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In today’s era, where our majority of the work can be performed digitally, the challenge for traditional financial institutions is a significant one. The rapid growth of NeoBanks, in particular, has challenged the survival of these banks, which still function on legacy systems. As per a report, neobanks and such digital only banks have dealt a severe blow to the market share of these banks. No doubt that technology has been and continue to play a key role in digital banking by ensuring banking and payments services become more personalised.
As per a survey report, an estimate of 205 million Indian adults has a digital-only bank account already. Don’t be surprised if these numbers shoot up immensely in the next few years. It is pertinent to note that neobanks can cater to a large population, just as traditional banks have been doing for all these years.
With tech giants like Google, Apple and Facebook making its way into the digital payments space and as the number of digital banks and digital payments services increase, the competition also heats up for the conventional banking system.
In order to counter this rising supremacy of digital banks, traditional banks are waking up to function as technology companies. Further, they need to accelerate digital transformation in order to compete in this evolving digital era. They must follow a digital first approach by digitalizing their core banking system and serving their customers in an innovative manner by offering personalised experience.
Neobanks practice digital only approach by extending seamless banking services to customers that can be availed just by having a smartphone. So what makes them stand out is that they represent customer centricity by having a mobile first approach, real-time update, 24×7 virtual assistance and such other features.
These features have enabled neobanks to improve customer loyalty for example, 8 of the 27 Neobanks in India provide their customers with some unique payment options like virtual debit cards, split payments, cards for teens, etc. Hence platforms like neobanks are making a mark in the financial landscape today by offering innovative features while making payments a seamless experience for its users.
NeoBanks in India put their focal point on consumer or retail customers or on growing small and mid-size businesses. It emphasises on its main idea to help various consumers and provide a holistic digital banking and a seamless payment experience, thus enhancing their consumer engagement and loyalty.
So now that the challenge for banks is real, banks need to integrate financial services into their systems. Their main objective should be to cater to the evolving customer expectations while making improvements to their competitive positions.
Then banks also need to adopt certain strategies which will accelerate their adoption of digital transformation and help them in faring well against Neobanks.
In the recent while, banks have been putting a major chunk of investment in front end channels, thereby raising the experience level and increasing engagement. It signifies that banks are leveraging data on consumer behaviors which in turn help them to understand when to engage with the consumer and how to ensure that offers are aligned with consumer and financial institution’s goals. However, there also prevails the risk as banks hold assets/securities, and in accelerating digital transformation, they can’t compromise with the security.
Another thought that can be pursued here is the collaboration between the neo banks and traditional banks, where, the traditional bank shall act as the backend partner whereas the neo bank takes the frontend position, exercising their expertise while smartly covering deficiency of each other.
Read our Article:NEO Banks Partnership with Fintech