Neobank
Also called: Digital-only bank, Challenger bank · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
A neobank is a digital-only provider of financial services. It has no physical branches, and customers use it through an app or website. In India a neobank has no banking licence of its own. It works with licensed partner banks, which hold the deposits and carry the regulatory responsibility. The neobank supplies the technology and the customer experience.
Example
A young professional opens an account through a neobank app. The account is actually held with its partner bank. The app provides features such as spending tracking and quick payments.
Don't confuse with
- Payments bank: it holds a real RBI banking licence, although a limited one (deposits up to Rs 2 lakh per customer, no lending). A neobank has no licence of its own in India.
Related concepts
- Differentiated banking
- Payments bank
- Small finance bank
- Non-Banking Financial Company
- Scale-based regulation
- Shadow banking
- Asset-liability mismatch
- Digital lending