Today, while Fintechs in India have the potential to bring about a digital information in the remotest parts in the country, neobanks are bridging the gap by making banking services even more accessible to people in the remote places. Emerging fintechs as well as neobanks have to start to look for developing strategies to utilize the 5G network in order to serve the remote customer base in India.

Neobanks - the digital alternatives to conventional branch-based banks, and with the advent of the Digital India movement, urban millennial are getting used to performing all their banking activities through mobile applications. Be it a small businessman who is migrating from a physical khata to a mobile app in order to maintain a ledger or a student who is sending money abroad for education fees; most of the things are possible through mobile applications.

While the story of rural India's banking is different than that of urban part of the country, there is a limitation in accessibility in remote access areas since banks do not find it economically viable for setting up branches in remote places. Moreover, with the emergence of 5G technology, a huge variety of products & services will become available to regions with sparse populations, however, thanks to better unit economics in operating digital platforms vis-a-vis physical branches.

Providing banking services to both villages & small towns digitally

According to a survey conducted by Gaon Connection, loan schemes do not reach more than 60% of the rural population and one of the huge reasons why rural dwellers are not able to obtain business loans when required is that they do not have any savings account.

Most of the population in rural India prefer keeping all their savings at their houses as most of the times they find it difficult to access a bank branch. Nonetheless, banks usually need require collateral in the form of a savings account prior to what they will give out a loan. The villagers are unable to obtain loans to start or expand their businesses without a savings account.

This lack of access to capital is one of the major reasons why poverty is so prevalent in rural areas & neobanks are changing this by rendering banking services to both villages as well as small towns digitally & by not being tied to conventional brick-&-mortar banking infrastructure & this means they can render banking services in areas where the penetration of physical banks is not very high owing to the higher cost of operation. The catalyst for this transformation will be 5G that can be utilized by the rural population to easily access banking services through fintech mobile applications.

Helping new companies to build solutions for their customers

Since the India market India is a large one with several consumers and retailers & with about fifty million MSMEs as well as tech savy consumers, distributors & retailers, people are looking forward to do business in both the Indian as well as foreign markets. What should be done at present is to ensure that the right regulatory framework is there for new organizations for building solutions that the MSMEs can adopt for rendering better service to their customers such as the OPGSP framework of the central bank. The market is certainly going to explode & everyone in the ecosystem is quite excited to service this new age MSMEs & new age consumers to have better user experience on the m-commerce site that is a natural extension to e-commerce.

Rendering services & solutions to SMEs

In India, a neobank is rendering its services as well as solutions to SMEs & playing a leading role in helping small businesses in managing their finances not just conveniently but also comprehensively. The neobank renders a platform that aids such businesses to send & receive payments, generate & track compliance of invoices with direct & indirect tax laws and access third-party banking and business applications from its platform, automate their accounting & reconciliation, letting numerous businesses to manage all their banking requirements, parallel under a single platform.

The road ahead

Attributes & offerings such as accessibility, cost-effective multiple banking & financial functionalities under a single umbrella, & personalization are a few of the major factors driving the growth of neobanks globally. In addition, FinTechs are creating niche solutions that are focused mainly on blue-collar workers & the underserved requirements of thin-file MSMEs, which is way forward.

Neobanking can also work as an extension of measures that are undertaken to solve the challenges of financial inclusion as well as bundling banking services with various other financial services - for instance, services such as opening of bank accounts for immigrants, facilitated via new on boarding procedures that are not based on conventional documentation of identification. With narrow targets initially, neobanks can expand by adding more functionalities & services over time.

Most of the digital as well as neobanks are yet to show sustained profitability, although they are beginning to be more popular and effective. However, they have huge potential to be disruptors in banking & financial services & the key in becoming profitable entities would be to convince traditional banks in investing in new-age technology & re-engineering processes for rendering seamless & swift customer experiences.