Back

The Rise Of NeoBanks - Back in 2015-16 India had a massive fintech moment thanks to neobanks but no one really talks about it now. It is like that chapter in our digital journey that just got skipped. Freo was the first to introduce neobanks in India and around the same time NIYO, OPEN and several other neobanks also entered the market. When neobanks first started in India they had a really tough time. They didn’t have an RBI license or any official support. Hardly anyone even knew or trusted them. And because UPI is free it was really hard for neobanks to figure out how to earn money. Even today neobanks in India haven’t fully solved their problems. RBI still doesn’t officially recognize them. They can only work by teaming up with regular banks that have an RBI license. In 2022 RBI launched something called Digital Banking Units to improve digital banking but it’s only for traditional banks. Neobanks aren’t included. So basically they still work in a grey area and depend completely on traditional banks to function. That is another reason why neobanks struggle with revenue. Banks only give them small commissions for things like account openings deposits and a few minor services. But that’s not very profitable for neobanks because their tech costs are much higher and they also have to manage their own customer support teams separately. That’s why a lot of neobanks today are running after NBFC licenses. And those who aren’t are trying to become DSAs. Because if they want to survive in the long run they have to focus on giving loans just like traditional banks do. Now whether they give out loans themselves by becoming an NBFC or act like a middleman and earn commission both are proven and profitable ways to make money.