Neo and Challenger Banks: Addressing Liquidity Crises Faced by SMEs through an Innovative Financial Model

In countries such as India and China, banks and other monetary institutions have been receiving governmental support for the past few years to expand their presence in rural areas. For instance, the Reserve Bank of India launched a priority sector lending scheme, wherein scheduled commercial and cooperative banks are compelled to give out loans to certain industries facing liquidity crises. At the same time, the increasing penetration of the Internet has led to the emergence of a new type of banking that focuses on the delivery of financial services using digital technologies. In countries such as the US, the UK, Germany, China, India, etc., the model of neo and challenger banks has become especially popular with the launch of 5G services.

Neo and challenger banks improving the range of financial services

Recently, Allied Market Research published a report on the neo and challenger bank market which states that the industry is expected to gather a revenue of $471.0 billion by 2027, rising at a CAGR of 48.1% during 2020-2027. The growing adoption of formal banking channels by small and medium-scale enterprises (SMEs) is anticipated to become the primary factor behind the sector's growth. These banks provide almost all conventional financial services through digital technologies, thus covering even the underserved areas in a region. For instance, neobanks are monetary organizations that operate entirely online without having any physical branches and don’t necessarily have banking licenses. Apart from allowing customers to open current accounts, these banks also offer enterprises automated accounting and expense management facilities.

The main reason behind the increased preference for neobanks among SMEs is that they offer almost all conventional financial services at extremely low servicing fees. With no withdrawal costs and monthly charges, these banks provide better interest rates on savings and fixed deposit accounts than conventional accounts. Also, since these banks have an online presence only, they focus on advanced mobile applications and web platforms to expand their operations. For example, many neobanks have launched AI-power chatbots to address customers’ queries and grievances.

At the same time, challenger banks, too, have become a popular banking model and an alternative to traditional monetary organizations due to their interactive digital interfaces and innovative financial products. These institutions, too, have a significant online presence. However, unlike neobanks which have no brick-and-mortar branches, challenger banks do have occasional physical existence and have a valid banking license. Naturally, they have a more formal status than neobanks.

The financial services offered by challenger banks are wide-ranging in nature as they have a license from competent governmental authorities. These banks offer loans to individuals as well as enterprises and other budgetary support services for addressing their liquidity issues. Moreover, challenger banks often partner with fintech companies to provide state-of-the-art money transfer facilities, along with credit cards to their customers.

Leading banks and fintech companies developing neo and challenger banking services

In the past few years, many financial technology businesses have launched platforms and web banking applications to provide digital services to their customers. For instance, in February 2022, Temenos, a SaaS cloud banking solution developer, unveiled its Temenos Banking Services.  Deployed using cloud technology, this solution is specifically designed to support challenger banks and help them scale their businesses with minimal implementation costs. Over the last couple of years, Temenos has managed to provide its services to more than 70 neo and challenger banks, thus expanding its footprint across the globe.

In conclusion, the increasing digitalization of financial services is estimated to help the neo and challenger bank market flourish in the coming period. Furthermore, the various advantages offered by these institutions, especially to small and medium-scale enterprises, have increased their popularity in the past few years. With the emergence of AI and cloud technologies, the scope of the industry is anticipated to broaden in the future.

More Reports:

M-commerce Payment Market

POS Security Market


Comments

Post a Comment

Popular posts from this blog

Revolutionizing Finance – The Rise and Impact of Alternative Financing Across Industries

Image
Alternative financing methods find applications across various sectors and scenarios, providing alternatives to traditional funding avenues. The following applications showcase the versatility of alternative financing methods in addressing diverse financial needs across different sectors, offering more inclusive and innovative solutions compared to traditional funding channels. Startups and small businesses  — alternative financing, such as crowdfunding , peer to peer lending, and angel investing, offers viable options for startups and small businesses that may face challenges in securing traditional bank loans. It allows them to access funds from a diverse range of individual investors. Real estate  — crowdfunding platforms enable investors to collectively fund real estate projects, offering an alternative to traditional property financing. This approach democratizes real estate investment, allowing individuals to participate with smaller amounts of capital. Venture capital  — alterna
Read more

Extended Warranty

Image
  Extended Warranty Industry: Role of Blockchain Technology in Shaping the Future of the Sector   Highlights: Surge in awareness for extended warranty Decline in sales of PCs Expansion of products and services Extended warranties are agreements that prolong the warranty duration of consumer durable goods beyond the manufacturer’s initial offering. They provide coverage for the expenses related to replacing or repairing a product affected by poor workmanship or manufacturing defects. Extended warranties offer customers an added shield against unforeseen repair expenses resulting from product defects or accidental damage. This heightened protection is anticipated to increase awareness of extended warranties. Numerous products typically include a standard manufacturer’s warranty at no extra cost. This warranty commonly covers the initial year or the first few years of the product’s lifespan. Consequently,  extended warranties  often offer redundant coverage that may prove unnecessary due
Read more

Health Insurance Sector: An Overview of Recent Developments and Revolutionizing Trends

Image
Health insurance is a type of protection that assists individuals and families in covering the costs of medical expenses and healthcare services. This industry includes different participants such as insurance companies, individuals, employers, healthcare providers, and government entities. These bodies provide plans according to an individual’s budget, duration, and compatibility. The extent of coverage under a policy can differ based on various factors such as the specific diseases covered, the age group of the insured individuals, government policies, and other relevant considerations.     The health insurance sector is mainly driven by factors such as a rise in the prevalence of chronic diseases, growing awareness about health insurance in rural regions, and improvement in claim management procedures. As per the recent market study by Allied Market Research, the global health insurance market is estimated to portray notable growth throughout the forecast timeframe. The industry
Read more