{"id":1969,"date":"2023-06-18T18:16:39","date_gmt":"2023-06-18T12:46:39","guid":{"rendered":"https:\/\/rzpwp.blog\/?p=1969"},"modified":"2025-03-25T15:12:47","modified_gmt":"2025-03-25T09:42:47","slug":"what-is-a-neobank","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/","title":{"rendered":"What is a Neobank? Everything you should know"},"content":{"rendered":"<blockquote>Fintech is the future of finance, and neobanking is the future of fintech.<\/blockquote>\r\n<span style=\"font-weight: 400;\">When people are used to ultra-fast 5G internet speeds and 15-minute food delivery, waiting an entire <\/span><i><span style=\"font-weight: 400;\">day<\/span><\/i><span style=\"font-weight: 400;\"> for a transaction to go through gets frustrating. <\/span>\r\n\r\n<span style=\"font-weight: 400;\">Traditional banking, which has been the go-to for hundreds of years now, has not been able to keep up with today&#8217;s tech-savvy customers. <\/span><span style=\"font-weight: 400;\">Long waiting times, security issues, and fixed working hours are a few of the problems plaguing legacy financial institutions today. <\/span>\r\n\r\n<span style=\"font-weight: 400;\">And so the fintech world came up with a solution: <em>n<\/em><\/span><span style=\"font-weight: 400;\"><em>eobanks<\/em>.\u00a0<\/span>\r\n\r\n<span style=\"font-weight: 400;\">Before we dive into whether neobanks are better than legacy finance, do we know what neobanks are?\u00a0<\/span>\r\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d71e6f62362\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d71e6f62362\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#How_does_a_neobank_work\" >How does a neobank work?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#1_Lower_Charges\" >1. Lower Charges<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#2_Ease_of_Use\" >2. Ease of Use<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#3_Smoother_UI\" >3. Smoother UI<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#4_Lesser_Restrictions\" >4. Lesser Restrictions<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#Should_I_make_the_switch\" >Should I make the switch?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#Neobanking_and_Fintech\" >Neobanking and Fintech<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#Top_Fintech_Businesses_in_India\" >Top Fintech Businesses in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#Neobanking_for_Businesses\" >Neobanking for Businesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#FAQs\" >FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#What_is_a_neobank\" >What is a neobank?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#Are_neobanks_better_than_traditional_banks\" >Are neobanks better than traditional banks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#How_can_businesses_use_neobanks\" >How can businesses use neobanks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-a-neobank\/#What_are_some_of_the_best_neobanks_in_India\" >What are some of the best neobanks in India?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"How_does_a_neobank_work\"><\/span>How does a neobank work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n&#8220;Neo&#8221; means new. These are new-age banks without any physical location, present <em>entirely online<\/em>. They provide digital, mobile-first financial solutions for payments, money transfers, lending, and more.\r\n\r\n<span style=\"font-weight: 400;\">They allow customers to make deposits and withdraw money. They offer debit cards, investment facilities, and more. They even provide credit and lending services.\u00a0<\/span>\r\n\r\n<span style=\"font-weight: 400;\">However, most neobanks do not have a banking license and cannot operate stand-alone \u2014 most neobanks partner with licensed banks to provide financial services.<\/span>\r\n\r\nSo are they really better than traditional banks?\r\n<blockquote class=\"modern-quote\"><span style=\"font-weight: 400;\"><strong>Yes, they are.<\/strong><\/span><\/blockquote>\r\n<h3><span class=\"ez-toc-section\" id=\"1_Lower_Charges\"><\/span>1. Lower Charges<span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<span style=\"font-weight: 400;\">Neobanks don&#8217;t have physical branches, which means they&#8217;re not spending money on rent, electricity, infrastructure, and other expenses that eat away at a traditional bank&#8217;s bottom line.<\/span>\r\n\r\n<span style=\"font-weight: 400;\">These savings are passed on to customers in the form of lower fees and higher interest rates. It also means neobanks have more resources, be it money or manpower, to dedicate to making the banking experience better for their customers.<\/span>\r\n<h3><span class=\"ez-toc-section\" id=\"2_Ease_of_Use\"><\/span>2. Ease of Use<span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<span style=\"font-weight: 400;\">The process of opening an account at a traditional bank is long and frustrating. There are forms to be filled out and waiting time. Some banks even require the customer to visit the physical branch and will also visit their home to verify their address.<\/span>\r\n\r\n<span style=\"font-weight: 400;\">With a neobank, everything is digital. Users can create their accounts on their mobile phones, sitting on their sofas at home. The account is ready to use in a matter of minutes.\u00a0<\/span>\r\n\r\nTasks that typically require a visit to a physical branch, like depositing a <a href=\"https:\/\/razorpay.com\/learn\/what-is-cheque\/\">cheque<\/a>, can be done on the go from a user&#8217;s mobile phone or laptop. This ease of use has become an important feature &#8211; especially in a post-COVID world, where people prefer the comfort and safety of home.\r\n<h3><span class=\"ez-toc-section\" id=\"3_Smoother_UI\"><\/span>3. Smoother UI<span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<span style=\"font-weight: 400;\">In 2018, financial institutions&#8217; top strategic priority was improving\u00a0the consumer&#8217;s digital experience.\u00a0<\/span>\r\n\r\n<span style=\"font-weight: 400;\">Neobank apps are built to improve the digital banking experience. Neo-apps are simple,\u00a0 powerful, <em>and<\/em> aesthetically pleasing. To keep up with the times, traditional financial institutions have been forced to develop their own digital offerings&#8230;<\/span>\r\n\r\nBut the apps developed by traditional brick-and-mortar banks are held back by glitches and lags because these banks are not digital-first. <em>Neobanks are.\u00a0<\/em>\r\n\r\nNeobanks can hire the best talent on the market to develop some of the smoothest, sleekest banking experiences that fintech can offer.\r\n<h3><span class=\"ez-toc-section\" id=\"4_Lesser_Restrictions\"><\/span>4. Lesser Restrictions<span class=\"ez-toc-section-end\"><\/span><\/h3>\r\nNeobanks are not actual banks &#8211; they don&#8217;t have banking licenses and are not regulated by the RBI. As a result, they enjoy slightly more autonomy than traditional banking institutions. They are not subject to legacy banks&#8217; policies and requirements and can, as a result, keep their costs low.\r\n<h2><span class=\"ez-toc-section\" id=\"Should_I_make_the_switch\"><\/span>Should I make the switch?<span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<ol>\r\n \t<li>How tech-savvy are you?<\/li>\r\n \t<li>Are you experimental, or do you prefer the tried-and-tested route?<\/li>\r\n<\/ol>\r\nNeobanking is for tech-savvy, experimental people who want to get the jump on a rapidly growing sunrise industry. New-age banking is <em>new.\u00a0<\/em>It is still in nascent stages but is all set to <span style=\"font-weight: 400;\">revolutionize the dusty old financial services industry.<\/span>\r\n\r\nIt&#8217;s not only neobanks leading this revolution &#8211; p<span style=\"font-weight: 400;\">eople are embracing <a href=\"https:\/\/razorpay.com\/learn\/digital-payments-india-definition-methods-importance\/\">digital payments<\/a> at a large scale; these days, even tender coconut sellers on the roadside have a QR code for payments!\u00a0<\/span>\r\n\r\n<span style=\"font-weight: 400;\">Our recent <a href=\"https:\/\/razorpay.com\/blog\/the-covid-era-of-rising-fintech-razorpay-report-10th-edition\/\">report<\/a> explores the rise of digital payments in post-pandemic India. According to the report, online payment transactions more than doubled in 2021 compared to 2020, crossing a billion.\u00a0<\/span>\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_what_is_a_neobank&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\">Check out the future of finance<\/a><\/div>\r\n&nbsp;\r\n\r\n<span style=\"font-weight: 400;\">Considering these numbers, we see that neobanks have tons of potential in India. With the government promoting UPI infrastructure and pushing for more businesses to adopt technology, it is only a matter of time before neobanks become mainstream. <\/span><span style=\"font-weight: 400;\">\u00a0<\/span>\r\n<h2><span class=\"ez-toc-section\" id=\"Neobanking_and_Fintech\"><\/span>Neobanking and Fintech<span class=\"ez-toc-section-end\"><\/span><\/h2>\r\nNeobanks are just one part of the great big world of fintech.\u00a0Fintech, or financial technology is an umbrella term for every area of finance that&#8217;s been improved by technology. Think ATMs, instant online money transfers, demat accounts &#8211; any and all technology that operates for finance is fintech. Even computer programs written to support finance is fintech.\r\n\r\nToday, fintech has become the norm. Just thinking about going all the way to the bank to make a money transfer sounds ridiculous. With such rapid growth of technology within the sector of finance, it is no surprise that banking itself is quickly becoming entirely digital.\r\n\r\nThere are hundreds of businesses that classify themselves as &#8220;fintech firms&#8221; &#8211; businesses that make software, apps, computer systems for banking, investing and lending.\r\n<h2><span class=\"ez-toc-section\" id=\"Top_Fintech_Businesses_in_India\"><\/span>Top Fintech Businesses in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<ol>\r\n \t<li>Paytm: Paytm is one of India&#8217;s leading digital payment platforms. It offers a range of services, including <a href=\"https:\/\/razorpay.com\/learn\/mobile-wallet\/\">mobile wallets<\/a>, online payment solutions, and e-commerce services.<\/li>\r\n \t<li>PhonePe: PhonePe is a popular <a href=\"https:\/\/razorpay.com\/blog\/digital-wallet\/\">digital wallet<\/a> and payment platform. It allows users to make payments, transfer funds, recharge mobiles, and pay utility bills, among other services.<\/li>\r\n \t<li>RazorpayX: RazorpayX is a full-stack financial suite designed to support businesses with their banking needs. It has a product for everything a business might need &#8211; vendor payments, payroll, current accounts, credit cards, capital, forex, and so much more.<\/li>\r\n \t<li>PolicyBazaar: PolicyBazaar is an online insurance aggregator that helps users compare and purchase insurance policies. It offers a wide range of insurance products, including life insurance, health insurance, motor insurance, and more.<\/li>\r\n \t<li>MobiKwik: MobiKwik is a digital wallet and payment platform that allows users to make <a href=\"https:\/\/razorpay.com\/learn\/what-is-online-transaction\/\">online transactions<\/a>, recharge mobiles, pay bills, and shop at partnered merchants.<\/li>\r\n<\/ol>\r\n<h2><span class=\"ez-toc-section\" id=\"Neobanking_for_Businesses\"><\/span>Neobanking for Businesses<span class=\"ez-toc-section-end\"><\/span><\/h2>\r\nEarlier this year, we <a href=\"https:\/\/razorpay.com\/blog\/exclusive-neobanking-report-for-smes-in-india\/\">partnered<\/a> with the International Data Corporation (IDC) to understand the challenges Small and Medium Enterprises (SMEs) face due to reliance on legacy financial systems.\r\n\r\nWe learned that the annual average loss suffered by SMEs depending on legacy systems is INR 67 lakh <em>per SME.\u00a0<\/em>Businesses that rely on traditional systems often have to carry out banking operations manually, running the risk of repetitions, errors, and unnecessary delays.\r\n\r\nBusinesses, especially SMEs, would benefit immensely from switching to neobanking.\r\n\r\nNeobanks are part of the larger fintech revolution that is changing the face of finance today.\r\n\r\nWith all-in-one financial suites like RazorpayX, founders can supercharge every aspect of their financial operations.\r\n<ul>\r\n \t<li>Save time, reduce manual effort and eliminate errors with<a href=\"https:\/\/razorpay.com\/x\/payouts\/\"> <strong>instant payouts<\/strong><\/a><\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">One single, <strong>powerful dashboard<\/strong> for all your money management needs<\/li>\r\n \t<li aria-level=\"1\">Intelligent <a href=\"https:\/\/razorpay.com\/blog\/what-is-invoice\/\">invoice<\/a> generation for <strong><a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\">vendor payments<\/a>\u00a0<\/strong><\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Smooth <strong>integrations<\/strong> with all major accounting platforms<\/li>\r\n<\/ul>\r\nAnd more where that came from. Your business is in the future &#8211; it&#8217;s up to you to ensure your banking is, too.\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_what_is_a_neobank&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Fix my finances!<\/a><\/div>\r\n&nbsp;\r\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<div id=\"rank-math-rich-snippet-wrapper\"><div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-1\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_is_a_neobank\"><\/span>What is a neobank?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Neobanks are new-age banks without any physical location, present entirely online. They provide digital, mobile-first financial solutions for payments, money transfers, lending, and more.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-2\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Are_neobanks_better_than_traditional_banks\"><\/span>Are neobanks better than traditional banks?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Neobanks are tech-first and offer benefits like smoother UI, automation, faster response times, and lower costs when compared to traditional banks. However, since most neobanks don't have a banking license, the range of services they offer is limited. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-3\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"How_can_businesses_use_neobanks\"><\/span>How can businesses use neobanks?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Businesses can benefit from the automation, cost-cutting, and speed neobanks offer. Neobanks are also innovating much faster than their traditional counterparts, and businesses can be sure they're ahead of the curve.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-4\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_are_some_of_the_best_neobanks_in_India\"><\/span>What are some of the best neobanks in India?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>With the rising popularity of neobanking, there are more and more such new-age banks everyday. The top few are Fi Money, Jupiter, Freo, and RazorpayX.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div>\r\n\r\n<!-- \/wp:post-content -->","protected":false},"excerpt":{"rendered":"<p>A neobank is a kind of digital bank without any branches. Rather than being physically present at a specific location, neobanking is entirely online.<\/p>\n","protected":false},"author":106,"featured_media":1973,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[273,57],"class_list":{"0":"post-1969","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking","8":"tag-neobanking","9":"tag-technology"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/1969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=1969"}],"version-history":[{"count":6,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/1969\/revisions"}],"predecessor-version":[{"id":21210,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/1969\/revisions\/21210"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/1973"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=1969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=1969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=1969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}