Get All Access for $5/mo

Here's Why One of India's First Neo Banker is Optimistic About Open Banking in India Technology will soon make traditional banking system redundant but is India ready for it?

By Vanita D'souza

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Entrepreneur India

In today's age of digitisation, it is all about the customer and improving his/her experience. To achieve this goal, banks and fintech companies have started to support each other. This change in the ecosystem has invented the concept of neo banking which can be rightly dubbed as the new era of the banking industry.

Vinay Bagri, who has worked with banks like Standard Chartered, ING and Kotak Mahindra, believes that the growth of traditional banks is stalled due to overheads like setting up branches, manual processes and high dependency on human resource, which eventually shoots up the cost for product making it expensive for the customers.

However, he realised the power of technology when ING launched its digital bank - ING Direct. This venture itched him to start something similar for the Indian market. In 2015, he partnered with Virender Bisht, who was then working with MobiKwik, to start NiYO Bank.

Unbundling Banking

The fintech startup is simply based on the open banking concept and its core business model runs around the neo bank model. However, to run a bank in India, one needs RBI's approval and for a startup to seek banking license is next to impossible. Having said, neo banks could collaborate with banking entities to roll out their products. This is exactly how NiYO's partnership with banks like YES, DCB and others came into existence.

Talking about the opportunity for neo banks, Bagri opines that India is at the nascent stage and domestic digital banks may opt for European models to scale, where multiple open banks will operate catering to niche demands.

"My personal view is that the scope is huge. In India, if you look at banks, they prefer products that are more commodity in nature and they do not prefer marketing products that are a niche or are tailor-made for a certain segment. However, this is where the opportunity lies," he said.

Presently, the neo bank offers two products – salary accounts for the blue-collar workforce and global card, which cancels the need for forex cards. The entrepreneur claims that the neo bank acquires around 4000 customers every day and will onboard 2 million customers by end of this financial year while on the global card front, NiYO is acquiring 500 customers every day and by end of FY20, it is looking to serve half a million customers.

The Direction

Considering there is hardly any regulation to manage digital banks in India, neo banks are presently overseen by the traditional banking laws. Having said, the RBI has digitalisation on top of its agenda and has rolled several new laws to support it.

In fact, the apex bank has rolled out new categories of banking license – small finance bank and payments bank, which has been a significantly a successful move. Bagri feels it is only a matter of time that RBI would roll digital bank license segment.

"If you look at Europe, Hong Kong, Australia and even the US, they all have a separate license category for digital banks. We hope that in the next few years, the RBI will have a similar licensing category with criteria that will safeguard customer's interest," he said while adding that, "Globally, we are one of the most robust banking systems today. So, they will do their due diligence and come up with regulation keeping in mind the risk parameter and the digital economy. Eventually, neo banks are about adding value to the end user and that's what RBI always promotes."

Vanita D'souza

Former Senior Correspondent, Entrepreneur India

I am a Mumbai-based journalist and have worked with media companies like The Dollar Business Magazine, Business Standard, etc.While on the other side, I am an avid reader who is a travel freak and has accepted foodism as my religion.

Business News

Here's What the CPI Report Means for Your Wallet, According to JPMorgan and EY Experts

Most experts agree that there will be another rate cut next week.

Leadership

I've Spent 37 Years in Business — Here's How I Beat the Odds and Stayed Ahead

For over thirty years, I have led a successful media production and communication consulting company. Only 25% of new businesses survive for 15 years or more, so I have beat the odds. But having staying power is not a matter of luck.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

News and Trends

growX Ventures Launches Fund II with a Target Corpus of INR 400 Cr

Fund II aims to target early-stage and growth-stage investments, backing 20–24 startups in deeptech sectors. It plans to deploy INR 10 crore in seed and INR 20–30 crore in Series B rounds.

Operations & Logistics

The Holidays Mean Vacation Time — But Disaster Can Still Strike. Is Your Crisis Plan Ready?

Holidays mean different working hours for companies and different schedules for employees that take off. Before you and your team enjoy some much deserved time off, it is important to put a crisis management plan in place so your business is ready to tackle any issue that crops up.