark-up," says Bagri. One can check real-time currency conversion rates as well on Niyo platform before any transaction in foreign currency.

Finin, which launched its beta version in May 2019 is all set to go live in August. "We have built a hyper personalised neobanking platform, which can be your personal assistant on saving and managing your money. We offer services like savings account, debit cards, smart budgeting, goal-based saving, account aggregation, and financial health view, etc - all at one platform," says Suman Gandham, founder and CEO, Finin.

Are neobanks secure?

When you open an account with a neobank, essentially you will have a traditional bank at the backend. So, money deposited in a neobanking account is as secure as it would be in a regular bank account. "Neo-banks are mandated to follow the same set of regulatory requirements such as data localisation norms or 2-factor authentication for card-based transactions. Additionally, neo-banks are among the first to adopt more advanced transaction security enhancing models such as MCC block, single-use virtual cards, and token online transactions," says Bagri of Niyo.

So, should open an account?

Adhil Shetty CEO at BankBazaar.com. Bankbazaar.com says neobanks can provide you digital tools that help ease transactions, analyse income and expenditure, save and invest, among other things. "The digitisation may appeal to young customers who are internet-savvy and know their way around digital tools and analytics. Some traditional banks may be limited when it comes to providing these digital bells and whistles."

However, there is a long way to go before neobanks can take place of your primary bank account. And neobanking platforms understand that. "We don't tell them to change their bank account from day-one. We want them to use our bank accounts. Just transfer some money to neobank account, and see if it brings a change in your life," says Gandham of Finin.  "Neobanking is something you don't need until you use it."

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