Neo Bank Vs Traditional Bank: All you need to know
Published on: 14 Mar 2024
Comparing the services, benefits and other features of a neo bank vs a traditional bank is crucial to choosing the right option. While both these institutions offer similar financial services, there are significant differences in how they operate. A traditional bank may be suitable for one person but will not be that convenient for another individual and vice-versa.
What is a Traditional Bank?
Traditional banks refer to financial institutions that offer banking and non-banking facilities through physical branches. These banks are generally established for a long time and have branches in various towns and cities. They offer facilities such as:
Bank accounts
Locker facilities
Money transfer services
Loans and investments
Credit cards
Cash withdrawals through ATMs
What is a Neo Bank?
Neo banks have emerged as a new type of financial institution that operates through the online mode only. These banks don’t have offline branches. Compared to traditional banks, they offer more flexibility and affordability and are quicker. They offer services like:
Bank accounts
Credit cards
Loans and investments
Money transfer services
Neo Bank Vs Traditional Bank
Refer to this table to know how these institutions differ:
Parameter
Traditional Banks
Neo Banks
Availability
Offer services through physical branches and via apps and portals
Offer financial and banking services in the online mode only
Demand
Comparatively more popular due to the physical presence
This is a new mode of banking, with a slowly rising demand
Services Offered
Bank accountsLocker facilitiesCredit cardsMoney transfer servicesLoans and investmentsRelationship managersATMs
Bank accountsLoans and investmentsMoney transfer servicesCredit cardsRelationship managers
Banking Licence
Have appropriate banking licences since they are regulated by the Reserve Bank of India (RBI)
Not directly regulated by the Reserve Bank of India (RBI) and may not have all the banking licences
Fees and Charges
Higher interest rates and additional fees and charges
Comparatively lower interest rates and other associated charges
Customer Service
Offline as well as online customer services
Only online customer service
Pros and Cons of a Traditional Bank
Here are some benefits that you need to be aware of when comparing a neo bank vs a traditional bank:
These banks are popular due to their longer standing and high accessibility.
You enjoy a wide range of banking and non-banking products and services.
Traditional banks offer more security as they are regulated by the Reserve Bank of India (RBI).
Most traditional banks have branches in various cities and towns to offer easy accessibility to customers across the country.
Traditional banks emphasise long-lasting customer relationships and offer online and offline customer service facilities.
Check out some limitations:
Traditional banks levy a higher interest rate and other fees and charges than digital banks.
Availing of banking and non-banking services involves more time and effort, as you need to visit the bank’s branch physically in certain instances.
Traditional banks may not offer the latest technology or features either due to the cost of adoption or regulatory restrictions.
They are generally less flexible as compared to neo banks.
They provide easy-to-use platforms for banking and non-banking services.
They upgrade their technology regularly to offer the latest features and facilities and offer a seamless experience to customers.
They are more affordable than traditional banks.
They offer 24×7 access to banking and non-banking services.
They facilitate faster services due to their online operations and fewer formalities.
Here are some limitations you need to know when analysing the features of a neo bank vs a traditional bank:
Neo banks face regulatory challenges since they are fairly new to the ecosystem and generally have issues getting licenced by the RBI.
They rely heavily on technology to operate since they only work on an online model and don’t have offline branches.
These banks may face a shortage of funds due to a lesser customer base than traditional banks.
Older members of the customer base may find it harder to opt in for newer features
Neo banks face high competition with traditional banks because of their popularity and high customer base.
If you decide that online solutions are more suitable for you, there are many options. For one, an Instant Personal Loan from Fibe is a great way to get funding. With a loan of up to ₹5 lakhs, you don’t have to worry about high-interest rates or hidden charges. So, install our Instant Loan App to get the funds or apply directly through our website.
FAQs on Differences Between a Traditional Bank and a Neo Bank
Is a neo bank a fintech?
Yes, a neo bank is a type of fintech offering financial services online. They offer:
Savings and checking bank accounts
Payment and money transfer services
Financial education tools, like budgeting apps
What is the difference between a neo bank and a digital bank?
Here’s how these banks differ:
Neo banks are completely digital, while traditional banks have branches as well as provide digital services.
Neo banks come with lower fees and charges as compared to traditional banks.
Traditional banks offer more services and facilities than neo banks.
Traditional banks have licences from the RBI, whereas only a few neo banks have licences.
