India is Poised for Next Evolution Arc in Financial Services with Neobanks: Report
With about 58.4% population underbanked in India, Neobanks have immense potential for growth in tier-II and- III rural segments of the country, a report “The Evolution of Neobanks in India” launched at the Global FinTech Fest indicated.
On day two of the Global FinTech Fest 2021 (GFF 2021), Jitendra Gupta who is the Chairman of the FCC’s Neo Banking committee and CEO of Jupiter Money; Anish Achuthan, Co-Founder and CEO, Open Financial Technologies; Anurag Sinha, Co-Founder and CEO, FPL tech/One Card and Vivek Belgavi Partner, Technology Consulting, Alliances & Ecosystems at PwC, released a report on “The Evolution of Neobanks in India”. The Neobanks strive to achieve superior digital experience, superior customer experience.
The report highlights that India is witnessing a dynamic shift towards digitised banking services, provided by FinTechs for a niche set of customers. Since Neo Banking is a fast-evolving segment, it will be important to assess its impact on other stakeholders such as banks, customers, regulators, etc.
The Neo Banking committee formed under FCC aims to be the voice of the industry and assist the regulator and government of any regulations to be proposed for the sector.
On the occasion, Mr. Anish Achuthan, Co-Founder and CEO, Open Financial Technologies who is also a member of the committee said, “I’m glad that FCC has taken the initiative to create the neo banking report for the Indian market. Neo banking is the future in the fintech space, and the industry deserves to know more about the segment”
Globally, the Neo Banking space has witnessed strong growth across geographies, both in the Western hemisphere – particularly in North and South America, the UK and Europe, as well as in the APAC region. The Indian Neobank landscape has seen some significant traction and exponential growth over the last two years. There is no specific license/regulatory approval for Neo Banking yet. Hence, India does not have a concept of digital banks/ challenger banks unlike some of the global counterparts. Neobanks in India have banking partnerships at their core. This is one of the core differences between global and Indian Neo Banking models.
“The report is very timely in recognizing the critical role Fintech innovation like Neobanks can have on the growth trajectory of small and medium businesses in India. RazorpayX is proud of being able to help small and medium businesses unlock the next phase of digital growth. The Government’s unwavering commitment to Digital India and its focus on building world class infrastructure has been instrumental in helping fintechs like ourselves widen our pool of services and cater to the differentiated banking needs of MSMEs and startups,” said Mr. Harshil Mathur, Co-Founder and CEO, Razorpay and member of the committee.
Over the last decade there has been an increase in use of cutting-edge, tech-enabled solutions in the banking sector. Currently, India has over 18 Neobanks. These tech-enabled solutions have also given rise to Neo Banking business models in the country. Currently, the Neobanks offer products that touch across all the three financial regulators viz. Reserve Bank of India, Securities Exchange Board of India (SEBI) and Insurance and Regulatory Development Authority of India (IRDAI).
Mr. Sujith Narayanan, Co-Founder and CEO, Epifi Technologies (Fi Money), said, “We are delighted to partner with FCC in creating the seminal report on neo banking in India. Neo Banking is a significant opportunity to address the unique banking and financial needs of digital-first consumers in partnership with banks and other ecosystem players.”
In a few years from now, the Neo Banking space is expected to further stabilize with the business models/products that the entities have to offer, and regulators, akin to its global counterparts may look at directly regulating the Neobanks. Given their technology prowess and innovative business models, Neobanks have the potential for further value-addition and growth.
Global Fintech Fest is organised by Fintech Convergence Council and Payments Council of India, the two councils of Internet and Mobile Association of India (IAMAI) and National Payments Corporation of India (NPCI). The Fest is presented by the Ministry of Electronics and Information Technology, Government of India, Reserve Bank of India and supported by NITI Aayog, Central Bank of Kenya, Startup India and Invest India.
The World Bank, United Nations Capital Development Fund (UNCDF), RBI Innovation Hub are the institutional partners of the summit. About 75 partners have collaborated for the summit, including Razorpay, Amazon Pay, WhatsApp, Google Pay, Open Digital Payments and Cashfree Payment.
About Internet and Mobile Association of India (IAMAI)
Internet and Mobile Association of India [IAMAI] is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was established in 2004 by the leading online publishers, and in the last 16 years has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, ecommerce and mobile & digital payments among others. Sixteen years after its establishment, the association is still the only professional industry body representing the online industry in India. The association is registered under the Societies Act and is a recognized charity in Maharashtra. With a membership of nearly 300 Indian and overseas companies, and with offices in Delhi, Mumbai, and Bangalore, the association is well placed to work towards charting a growth path for the digital industry in India.
About Fintech Convergence Council (FCC):
FCC is formed under Internet and Mobile Association of India (IAMAI) and represents the FinTech industry. The purpose of the council is to encourage collaboration, seek complementarities and build synergy between the FinTech ecosystem. The council has worked towards interpreting the regulatory and legal framework, aggregating the concerns and feedback of the various players and communicating it to lawmakers and organizing gatherings of the industry participants.
About Fintech Convergence Council (FCC) NEO Banking Committee:
Out of the various sectors that FCC represents, Neo-Banking is one of them. The goal of this FCC’s Neo Banking committee is to become one mature voice of the neo banking industry since it’s at a nascent stage and evolving and also assist the regulator or government for any proposed regulations pertaining to the sector . The neo-banking committee represents players such as RazorpayX, Open Financial, NIYO, FPL Technologies, EpiFi Technologies, Jupiter, Instant pay India, etc.
About Payments Council of India (PCI)
Payments Council of India was formed under the aegis of IAMAI in the year 2013 catering to the needs of the digital payment industry. The Council was formed inter-alia for the purposes of representing the various regulated non-banking payment industry players, to address and help resolve various industry level issues and barriers which require discussion and action. The council works with all its members to promote payments industry growth and to support our national goal of ‘Cash to Less Cash Society’ and ‘Growth of Financial Inclusion’ which is also the Vision Shared by the RBI and Government of India. PCI works closely with the regulators i.e. Reserve Bank of India (RBI), Finance Ministry and any similar government, departments, bodies or Institution to make ‘India a less cash society’.
About National Payments Corporation of India (NPCI)
National Payments Corporation of India (NPCI) was incorporated in 2008 as an umbrella organization for operating retail payments and settlement systems in India. NPCI has created a robust payment and settlement infrastructure in the country. It has changed the way payments are made in India through a bouquet of retail payment products such as RuPay card, Immediate Payment Service (IMPS), Unified Payments Interface (UPI), Bharat Interface for Money (BHIM), BHIM Aadhaar, National Electronic Toll Collection (NETC Fastag) and Bharat BillPay. NPCI also launched UPI 2.0 to offer more secure and comprehensive services to consumers and merchants. NPCI is focused on bringing innovations in the retail payment systems through use of technology and is relentlessly working to transform India into a digital economy. It is facilitating secure payments solutions with nationwide accessibility at minimal cost in furtherance of India’s aspiration to be a fully digital society.