Investment in neobanking space plunges

Subject: Economics

Context: However players say it’s still early days with many more deals in the pipeline.

Concept:

Neo banks are virtual banks. They are the banks that are only operable online. The bank is not physical but is completely digital.
Neo Banking is a technique to provide a complete banking experience but through digital platforms like a mobile application.

Neo banking: Features

These banks are cheaper and quicker.
Neo banks have the ability to leverage a single network with the complete financial portfolio.
In short, Neo bank is a kind of digital bank with no branches.
Neobanks can be called fintech firms providing digital and mobile-first financial solutions payments along with money transfers, money lending, and more.
Neo banks do not have a license of their own but they have banking partners to provide licensed services.
Conventional banks are at the frontline of increasing rivalry from the digital world. With neo banks expanding so quickly, their state of art technologies are winning over customers who wish the financial services to be easier for them.

Situation in India:

In India there are 10 neo banks at present. ICICI took lead and partnered with three of them namely- Free, Instant Pay and Yelo.
Neo Banks have been divided into licensed and non licensed. Non licensed banks tie up with a traditional bank and provide their products while the licensed banks obtain their licenses and work on their own.
Currently in India neo banks are not allowed to hold customer deposits and they are not even being granted virtual license by the RBI since it maintains the stand on the need of physical availability as per its 2014 guidelines.