Neo-banking vs Traditional Banking
Have you ever wondered about the evolution of banking in India?
If you are new to the concept of neo-banking and digital accounts and are considering opening a digital savings account with a neo-bank, you may have concerns about the safety and security of your money, your personal details and other confidential information. If you’ve only ever dealt with traditional banks, this is a perfectly understandable concern.
Tight regulations, RBI (The Reserve Bank of India) and government monitoring, and a physical brick-and-mortar presence have all played into the reputation and customer trust surrounding traditional banks. However, instances of online fraud have put a spotlight on some of the safety and security concerns that exist even in traditional banks.
Contrary to popular belief, neo-banking actually carries many advantages in counteracting and avoiding such scenarios and provides airtight security solutions that enable users to spend and deposit, worry-free. Through this post, we will explore some of the common concerns about neo-banking in particular, and clear some common misconceptions that have arisen over the past few years.
Mythbusting: Clearing neo-banking misconceptions
1. The money deposited in a neo-bank account is not secure
Money deposited in a neo-bank account is as secure as it would be in a regular bank account. All the neo-banks in India work on a partnership model with traditional banks. This means that customer funds are parked in an established bank. In fact, if your account is a savings or current account with a traditional bank, the RBI guarantees customer funds up to ₹5 lakhs through Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance. The same is applicable for customer accounts opened with neo-banks too, since the underlying account is provided by a traditional bank.
2. I am unable to access my money
With no physical branches, many consumers may assume that they will not be able to access their money in case of an emergency. However, established, full-stack neo-banks typically provide their customers with full access to ATM withdrawals. For example, with our NiyoX account, customers can withdraw cash from ATMs both in India and abroad and transfer funds to their bank accounts 24X7 from our NiyoX mobile banking app.
3. I have data security and privacy concerns
A big advantage neo-banks have over traditional banks is that they don’t rely on old legacy systems, and hence tend to have a strong focus on security and safety while designing their platforms. For our NiyoX account, for instance, we have built innovative features such as:
- Locking/Unlocking the entire card or specific transaction channels such as Ecom, POS, ATM withdrawals, and Spending abroad
- Blocking the card permanently in case it is lost or stolen
- ATM and login PIN resetting
- Setting transaction limits depending on the channel or type of transaction
- Hiding account balance and card number within the app
- Realtime transaction updates and detailed transaction history log
- Sim binding ensures that nobody else can access your account on any other device
- Wave functionality helps you hide your account balance from prying eyes with just a moving gesture of your palm
Additionally, neo-banks are all mandated to follow the same set of regulatory requirements like data localization norms or 2-factor authentication (2FA) for card-based transactions. Furthermore, neo-banks were amongst the first to adopt advanced transaction security-enhancing models like MCC block, single-use virtual cards, and tokenized online transactions.
4. Not enough customer support
When it comes to matters of money, Indian customers still prefer having access to a person to whom they can relay their queries or concerns directly. Most full-stack neo-banks offer multiple options for customers to communicate with them. Customers can contact neo-bank customer support via phone, IVR, email, online chat, in-app chat, WhatsApp, etc. With the NiyoX account, our customer support team provides 24X7 access to customers through all the aforementioned channels.
Neo-banks sound futuristic, don’t you think? Learn more about how a neo-bank works.