Neobanks have an opportunity to address ~120 Mn professional income accounts: Redseer
A report released by RedCore, the research arm of Redseer, suggests that the primary bank accounts of professionals (salary or business income) will drive the growth of neobanks in India and provide an addressable market of 120 million. In addition, there is an opportunity to address ~25 Mn additional accounts of new professionals every year.
The estimated 120 Mn professionals (steady income earners) currently represent around 80% of the addressable banking ARPU or Average Revenue Per User. Despite holding most of the wealth, this segment is still underpenetrated. The findings further suggest that a majority of the professional’s banking ARPU is driven by primary income accounts. Thus, the value for neobanks lies in becoming the primary banker for steady income earners and professionals.
Kanishka Mohan, Associate Partner at Redseer said, “The product offerings of neobanks are still at a nascent stage, so the immediate play for neobanks is to target accounts with a steady income, thus differentiating themselves from traditional savings accounts. A huge step in the direction of success for neobanks involves becoming the primary banker for the target group: this holds the potential to generate a 10X Lifetime Value (LTV) compared to secondary accounts.”
Currently, salaried professionals rarely get to choose their preferred salary account provider, as companies/employers choose a default salary account provider for their employees. However, as per the findings, salaried professionals prefer banks that offer better service.
Neobanks, the latest digital-first innovation to seep into the banking arena, works on three models globally, of which two are relevant in the Indian context. The first model involves pure-play virtual banks, where digital platforms partner with incumbent licensed banks to offer tech-driven and niche offerings. The second model includes neo banking operations of traditional banks that function autonomously and compete with stand-alone neobanks through repackaging of existing offerings. The third model involves digital-only banks that have a fully operational banking license, offer independent financial services, raise capital and lend on their own: this model does is yet to make its way to the Indian context.
The report went on to state that Indian neobanks have attracted significant investor interest & venture capital over the last few years.
India’s retail banking landscape is at a once-in-a-generation inflection point as neobanks look to revolutionize the personal banking experience. By leveraging technology, neobanks are offering unique and better banking experiences, aiming to address the gaps in the current banking system.
Boilerplate:
Redseer is a leading homegrown strategy consulting firm, with global footprints. Founded in 2009, Redseer works on new age, consumer focused strategy and business problems. The firm collaborates with leaders and organizations to build thriving digital businesses. Using proprietary methodologies, deep consumer understanding and high-quality research, Redseer offers unparalleled solutions in private equity, growth advisory and consumer strategy. Headquartered in Bangalore, with offices in Delhi, Mumbai, Singapore, and Dubai, Redseer has a strong team of 200+ consultants in India and around the world.
