What are the new banks?

The new banks are online-only fintech companies that operate digitally or via mobile applications. Simply put, the new banks are digital banks without any physical branches.

How is it different from traditional banks?

New banks are disrupting the traditional banking system by leveraging technology and artificial intelligence (AI) to deliver a range of personalized services to customers. On the other hand, traditional banks take a multi-channel approach, i.e. physical banking presence (through branches and ATMs) and digital banking presence to offer various products and services.

Right from customer acquisition to traditional banking services such as remittances, money transfers, utility payments and personal finance, the new banks are offering a wide range of offerings to customers across the retail and small to medium business (SME) categories. Typically, new banks apply a design thinking approach to a particular banking area and adapt their products and services in a way that makes banking simpler and more convenient for end consumers.

How do you develop?

The term ‘new bank’ started gaining worldwide fame in 2017 as it emerged as a new competitor to traditional banks in terms of customer engagement, connectivity, access, and most importantly, user experience. That is why new banks are also called “competing banks”. The market potential for new banks is driven by the increasing penetration of the internet and smartphones across the globe.

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According to a report by KBV Research, the global new banking services market size is expected to reach $333.4 billion by 2026, growing at a compound annual growth rate (CAGR) of 47.1 percent. Although the concept of new banks is a relatively new concept in India, this concept has been gaining traction over the past few years. There are about a dozen new banks in India including Razorpay X, EpiFi, Open, NiYo, Jupiter and others. Recently, some of these companies have raised financing from prominent global investors, who are betting on the potential of the heavily banked Indian market.

Can they replace traditional banks?

Not completely. New banks offer only a small range of products and services compared to the full range of services offered by traditional banks. Additionally, because new banks focus heavily on digital technology, they may not be able to meet the banking needs of tech-savvy consumers or people from rural areas of the country, who believe in interacting face-to-face with their finances. guardians. As of 2020, the smartphone penetration rate in India is only about 54 percent.

What are the challenges they face?

Many. First and foremost, build trust. Unlike traditional banks, new banks do not have a physical presence, so customers can literally not “handle” in case of any issues/challenges. Secondly, the new banks were not recognized by the Reserve Bank of India (RBI).

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Therefore, they have to deal with banks and financial institutions that are regulated to provide financial products and services. In the absence of enabling regulations, new banks cannot accept deposits or offer lending products on their own books. This is the reason why some FinTech companies have a Non-Banking Financial Corporation (NBFC) as the parent to engage in lending activities while most others partner with banks and financial institutions.

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