“Neobanking apps have created a layer on top of these banking technologies to help customers interact with the bank in an easier way,” said Pai
He added that full-stack banking solutions from the neobanking apps are the future of banking
“When a customer applies for a loan, these apps can then go to the underlying banks with the customer data and ask them to bid to lend to the said customer,” Pai said, explaining the edge neobanks hold
Speaking at Inc42’s Fintech Summit 2022, TV Mohandas Pai, chairman at Aarin Capital Partners, said that banks are going to lose customers to neobanks and that is exciting for the fintech segment.
Explaining what neobanks do, Pai said, “Banking technologies have been created historically to help the banks & institutions. These technologies are not customer friendly. Neobanking apps have created a layer on top of these banking technologies to help customers interact with the bank in an easier way.”
Pai said that banks have always developed technology that helps themselves, in an inside-out way. On the other hand, the neobanks are developing a layer on the top of banks with an outside-in technology that helps them to provide a better customer experience.
Pai, who is a prolific investor, said that companies such as Open (for SMBs) and Jupiter (for customers) have pioneered in this field, which has led them to attract users and retain them. Most importantly, this allows these apps to retain rich customer data which the banks are slowly losing out on.
“When a customer applies for a loan, these apps can then go to the underlying banks with the customer data and ask them to bid to lend to the said customer,” Pai said, explaining the edge neobanks hold. This means that the neobanks can retain customers for a longer time than banks, owing to a better customer experience offered by them.
According to Pai, this has led the central banks across the world to move to protect banks, as banks are the instruments through which these central banks work in the first place.
However, Pai said that the fintech players still have to play by the rules. “We cannot have a fintech system where everyone is a cowboy. Fintech firms need to work with regulators,” he said, in a query related to the recent RBI notification about non-banking PPIs.
He added that full-stack banking solutions from the neobanking apps are the future of banking. Pai further depicted Banking as a Solution (BaaS) as the next step in banking, with the example of Revolut in the US, which aims to create a super app for all the financial needs of a customer.
Pai took the case of Open and Jupiter again, explaining how the two neobanking startups are working to achieve similar results as Revolut. While the credit lines offered by Jupiter and Open have been thrown into doubt over the recent RBI notification, the two apps still offer full-stack banking solutions.
