Last week, the Reserve Bank of India (RBI) liberalised a few restrictions imposed on pre-paid instruments (PPI) and payment bank players, signalling that the central bank views these companies with greater respect when it comes to handling people's money. With the widespread usage of digital wallets and the numerous services offered by fintech payment players within an app, the RBI has decided to give these new banking models more room to grow. The central bank has now allowed digital wallet companies and payment banks to compete with traditional banks for deposits and payments services for a specific market segment. While the adoption of non-bank payments services has largely been driven by a handful of entities in the last few years, banks still have a monopoly on the customer experience when it comes to lending and other services. However, given the success and demand for digital services post-Covid, the regulator and the banks see the benefits of further intermediation between the ownership of assets/liabilities from the customer experience. This phenomenon, called neo-banking, is the idea that access to financial services should be administered through software rather than brick and mortar entities. Industry experts told MediaNama interest in neo-banks from customers and investors has picked up post the pandemic and that in the next few years, "neo-banks" will be as ubiquitous as digital payments. What are neo-banks? The adoption and growth of digital banking channels, credit marketplaces and other platforms has improved by a large margin over the last year. This means…
