Traditional banking has mostly relied on legacy tech. In other sectors, new softwares such as CRM, accounting, ERP or HR have appeared. They were not in use 20-30 years ago. However, banks continue to use legacy technology platforms that have been around since 1970s. API-technology made cross-service integration seamless. API stands for Application Programming Interfaces and these are software modules that embed in consumer tech applications.

Such space is called neo-banking or cloud-banking or challenger banking.

Since 2010, more than 310 neo banks have been launched around the world. They have attracted an estimated 39 million users worldwide (Insider Intelligence). In fintech, this sector has attracted funding.

Some core tech platforms that power banks such as FIS, SWIFT, Finserv and Jack Henry must have a refresh. This causes concern among bankers. Digital banking services have come developed 811 Kotak, Yono SBI or Digibank DGS.

Aadhar has demonstrated that API-based architecture is faster and cost-effective. It generated start-ups such as Setu. Open and Niyo offer banking functions in automated and digital fashion.

Neo-banks have the ability to collect and analyse data. They understand consumer behaviour. It facilitates faster disbursal of loans and banking services.

They provide last digital mile services. They partner with smaller commercial banks who can then compete with larger banks.

Internationally, Nubank is the biggest neo bank in Latin America. Asia Pacific countries are issuing virtual banking licenses to bidders. E-commerce players have entered into lending through neo-banking platform called MyBank.

There is rise of a new-age, agile digital only banks.