Neobanks, the new-age digital entities that provide a suite of financial services, have been seeing steady growth and many players say they have got a boost post-Covid and are looking to launch new products.
“We had slowed down a bit after Covid but it is back on track. The idea is that we have partnered with a couple of large traditional banks to provide full-scale banking services to SMEs,” said Harshil Mathur, CEO and Co-founder, Razorpay.
Launched in November 2018, Mathur said RazorpayX now has over 8,000 businesses using its neobanking systems, and it continues to scale up operations.
In November 2019, it introduced a new product suite, including current accounts and corporate credit cards, for businesses and also acquired the payroll management company, Opfin.
Digital banking fintech Niyo, too, has utilised the lockdown to expand its product suite through mergers and acquisitions.
“The company recently announced the acquisition of Goalwise, a new-age mutual funds platform, to launch a vertical under the brand name ‘Niyo Wealth’. Niyo Wealth will offer robo advisory, auto investments, and domestic and international stocks by the end of September,” it said in a recent release.
Most players are focussed on micro, small and medium enterprises and start-ups, which have varied financial needs, but may not be an attractive proposition to full-scale banks.
Further, the current pandemic and social-distancing norms have also pushed people towards digital banking, and many players say that their digital interface is often easier and more comprehensive than that of banks.
Niyo said it expects Covid-19 to accelerate the digital adoption of financial services, and the present crisis offers a great opportunity to ride the digital wave.
Mathur also noted that many customers are not going to bank branches due to the pandemic. “Our digital interface is better than what traditional banks provide. We see a longer term trend,” he noted.
According to the MEDICI India FinTech Report 2020, in partnership with FCC of IAMAI, the second wave of disruption in the Indian fintech ecosystem is led by neobanks.
“Problem statements being addressed include fully digitised account opening, free debit cards, instant payments, personal finance advisory, cash flow analysis and projections, GST-compliant invoicing, and accounting integration,” it said.
There are about 15 neobanks in the country, including digital-only brands of banks such as State Bank of India’s YONO and Kotak Mahindra Bank’s 811, while many are still under development.
“With fintech segments like payments and digital lending getting overcrowded, investors’ interest has shifted towards neobanking. The total funding raised by Indian neobanks so far totals $139.8 million,” it further said, adding that this does not include the $93 million raised by Razorpay since 2019 for its neobanking initiative.