Page 43 - Banking Finance October 2025

ARTICLE

From Branches to

Bytes: Understanding

the Neo banking

Transformation

Om Prakash Prasad
Senior Manager (Finance)
General Insurance
Corporation of India

Unlike traditional banks, which rely on a physical infrastructure, neo banks provide services typical
of banks such as payments, savings, loans, and investments, primarily through mobile applications
and internet interface, and with much lower overhead. The development of neo banks has been
accelerated by factors such as increased penetration of mobile phones, open banking, and
changing consumer behaviours about being available 24/7.

Abstract services with technology. Neo banks, or digital-only banks,
are an emerging trend in banking and are appealing to a
Neo banking is revolutionising the banking industry, of-
new kind of banking consumer who values convenience,
fering all digital banking characteristics of convenience,
transparency, and customisation over relationship banking.
cost, and user experience. The shift towards neo bank-
ing results from increasing mobile penetration, open Unlike traditional banks, which rely on a physical infrastruc-
banking, and changing consumer expectations, and it ture, neo banks provide services typical of banks such as
caters to digital consumer behavioural patterns through payments, savings, loans, and investments, primarily
innovative production methods. While they face regu- through mobile applications and internet interface, and
latory restrictions, cybersecurity risks, competition from with much lower overhead. The development of neo banks
traditional banks, and profitability concerns, they hold has been accelerated by factors such as increased penetra-
strong potential for financial inclusion and market dis-
tion of mobile phones, open banking, and changing con-
ruption. Strategic growth will require trust-building, sumer behaviours about being available 24/7.
inclusive finance, data-driven personalisation, and stra-
tegic partnerships. As a key evolution in fintech, neo Neo banks have developed as a fintech category defined
banking is poised to redefine the future of banking and by a fully digital form of operation and a strong emphasis
customer engagement. on user experience. They can be categorised in a very broad
sense into two categories:
Full-stack neo banks, which provide services from end
1. Introduction and Evolution of Neo to end under their banking licenses.

Banking Front-end neo banks - which use a partner bank and
Over the last decade, the banking environment worldwide their regulatory framework, providing the customer in-
has been transformed due to the intersection of financial terface but not holding their bank license.

38 | 2025 | OCTOBER | BANKING FINANCE