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How Neo banking is revolutionising business lending

by | Aug 16, 2022 | Banking

 

The thought of banks brings to mind a physical branch which you visit to set up an account, go to the ATM, deposit a cheque or acquire a loan. This is a traditional world where there are mounds of paperwork involved for the simplest services. However, the advancement of technology has revolutionised the face of traditional banking. It has eliminated the need to stand in long lines to avail of banking services and cut the queue of acquiring the necessary capital at any time. 

Technology has rendered the traditional form of banking almost obsolete as more people and businesses are shifting to a form of digital banking. These aren’t banks in the formal sense of the word but are non-banks that function the same way as banks. This is the world of Neobanking.

 

What is Neobanking?

This concept has recently sprouted in the Indian finance world. However, it has taken the entire industry by storm. Experts believe that Neobanking will takeover and credit its rapid growth to its lender and SME-friendly characteristics. The global neo banking market is expected to have an annual growth rate (CAGR) of approximately 46.5% between 2019 and 2026, generating around USD 394.6 billion by 2026. 

Being a purely digital platform, they are smart, efficient, fast and straightforward. However, it is different from online banking. Neobanks are standalone systems whereas an online bank is a part of an established physical bank. These terms are used interchangeably despite their distinct definition. 

Each neobank possesses different characteristics. Some are strictly designed to open a bank account to store your savings and invest in the right avenues. Others help you with the credit-underwriting process, which is currently a major hurdle for SMEs and enterprises seeking capital for expansion and other needs.

Why are businesses choosing Neobanking for lending?

When the COVID-19 pandemic hit and businesses began witnessing their downfall, access to capital was more paramount than ever. At such a time, traditional banks witnessed an influx of loan applications to keep their companies afloat. 

While SME and enterprise lending has been a priority for banks, the volume of transactions and lack of data and documentation have prevented banks from growing their SME lending business significantly. Furthermore, mounting documentation requirements have increased the time a company can receive the money they need.

This is where Neobanks were the ultimate saviours. According to a report, 4.5 million MSMEs eligible for the ECLGS scheme, only 2.4 million, or 53 per cent, have secured loans. Thus, Neobanks provided alternative credit options to the remaining SMEs and MSMEs at any time.

Is Neobanking the future of SME lending?

Neobanks bring a variety of products and offerings to the table, including AI and data science that serves a large customer base with smart insights. Furthermore, it combines the best of traditional banking powered by technology. 

They are the perfect solutions amidst a flood of new businesses and the long term behavioural changes brought about by COVID-19. With Nupay, businesses are already experiencing the future of banking with all the financial processes and most importantly, lending. With unified collections, integrated accounts receivables and payables, and specialized payments products. Reach out to us to kickstart your business growth through AI-powered banking today!

About the author:

Nishant Mahajan, CBO

Nishant is the Chief Business Officer at Nupay. His forte and passion lies in creating sustainable businesses by driving team productivity and efficiency.

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