Neobanks is the buzzword in boardroom circuits across traditional banks today as neo-banks threaten to disrupt the way banking has functioned traditionally.
Today the offerings of neo-banks target individuals to SMEs (Small & Medium Enterprises) and provide well-thought-out solutions in the space of remittances, money transfers, utility payments, and personal finance.
Their focus on customer-centric products, processes, and services has resonated well with new-age customers and has led to high adoption rates.
Before dwelling on the uniqueness of Neobanks, let us understand what Neobanks are.
What are neo-banks?
An entirely online bank without any physical presence is a Neobank. Neobanks is the bridge connecting traditional banks with customers’ evolving requirements of the new digital age. They are the new face of FinTech.
You need to understand that Neobanks are not digital banks. Both offer services through smartphones and other devices, but there are no other similarities besides these.
They are financial institutes that leverage New-Age technology to offer customized services at a minimal cost.
Why are neo-banks so unique?
Neo-banks have been able to leapfrog a large amount of innovation and process in most of the transactional offerings in banking. They have been able to provide solutions using design thinking principles and have aimed to simplify interactions with the end consumer.
This is much unlike traditional banks, which have a mammoth base of processes and systems, which have evolved organically over the decades. The new-age thinking of neo-banks is a notch above, as it starts with new-age thinking compared to traditional banks.
Although Neobanks lack the funds and customer base of traditional banks, they have technology and innovation to efficiently serve customers at a faster turnaround rate.
Where does Neobanks come into play for an SME?
Neobanks is the answer to the financial needs of retail customers and Small and Medium Enterprises (SMEs), which are generally not catered to as efficiently by traditional banks. Retails customers and SMEs face significant challenges or issues when getting financial help in the following domains.
Working capital crunch – Retail customers and SMEs have irregular cash flow and face working capital crunch situations that are generally not fulfilled by FIs (Financial Institutions).
Financing and funding – Lack of assets hinders SMEs and retail customers from procuring timely credit as FIs prefer to work on asset-backed lending. SMEs are often left in the lurch due to a lack of funding.
Manual account follow-up – As many SMEs do not have the latest accounting technology, they end up manually following up for accounts receivable and payable, which is tedious and time-consuming.
Managing multiple bank accounts – SMEs and retail customers often have their accounts spread out in different banks; thus, managing accounts becomes a nightmare and leads to financial mismanagement.
Neobanks, with their innovative features, can help SMEs and retail customers with all the above issues.
What do Neobanks offer to SMEs?
Neobanks is the solution that provides a business banking platform that helps SMEs with automating and run their finances efficiently.
Neobanks offer a plethora of services, some of them include:
Account Payable and receivable management – Neobanks provide end-to-end automated account payable and receivable management, thus doing away with tedious manual maintenance of books.
Real-time finance management – SMEs can manage and check their business finance anytime, anywhere with a finance dashboard.
Bank Account Management – SMEs can manage their current accounts in place.
Credit – SMEs can now avail themselves of faster and better working capital and business loans based on their cash flows without placing assets as collateral.
Flexibility – Neobanks offer flexibility in payment terms, thus easing repayment stress.
Payroll and Vendor management – Seamless automated payroll management and vendor management for SMEs, thus helping with the efficient functioning of the business.
Final thoughts…
With a bunch of innovative features, Neobanks are at the cusp of revolutionizing banking services. Most of these products and services have been created to cater to Bharat, or the new real-India, which is full of SMEs. It is a must for all SMEs, promoters, and startups to educate themselves with the latest offerings on the market to take advantage of the technological and thought-process leap taken by the new age neobanks. It is a symbiotic relationship that will allow SMEs to flourish and grow their business steadily and robustly.