Foreword

(An Interview of Jeevan Gopisetty by Adithya Gandhi)

I(Adithya Gandhi) sit down with an up-and-coming neobank’s co-founder to better understand the Indian neobanking scene.

It’s no secret that neobanks have become a buzzword in the fintech space. The global neobanking market has grown at a CAGR of 50.6% since 2016, surpassing earlier estimates. For context, the global fintech space has grown at a rate of 23.5%! VCs have backed neobanking upstarts, investing more than $15 billion in such startups around the world. Europe and the Americas have emerged as one of its early adopters, boasting more than a dozen unicorn-valued neobanks.

And India, too, is catching on. Indian neobanks have attracted significant VC funding, raising upwards of $100 million collectively. But while there is definite interest, there still seems to be a lack of clarity regarding the whole neobanking movement. Is it just a digital bank? How is it different from traditional banks? What services does it offer?

Taking up the mantle myself, I approached founders of Indian neobanks, hoping they’d be willing to share their first-hand experience of making their way through the industry.

Here’s my conversation with Mr. Jeevan Gopisetty, co-founder Nemo, on the evolving neobanking industry in the country and its various challenges.

Me: Hi. Let’s start by giving the readers some background about you.

Jeevan: Sure, I’m Jeevan Gopisetty, co-founder and CEO of Nemo. I have over 12 years of experience with tech giants like Qualcomm, ARM, and NVIDIA, across the UK and India. After my B-tech, I completed my MBA from IIM Ahmedabad, where I also met my co-founder.

What is Nemo?

Nemo is a unique ecosystem and neobanking platform for SMEs, providing tools for better financial and operations management, quick credit access through a network of lenders, and a range of need-based business services. We have partnered with ICICI bank for our banking solutions. We are dedicated to make Nemo a unified solution to all SME growth problems.

What is a neobank, and how does it work?

To understand neobanks, first, we’ll have to understand how businesses operate in the country. Small and medium-sized companies tend to lack an understanding of their demand, operations, and resources, which is critical. And due to a lack of technical know-how, they are often apprehensive about taking a data-based approach. On top of that, they tend to have these functions segregated. Their banking, accounting, sales, and operations are often managed at different places(platforms), not giving them a holistic view of things. Unification of these functions is crucial since only then would one understand how their interplay is changing the course of the business. This is where neobanks come in.

Think of it like this; banks provide you with an account and some standard functions that are common across all customers. Neobanks, on top of those standard features, offer a customized experience tailored to a particular user. Neobanks partners with traditional banks to provide these services.

What challenges do neobanks face?

Lack of awareness and trust are the biggest challenges that neobanks face today. Businesses need to be educated on the benefits of using a neobanking product, which is a big task. And trusting a third party with their financial information also seems a barrier to entry, which will improve with time.

Who’s the target customer for a neobank?

Neobanks can be either B2C, targeting retail customers and helping them understand their finances better, or B2B, offering services to medium-sized businesses. We, at Nemo, believe the latter is a much more important problem to be solved, for which we are building our platform with a multitude of services aimed towards businesses.

Why are banks willing to partner with neobanks?

Banks want a higher user engagement, which neobanks can provide. Traditional banks have become too big to innovate and look to partner with fintech to drive growth and engagement. Neobanks also help in adding new customers to the banking partner.

Do Indian neobanks face regulatory issues with RBI?

Neobanks can be constructed in one of two ways: either by actually applying for a banking license or by partnering with a traditional bank for banking infrastructure. Indian fintechs tend to take the latter approach owing to the strict banking guidelines of the RBI.

Why is this the correct ‘time’ for neobanks?

With the growth in internet users in the country, customers now demand a better product centred around an excellent overall user experience. Businesses nowadays are much more open to use newer platforms to manage operations. And this greater acceptability is why neobanks are likely to be a high-growth sector in the coming years.

How is the neobanking space evolving?

In 2019, the whole neobanking market was worth around $30 billion. Till 2027, the market is expected to touch $500 billion. So you can imagine how fast this space is growing.

What’s next for neobanks in India?

Well, the industry is bright and highly evolving. We are seeing an increasing number of VCs being bullish on Indian neobanks. Having said that, the sector is still pretty young. Neobanks are expected to co-exist with traditional banks and create a wider range of offerings.

Hope this helps in clearing the air about neobanks that much more.

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