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Gone are the days when one had to visit a bank branch to get a Demand Draft prepared to pay a college fee or to subscribe to any service. Now one can transfer all sorts of fees and payments online, and most banking transactions are carried out digitally.  

With the advent of FinTech, the financial services market is being revolutionized and relying on Internet and Mobile technologies. Traditional banks are adopting digital technologies and extending their services on digital platforms. Internet banking and digital banking are already in place to reduce costs and provide convenient banking to its customers. We now have digital banks and Neo banks because of the profound transformation in India’s banking landscape. 

What are Neo Banks?


Neo banks are online-only financial institutions that operate exclusively digitally. They provide all traditional banking services through a digital platform or mobile applications, with no physical branches. This is a type of digital bank that caters to the financial needs of the tech-savvy generation, such as instantaneous money transfers, lending, and payments. Simply put, a neo bank is a digital-only and mobile-first bank. 

How do Neo banks operate?

In India, technology, most notably Artificial Intelligence Technology, drives the operations of Neo banks. Since Neo banks lack physical branches, their entire service framework is based on leveraging technology to provide high-quality and highly customized banking services to customers. 

The Reserve Bank of India (RBI) has not yet authorized Neo banks in India to hold a banking license. Therefore, strictly speaking, they are platforms that offer financial services through their licensed banking partners. Neo banks’ emphasis on innovation is a crucial component of their business model. 

Neo banks are continually seeking to improve their use of technology to provide customers with a seamless experience. The absence of a physical office in which to provide their services affords them the added benefit of low operating expenses. 


Since neo-banks are entirely digital, they provide clients with a vast array of benefits, including: 

Economical Structure 

Higher savings and FD rates than traditional banks 

An intuitive and captivating mobile experience 

Services in real-time for account opening, payments, checking balances, opening, and redeeming time deposits, etc. 

24×7 support – sophisticated chatbots 

Strong security features, such as locking and freezing via an app at any time 

Personalized discounts and offers based on income, expenses, and spending habits. 

Most Neo banks offer international payments at interbank rates via multiple banking and payments partners on a single platform for linking multiple accounts, apps, and services. 

Shortcomings or challenges 

Narrow range of products as compared to traditional banks 

In-branch support is not available which creates trust issues for some customers. 

Regulatory compliance. 

Requirement of tech-savviness for customers. 

Difference between Neo banks and traditional banks


Traditional banks like SBI, ICICI, HDFC, PNB, etc. have a wide physical presence with ATM outlets and bank branches. These banks also offer digital banking or net banking services. This provides an upper edge to them as compared to Neo banks.  

The customer base of Neo banks is less as compared to traditional banks.  

Traditional banks can accept deposits and offer loans however Neo banks cannot do that. 

Traditional banks have banking licenses from RBI; however, Neo banks are working with traditional banks to offer various FinTech services to their customers.  

Neo banks provide innovative and customized products to their customers as compared to traditional banks. Traditional banks are mostly offering standard products.  

Neo banks customers are mostly the tech-savvy young generation who want new-age fintech services. 



The average Indian consumer seeks tailored and comprehensive financial management solutions. Generations Y and Z are now more financially literate than ever before. Neo banks capitalize on their strengths, utilizing technology to develop engaging features that track users’ cash flow and financial behavior and recommend appropriate instruments. Neo banks provide low-interest loans, high-interest savings accounts, and seamless, low-cost services. 

Learn more about the latest trends and career prospects in finance or banking system by enrolling to an online MBA degree through Online Manipal, an online learning platform of Manipal University Jaipur (MUJ). You can choose from the different finance related electives such as BFSI, Finance, and IT and FinTech. MUJ’s MBA curriculum is designed by experts keeping in mind the latest changes in the industry trends and the degrees are valued highly by top employers and higher educational institutes across the world. 

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