Incumbent Banks Vs Neobanks – Personal Finance As A Strategy

With a host of new banking options suddenly available to the Indian consumer, the battle of the banks is hotter than ever. Engaging users with better personal finance experiences and tools is increasingly becoming a critical factor in deciding which bank the Indian consumer will choose.

Niyo, FamPay, Jupiter and Fi raised $230 million in funding in 2021 alone. These neobank solutions, with many more to come soon, will serve over 10 million Indian consumers by the end of this (projected) year.

The Indian consumer is now surrounded by a variety of banking options, from established players to the new neo-banking experience. The checkout page of all consumer apps in India is packed with discounts and rewards from all new and old banks in India. This comes at a time when the average consumer is looking for personalized, holistic personal finance management to improve their financial habits and health.

We believe that building capacity around personal finance will be key to market share as incumbents and neobanks battle it out. Neobanks, with technology as their core competency, are slowly building personal finance experiences that drive growth from acquisition to engagement to revenue.

But the incumbents, with a majority market share, are unable to rapidly advance personal finance as a strategy, due to weak technological capabilities. But the cost of that will manifest as lost customers, at a time when retention is key for incumbents.

Personal finances are becoming a priority

With the socio-political landscape driving financial inclusion and the growing awareness among millennials and Gen-Z, financial education is evolving faster than ever. Indian consumers, who are aggressively opting for digital banking, are now more aware than ever about personal finances.

Consumers are looking to understand and control their spending, tools to save and invest, and stay on top of their overall financial health. All of this was inaccessible to consumers until recently, when the account aggregator framework made a variety of personal finance experiences possible.

Since then, there has been a rise in venture funding for personal finance mandates and then a subsequent rise in the number of personal finance apps and their downloads in India. The modern Indian consumer has made personal finance a priority.

Personal finance as a strategy

Neobanks are leveraging technology to create compelling personal finance features such as expense overview and analysis, budgeting and saving, recommendations on investment options, and more. This is in line with the fundamental principle of neobanking: customer satisfaction.

These experiences impact the entire customer lifecycle for neobanks:


● Buying by offering innovative personal finance features such as spending caps and budget tracking.
● Commitment throughout financial journeys by offering features like rounded-up savings at checkout.
● Monetization by monitoring cash flow and financial behavior and recommending savings and investment instruments.

Neobanks have created rich experiences powered by multiple technologies like machine learning where users can search for information like “How much money did I spend on food last month?”

Technology: the Achilles heel of traditional banks

In a world where most app store ratings are filled with complaints about poor user experience, traditional banks have a lot to overcome in this battle of the banks. Banks are traditionally slow-moving organizations and lag far behind neobanks in terms of digital offerings and experiences.

● High time to market with any new digital experience is a huge threat to incumbents.
● Weak fintech competition prevents banks from implementing advanced technologies and seamless experiences.

However, established banks have a huge moat in the form of historical data that lies close to digital experiences. But unless they get past the Achilles’ heel of technology, they won’t be able to extract value from their data.

Creation of integrable personal finances

Backed by the industry’s leading fintech players and some of India’s leading hedge funds, Chennai-based startup Fego is creating a solution for traditional banks. By bundling most of the engineering and technology overhead involved in delivering personal finance experiences, they can significantly reduce time to market for traditional banks.

While solving dependency on technology, Fego experiences can be simply integrated by traditional banks into their existing digital presence. With a variety of modular personal finance experiences that are optimized for customer delight, these experiences can help cardholders replicate the full-funnel growth that is currently restricted to neobanks.

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