Neo-banking

A neo-bank could be a transactional platform for merchants, or an account manager or could be a lending service as well.

Open has flourished as a neo-bank and has witnessed spectacular growth. Amazon too is building its own digital banking platform. Amazon will allow local sellers to open current account, manage expenses and avail of the credit line from an array of partner banks. Open provides business banking, payments and services to SMEs. Google and Visa too are receptive to neo-banking.

Other remarkable neo-banks in India are Jupiter, RazorPay, and Niyo. Amazon and Paytm too are keen to enter this space. Globally, we have Revolut, Chime and Banco.

As there are no regulations in India, it has hindered the growth of neo-banking. RBI does not acknowledge these banks a separate class of banking intermediaries. Thus they are ambigously defined and do not follow any standard code. The resulations are based on the ties they have with the licensed lenders.

A full functional neo-bank requires approvals to become a business correspondent or a payment aggregator. A formal contract with a regulated bank spells out ethical practices.

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