While old customers may be satisfied with the services offered by the traditional banks, the tech-savvy new generations don't have patience and mind set to do things with backdated processes.
Gone are the days when we had to visit a bank branch on a working day and stand in a queue to make any transaction. The advent of technology has completely changed the way banking transactions are done now. Although traditional banks are trying their best to adopt technology, they lag behind the financial technology (fintech) based new generation financial institutions or neo banks.
“Traditionally, banks have been taking care of all our financial needs, including deposits, loans, debit and credit cards with the help of their branches spread across the country,” said Kunal Gangal, Analyst – Tavaga Advisory.
“Fintech companies have come up with an innovative approach of offering banking services without having any physical presence. These fintech companies are referred to as neo banks. Along with the traditional banking services, this class of new-age banking has also managed to digitally help the individuals track their income and expenses, all documented in one place,” he added.
While old customers may be satisfied with the services offered by the traditional banks, the tech-savvy new generations – e.g. millennials and Gen-Z – don’t have patience and mind set to do things with backdated processes.
“The tech-savvy millennials are the real beneficiaries of these neo banks who prefer operating and budgeting their finances online. The entire model of neo banks is built with the usage of robotics and artificial intelligence with low human dependency,” said Gangal.
“Millennials, and Gen z’ers, two sets of digitally native generations that are entering the workforce are more open to spending money on the products, services and solutions that are created with smartphones, technology, social media and connectivity in mind. Neo banks – the newest entrant into the banking world, are representative of the changes we see in today’s environmental circumstances inseparable with technology. Each neo bank in the fintech market today, offers their own set of solutions making it a customer focused product with the flexibility to customise it to different needs for saving, spending, and salary ranges,” Anuj Kacker, Co-Founder, FREO.
Not only have neo banks made the banking transaction faster, they also offer hosts of other things that make managing finances easy.
“With simple account opening procedures and lesser costs compared to a traditional bank, the neo banks have managed to demystify the entire banking process and bring in simplicity. By leveraging technology, the neo banks have started offering commission-free mutual funds, expense management tools, instant loans, and other financial planning mechanisms with a customer-centric focus,” said Gangal.
“Millennials’ need for uniformity concerning the currency denomination also gets fulfilled with the help of neo-banks. Students going abroad for foreign education benefit the most out of this as the bank allows spending in local denominations, thus helping these millennials to opt for a cost-effective approach for transactions,” he added.
Echoing the same, Kacker said, “The wave of Neo Banking is coming at the right time into the lives of Millenials and Gen Zers, because being the tech-savvy consumer they are, they are drawn to its simplicity and hassle-free usage. Neo Banks are also enabling financial inclusion of a big portion of the unbanked and underbanked and provide ease and convenience when it comes to opening a new bank account, or even building a healthy credit score, when someone has had no background of availing any banking services before.”
“When all your banking is done on an app on your phone, it’s also easy to avail additional services which allow you to measure different criteria of your spending. For example, today, customers of a banking app, get customised recommendations for areas where they might be making hasty financial decisions, or app alerts when they are overspending. Reminders that you can set to remind you to pay back bills, EMIs, Loans, etc., in time. There are additional ways in which users can check credit score and get free credit reports and more. With everything available digitally, the young working professional or student today can also measure what they are doing with their money, view analytics reports on their app or email, and enjoy the ease of banking in multiple ways,” he added.