NeoBanks — A Product Case Study

5 min readJan 31, 2022

Neobanks will be the next big thing in the Indian Banking system. Through this post, I have shared my research on the NeoBank industry in India and How a Product Offering can be created especially targeting Indian customers.

Industry Overview:

The global neo bank industry currently has more than 256 players and is worth 18.6 billion USD. With 2000+ fintech companies in the market and digital payments being embraced on a large scale, the industry saw a 50.6% CAGR between 2016 and 2020. Early signs of adoption and opportunity can also be witnessed in the Indian context. 95% of India’s industry is MSMEs and SMMEs, and 80% of India’s population remains severely underbanked. On the other hand, India’s active internet user base is expected to increase by 45%, driven by high adoption of the internet in rural India — currently at a 13% growth rate and 300 million active users.

Neobanks in India:

There are over 20 functional Neobanks in India, including RazorPayX, PayTM Payments, Fino, and Airtel Payments Bank.

Few others are InstantPay, Zeta, Fi, SBI YONO, Kotak 811 etc.

Risks & Challenges:

Regulations & Compliance:

RBI regulations don’t permit 100% digitized banks
Offer services that are built on top of traditional banking services.
RBI’s regulatory policies neither agree nor disagree with the factuality of fully digitized online banks

Technology Integration Constraints

Banks are based on the old legacy system
Connecting and integrating with legacy systems is difficult
Conventional banks expect infrastructure and security practices of neobanks to comply with internationally accepted standards.
Users are not very familiar with online banking in rural areas

Security & Privacy Issues

Need to follow compliance such as Personal Data Protection Bill, India’s GDPR equivalent
Setting up AI/ML systems, security systems, encryption technology and data management will require significant investment

The Target Market:

The potential market size that a Neobank app can target is close to 550 M people.

In terms of the segment that we can target, we can focus upon:

Millenials
Gen Z
MSMEs
Farmers
Small Traders

The Product: WAYNEX (Prototype name)

We will launch a NeoBank platform — WayneX, specifically catering to the target segments mentioned above.

Neobanks like WayneX can be a key driver to bridge the socio-economic gap in the country by expanding services i

Product Offerings:

Product Flow:

Product Architecture:

Problems WayneX will solve:

Banking for MSMEs:

A major hurdle in economic growth is the unavailability of resources to invest in a business.

By easing the loan acquisition process, WayneX can facilitate the users of the app to start their own ventures and invest in the economy’s growth.
With features that businesses send and receive payments, automate their accounting and reconciliation, generate and track compliance of invoices with direct and indirect tax laws, and access third-party banking and business applications from its platform, WayneX will enable small and medium enterprises to gain financial control and become self-reliant. This would help MSMEs boom, facilitate investment in underbanked or economically stagnant areas, generate employment and increase the overall standard of living.

2. Banking For Rural Areas (Farmers, Small Traders etc.)

To specifically aid the growth of farmers and help them achieve financial self-reliance, WayneX can include features like machinery/equipment loans, agriculture-based seasonal kickbacks, revenue-based EMI/loan repayment structures, weather insights, crop recommendations, market prices etc.
WayneX can drive social development by building upon the pillars of transparency, inclusivity, information asymmetry reduction, and accessibility, and garner trust amongst the people.
Increased adoption will lead to trust and an auto formulation of a service layer that will drive the usage across rural India

By creating an ecosystem that provides comprehensive solutions to the specific financial needs (and constraints) of different segments of the country’s population, WayneX can succeed in gaining consumer trust by high adoption numbers, that will eventually lead to banking for all.

References:

1. Forbes: https://www.forbes.com/advisor/banking/what-is-a-neobank/

2. Inc42: https://inc42.com/startups/can-open-widen-neobanking-niche-with-its-sme-playbook/

3. Lead: https://www.leadsquared.com/neobanks/

4. BCG: https://image-src.bcg.com/BCG_COM/BCG-Google%20Digital%20Payments%202020-July%202016_tcm21-39245.pdf

5. Media: https://www.medianews4u.com/neobanking-market-in-sea-will-grow-1-5-times-in-2021-unafinancial-survey/

6. ET: https://economictimes.indiatimes.com/tech/technology/india-to-have-900-million-active-internet-users-by-2025-saysreport/

articleshow/83200683.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

7. Pwc: https://www.pwc.in/consulting/financial-services/fintech/fintech-insights/neobanks-and-the-next-banking-revolution.html#:~:text=But%20as%20per%20the%20Global,services%20on%20a%20large%20scale.

8. TWI: https://twimbit.com/neo-banking/india-the-new-hub-of-neobanks

9. CT: https://clevertap.com/blog/fintech-app-teardowns/

10. Rural Pop: https://www.statista.com/statistics/271312/urbanization-in-india/