The banking and finance industry is always on the move. It is rapidly changing, and this is because the firms are always on the hunt for better services and convenience to offer to their customers. 

With the advent of technology and the Internet, access to e-commerce platforms, the rise of start-ups, and more, it has pretty much become mandatory to have a digital stage to facilitate financial services for individual customers and businesses alike.

The global need for easy transfers and services gave rise to net banking. But it doesn’t end there. The technology used in this industry is always evolving. Multi-national connections and global opportunities have presented a platform to ease investments, payments, and financial management as a whole.

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This is where Fintech and Neobank businesses step in.

Long gone are the days when banks and financial institutions indulge in traditional money and portfolio management. With the economy growing year after year, the markets giving global access to opportunities, the importance of making informed decisions, and the growing complexities of the finance industry, banks need to go beyond the traditional services to stand out and be of substantial help.

While they cannot drift away from the core of banking services, they must keep adding more. And they are successful in doing this only because of fintech companies.

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What is a Fintech company?

This company uses technology in financial services to enhance and automate these services and processes. Serving individuals as well as businesses, fintech companies can be found in a wide array of fields like banking, cryptocurrency, insurance, investment applications, etc.

A fintech company is not a competition for traditional banks, but a support, as it helps them integrate technology-eventually serving the customers what they want today, i.e. services and information on a click.

The UPI payment systems we use, are all run by Fintech Companies.

So how exactly do they work?

Well, financial technology has been around for a very long time. It all started with the introduction of ATMs, and credit/debit cards back in the 1950s. The companies providing this as a service per se have only entered the scene in the recent past.

Today, they deal not just with credit cards, but also with blockchain technology, personal finance management, high-frequency trading, and more.

So, the fintech industry has existed for a very long time. It has only grown, and continues to grow, with leaps and bounds now. It doesn’t provide banking services by itself but facilitates the same in collaboration with traditional banks.

Along with fintech, the need to avail of all kinds of banking services with the click of a mouse has given rise to a new wave of banks.

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What is a Neobank?

This is a new wave of digital banks, which run purely online. They do not have any physical branch. Providing only app-based services, they are here to transform how we make payments. Not just that, they provide their customers with super helpful tools to track their expenses and help manage their money better.

The services they provide overlap a lot with traditional banks, with account opening, loans, cards, and more, but they are more tech-oriented. Their primary aim, unlike traditional banks, is to foster better financial habits in their customer base. Neobanks stress less on money management and more on helping their clientele.

Each neobank can target a specific segment of the economy. Some cater only to start-ups and businesses, some to professionals and the elderly working population. We, at NuCash focus on the youth, mainly students.

Now, how exactly are fintech companies and neobanks different?

Let's understand the basic difference between fintech and neobank.

Fintech companies provide a technological platform to individuals, businesses, and banks to ease their financial management. They do not have any banking license and focus mainly on providing seamless customer service through convenience, accessibility, customization, and functionality.

Neobanks, on the other hand, work similar to a traditional bank, sans the physical presence. Since in India, RBI identifies only traditional banks as licensed banks so far, neobanks are currently functioning and providing banking services tied up with a traditional bank. Their main focus is improving their clients’ financial habits.

So neobanks can use fintech to aide their services. They can work hand-in-hand, but can never replace each other.

The last word:

Whether a fintech company or a neobank, both are here to stay. With everything digital, a question of cybersecurity arises, but it is well taken care of with proper guidelines and rules. They’ve only been making things easier, and are indeed great tools for enhancing financial operations and soundness. All you need to do is be informed, and make well-thought-out decisions. India is entering a wave of insurgence in digital finance and banking, which, directly or indirectly, will take us to the next level.

For more on neobanks, read about Neobanks in India