Top 5 Neobanks in India

Banking is an old system, so much so that one might even call it ancient. How ancient you ask? Well, the earliest instance of an organisation managing the funds of a large group of people can be seen as far ago as the 15th century. As the barter system came to an end due to its inherent flaws and the currency became the mainstay, banks were a complimentary development that needed to happen.

Through the passage of time, banks have developed to become a multifaceted part of the economy, providing more services than just storage and distribution of funds. With digitisation, banks had new avenues to explore and eventually they did travel into them. As time passes banks will have to fill greater shoes, the distance they have to walk is long after all. For as long as humans exist, so will exchange and the need to manage this exchange will come along very far into the future. A need banks will fulfil.

Unless of course, someone comes up with a better system to replace, well… the entire idea of MONEY. I’m not challenging anyone, I’m just saying, that’s what it will take to get rid of banks.

A new form banks have taken is in the form of Neobanks. The recent socio-technological environment has made it so that a lot of the services rendered by banks had to be moved from the physical to online platforms. Neobanks take this move to an extreme by not only having an online presence, but by having an online-only presence. That’s right, neobanks have no physical branches for customers.Every interaction with them takes place through a webpage or an app. Today, we take a look at the most promising players in various segments of this sector.

What are Neobanks?

The word Neo comes from the Greek word Neos, which means “New”. Thus, neobanks are a new version of an old system. What does this new version entail? Let’s find out.

Neobanks work on a partner-bank model. This means that the online platform comes together with a pre-existing traditional, brick and mortar bank of NBFC and provides the services of the bank or NBFC on its online platform. Neobanks provide nearly all the services of a traditional bank that they partner with. However, they focus on one of the services of the traditional bank and capitalise on it by providing it as their unique offering. This allows the neobank to appear more lucrative to newer clients/customers.

The reason why neobanks conduct their business in such a way is because you see, neobanks… aren’t really banks. Not in the eyes of the RBI at least. Which is why neobanks are not granted a banking licence by the RBI. As a result, neobanks have been somewhat downgraded into being just marketing tools for their partner banks in a way as in their current state of operations, neobanks attract customers that open accounts with the partner banks. The neobanks only act as a convenient way for the customers to accomplish this act of account opening.

So, it seems to be crystal clear that there is room and requirement for improvement in the status of neobanks in India. Yet, some neobanks have been growing and showing prominent growth prospects, even in these adverse conditions. 

List of Top Neobanks in India

Here’s the 5 of the most promising neobanks in India.

1. Fi Money

Created by Google Pay co-founders Sujith Narayanan and Sumit Gwalani, this neobanks’s target audience is salaried millennials who might not have the time to schedule bank visits to be able to avail all the people services provided by said traditional banks.

Partnered with Federal Bank, Fi offers a whopping 7.25% annual interest on its smart savings account. Fi also has an AI based feature called FIT rules that allows users to automate their savings by setting certain checks based on popular events like cricket matches. If said checks get triggered (Ex. Team X winning a match, player Y scoring a certain amount), an amount decided by the user gets transferred to a custom savings account. Users can also create multiple savings accounts for various goals.

Fi charges 1% of the interest rate of the savings account in case of premature withdrawal from said account.

Fi account holders also get a VISA debit card issued corresponding to their account.

2. Jupiter

Also partnered with Federal Bank, Jupiter targets the same demographic as Fi Money, making it a direct competitor. Jupiter also has an automated savings mechanism called Pots that provides a 3.05% interest rate.

Jupiter also allows users to track their spending habits with a feature called Insights. Jupiter also ran an invite-only campaign called “Mission Invite” under which new users could start using the app by either being invited by an existing member’s invite or get an exclusive invite by Jupiter’s team.

Since both Fi and Jupiter are partnered with Federal Bank, a person can open an account with only one of the neobanks. However, users can switch from one neobank to another. Jupiter users get a VISA debit card as well.

3. FamPay

Partnered with IDFC First Bank, this neobank platform currently only offers prepaid cards. The platform targets teenagers and intends to capitalise on the demographic’s need for financial freedom.

The prepaid cards are issued by VISA and are numberless. The numberless feature allows teenagers to spend money from their prepaid cards without possibly compromising the security of their guardians account.

4. Mahila Money

Created by Sairee Chahal, the creator of a female-only social media website “Sheroes”, Mahila Money is a neobank that serves only female entrepreneurs from suburban and urban settings. The purpose of this platform is to provide female entrepreneurs without any micro-financial support an opportunity to start their own businesses.

The platform also has community based features that allows users to interact and share experiences for the education of new entrants to the world of enterprise. Mahila Money provides its users with loans as well as prepaid cards by partnering with an NBFC named Capital Trade Links Ltd.

The interest rate on said loans is at 20-25% p.a. which seems a bit high, considering there are business loans available from mainstream banks at lower rates. This exorbitant rate is set-off, however, by the fact that these loans are unsecured, which is a feature that business loans from traditional banks lack.

5. RazorpayX 

Partnered with RBL Bank, RazorPayX targets small and medium enterprises by providing them features to help ease their business operations. The current account provided by RazorPay allows its users to access features such as tax and vendor payment automation, business reporting, etc.

The platform also provides corporate cards and instant loans with no collaterals to its users.

The Bottom Line

So the obvious question that you, my dear reader must have is, “Should I open a neobank account?” In my personal opinion, I don’t see why anyone shouldn’t. As far as security is concerned, neobanks might not possess a licence, but they do need to pass standards posed by partner banks to operate with them. The partner banks themselves afford a layer of safety to the users’ funds.

From a customer’s perspective, neobanks could open a new layer of accessibility and ease of use. Neobanks are also providing a lot of benefits to their users right now to attract more customers. Might as well use them.

So what do you think about neobanks? Will you give them a shot? Also, did we miss any others in this list that you think are worthy of consideration? Let us know in the comments section below.

Until then, happy investing!