The Strong advantages of Neo banks over Traditional banks 2023

  Theme: The Concept of Neo bank emerged years ago(2013-15), but in India, this concept came in 2016 by the company ‘Niyo Solutions’. What are Neo Banks? Neo Banks are simply digital banks without any physical branches. Advantages of Neo Banks: Convenience:–  Customers can use these banks with the help of an app and they are easily accessible from anywhere and anytime. Lowers cost:– Neo banks charge lower interest on loans as well as they provide high interest on customers saving accounts also neo bank doesn’t require any physical branches so it helps banks to save their overhead costs. Speed:- Neo banks use advanced technology and help customers to register their accounts readily and process request time is quite low as compared to traditional banks. Examples of specialized Neo Banks:- Akudo:– These banks provide prepaid cards to teens so that the teenagers can safeguard their money as well as spend wisely. The tagline of the bank is – A Neo bank that rewards teens for mastering money.’  LXME:– It is India’s first bank for women-specific financial needs. Challenges of Neo Banks: Digital Literacy:- Tech literacy is quite low in India and these banks can only run online so, the banks are not able to cater to rural India. Building trust:- They don’t have physical branches like traditional banks because they feel risk in case of any issues or challenges. Services offered:– These banks offer a small range of banking services, unlike traditional banks. Recognition:– These banks are not yet recognised by the Reserve Bank of India(RBI) and hence it’s a huge challenge for Neo Banks. What are traditional banks? Traditional bank means those banks which have a physical presence and have a domestic banking license. These banks offer personal visits during specified office hours.  Services offered by traditional banks are cash deposit and withdrawal, ATM services, financial transactions, International transactions, opening accounts, Fixed deposits, etc.  Advantages of Traditional banks: Personal interaction:-  In-person service to customers to build more trust in banks. Cash transactions can be processed:– Cash and check services are easily accessible to customers A wider range of financial services:- They offer a variety of services, unlike Neo banks such as checking, savings, certificates of deposit, auto loans, investing, etc. Digital literacy is not required:- people who are less familiar with tech can also easily access traditional banks. Challenges of Traditional Banks: Interest rates on loans are higher as compared to Neo banks. Traditional banks provide less interest on money in a savings account.    While opening an account it requires a lot of paperwork and it is time-consuming.   Collaboration of Traditional and Neo Banks: Many of the Neo banks are collaborating with traditional banks as traditional banks can reach the young and techy generation as well as data-driven insights, and personalized experience helps neo-banks to achieve a good position in the market and retain customers’ trust. Chqbook neo bank is the first-ever neo bank in India that caters to small business entrepreneurs. Since September 2020, its Mobile Application has been downloaded by more than 1 million users dwelling in 500+ cities in India.  Conclusion: The meaning of ‘Neo’ means new. These are new-era banks without physical branches and can be easily accessible from anywhere via the Internet. They provide financial solutions such as payments, lending of money, payments, and more. They even provide investment facilities, debit cards, and more. It is still hard to judge whether Neo banks will be able to replace traditional banks in the future or not. Because still Neo banks are not recognized by the RBI (Reserve Bank of India).   References : https://www.thehindubusinessline.com/blexplainer/explainer-neo-banks-vs-traditional-banking/article37801052.ece Also read : IMF World Economic Outlook 2023 The Strong Impact of 5G on the global economy