Management Development Institute Gurgaon PGDM-IB-Dissertation ESCP Europe-MIM Master Thesis

Customer experience parameters mapping for Neobanks

& benchmarking Indian Neobanks

A PGDM-IB Dissertation- MIM Master Thesis Proposal for

PGDM-IB-MIM Twinning Programme

By

Ankit Singh

Under the guidance of

Prof. Ritu Srivastava
MDI Gurgaon

Management Development Institute

Gurgaon 122 007

1
 December, 2021

MIM Master Thesis Report

Customer experience parameters mapping for Neobanks

& benchmarking Indian Neobanks

By

Ankit Singh

Under the guidance of

Prof. Ritu Srivastava

MDI Gurgaon

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 Management Development Institute

Gurgaon 122 007

January, 2022

Certificate of Approval

The following PGDM-IB Dissertation- MIM Master Thesis Report titled

"Customer experience parameters mapping for Neobanks. Are Neobanks
solving a need?" is hereby approved as a certified study in management
carried out and presented in a manner satisfactory to warrant its acceptance
as a prerequisite for the award of PGDM-IB-MIM Twinning Programme for
which it has been submitted. It is understood that by this approval the
undersigned do not necessarily endorse or approve any statement made,
opinion expressed, or conclusion drawn therein but approve the Report only
forthe purpose it is submitted.

Report Examination Committee

Faculty Guide : Signature…………………………………….

: Name Ritu Srivastava
: Designation…………………………………….
: Address………………………………………...
……………………………………………………
……………………………………………………
…………………………………………………… Tel
No………… 0124-4560376………………
Email………
ritu.srivastava@mdi.ac.in

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 EXECUTIVE SUMMARY

Customer experience parameters mapping for Neobanks & benchmarking

Indian neo banks

By Ankit Singh

India is a developing country where banks play a critical role in economic

development. Banks not only safeguard their customers' funds, but they also
contribute to their growth by paying interest. It also assists consumers by providing
loans to help them build their businesses. As India is progressing and digitalizing,
banking solutions can’t be limited to working hours of traditional banks.

Objectives of the thesis were:

The first outcome of this thesis will put more light on the emergence of Neobanks
and map parameters of customer experience in Indian context. Also, to research and
set the preference order of the parameters. Detailed study has been conducted to
benchmark various Indian Neobanks in terms of customer experience and also a
hypothesis formulation has been done on following determinants of customer
experience in Neobanks: ease of use, security & control over assets, seamless
experience, innovativeness and speed of operations

The second outcome of the thesis would be benchmarking of Indian Neobanks on

the above mapped parameters to judge the current best Neobank.
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Research:

The approach used here is case-based research, which allows both qualitative and
quantitative data to be included. Both primary and secondary research was done.

A google form was floated with all the questions and all the responses were
recorded accordingly

Results:

Result 1:

The parameter preference in decreasing order

1. Ease of Use
2. Security & Control over assets
3. Physical Presence
4. Innovativeness
5. Seamless Experience

Result 2:

Niyo Bank topped amongst all the variable and came out to be clearly the best
Neobank in India in terms of customer experience.

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 ACKNOWLEDGMENT

I want to communicate my heartful regard towards Ms. Ritu Srivastava for taking me
under her wing to provide her guidance for this project.

Also, I want to acknowledge the role that digital library of ESCP Business School and
MDI Gurgaon have played in my research, by bringing the best content to my
fingertips.

I'd also like to express my gratitude to my dear friends Kaushik K, Aditya Kalra and
Chetan Sodhi for sharing their technical expertise with me and letting me pick their
brain. I would be remiss if I did not thank the 200 people who took their precious time
out to participate in my extensive survey.

Last but not the least, I want to express my gratitude towards my family and friends
who supported me during my project.

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 TABLE OF CONTENT

1. Executive Summary 04
2. Introduction 09
3. Indian Neobanks & Structure 11
4. Literature Review 18
5. Research Problem 22
6. Research Design 23
7. Data Analysis & Results 27
8. Conclusion 33
9. Limitations 34
10. Benefits & Drawbacks 34

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 11. References 36
12. Appendix 39

LIST OF FIGURES

Number Description Page number

Fig 1 Frontend & Backend structure of Neobanks 13
Fig 2 MSME credit exposure and potential 15
Fig 3 Pillars of Neobanking in India 16
Fig 4 Neobanks of India 17
Fig 5 Overview of Neobanks characteristics, types & functions 19
Fig 6 Overview of growth rates of Neobanks across the globe 22
which can be replicated in Indian context

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1. INTRODUCTION

Without a doubt, technology innovations have cleared the path for new sectors and
are radically altering current ones. Financial services are one business that has been
impacted by technology improvements. Financial technologies, or FinTech, are
transforming the financial services business. In FY20, the Indian FinTech business
was valued at $ 50-60 billion dollars, and by 2025, it is expected to be worth $150
billion dollars. The value of Fintech transactions is predicted to grow at a CAGR of
20% from US$ 66 billion in 2019 to US$ 138 billion in 2023.

1.1 Background
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Keeping track of all the Fintechs coming up across markets has certainly been a
difficult endeavor for anyone watching the expansion of digital businesses in financial
services. Regularly published Fintech "radars" may appear to be out-of-date the
moment they reach the web, and frequently depict a plethora of firms disrupting the
transactions, loans, or banking as a services scene, to mention a few. However, for a
lot longer, Fintechs were only focused on fixing a single financial problem, with entire
Neobanks, which were founded to compete effectively with traditional banks.

The idea of a Neobanks has evolved, despite its recent entrance into the larger
FinTech sector. A Neobanks was originally defined as a bank that operates fully
online and interacts directly with consumers and has no physical presence. A
Neobanks wants to be more than a bank by providing a superior digital banking
experience. As Neobanks sought to differentiate themselves from incumbents' online
banking services, this notion evolved, shifting from a focus on digital banking to a
focus on providing a great client experience.

1.2 Banking Key Concepts

1.2.1 Online Banking

The concept of doing financial transactions over the internet is known as internet
banking or internet banking. Nearly every single bank offers a computer-based or
mobile-based version of internet banking. Customers can use these e - banking
services to conduct transactions, make deposits, and pay bills without having to visit
a branch. (According to Frankenfield 2020.)

1.2.2 FinTech

FinTech is an abbreviation for financial technology. FinTech refers to the application

of innovative technology to the financial industry. FinTech is employed in a variety of
industries, including education, finance, investment management, and
cryptocurrency production and use. (According to Kagan, 2020)

1.2.3 Traditional Banks

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Traditional banks are financial institutions that are licensed to accept deposits and
lend to individuals and companies. Wealth management is another financial service
provided by some banks.

Corporate, retail, and investment banks are examples of different types of banks. In
most nations, they are overseen by a banking system or the central government. In
India's case, the Reserve Bank of India (RBI).

1.2.4 Neobanks

The banking sector is one of the sectors in the financial services industry that is
being impacted by new entrants. In the financial sector, a boom of neobanks –
autonomous digital-only companies — has occurred in recent years. Despite its
recent introduction into the larger FinTech market, the concept of a neobank has
evolved. A Neobank was originally characterized as a bank with no physical
presence that operates entirely online and interacts directly with customers. A
neobank aspires to be more than just another bank, offering a superior digital
banking experience.

This concept has developed as neobanks have sought to distinguish themselves

from incumbents' online banking services, shifting from an emphasis on digital
banking to a focus on providing a superior client experience.

The neobank subsegment is not alone in experiencing this transition. Digital

technologies and customer satisfaction have long been the two cornerstone policies
of the wider FinTech sector. Neobanking policies, on the other hand, have
undergone a gradual adjustment. Alternative lenders, for example, are increasingly
focusing on embedded finance and use-case-centered lending rather than solely on
pure-play lending platforms and marketplaces.

Other FinTech categories have adopted the same strategy, with firms attempting to
seamlessly integrate financial services into bigger client needs to build more
sustainable demand and product innovation. The widespread development and

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implementation of embedded finance is being driven by the digitization of the entire
banking and transaction experience, the upgrade of old systems and ways of serving
consumers, and the ability to enable transactions at the source. Banking is rapidly
changing as part of embedded finance to focus on client satisfaction.

1.3 Benefits of research

India is a developing country where banks play a critical role in economic

development. It also assists consumers by providing loans to help them build their
businesses. As India is progressing and digitalizing, banking solutions can’t be
limited to working hours of traditional banks. Traditional banks do offer electronic
banking and UPI but overall application experience is limited and E-Banking is also
largely limited as it can be only done in office hours.

The first outcome of this thesis will put more light on the emergence of Neobanks
and detailed parameters of customer experience in Indian context. Detailed study
has been conducted to benchmark various Indian Neobanks in terms of customer
experience and also a hypothesis formulation has been done on following
determinants of customer experience in Neobanks: ease of use, security & control
over assets, seamless experience, innovativeness and speed of operations

The second outcome of the thesis would be benchmarking of Indian Neobanks on

the above mapped parameters to judge the current best Neobank.

2. INDIAN NEOBANKS AND STRUCTURE

2.1 Regulatory laws for Neobanks in India

Virtual banking licenses are not permitted under the Indian regulatory environment.
The Reserve Bank of India has demanded that digital banking service providers
have at least some physical presences under its Master Circular operational
Guidelines for Banks. Because of this, neobanks in India can only provide
banking by outsourcing their banking functions to licensed banks and NBFC's. Many
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of these banks and fintech companies are structured as outsourcing arrangements,
with non-banks verifying data for credit requests or doing preparatory work.

In addition to the aforementioned regulations, neobanks must follow data privacy

rules because they allow a variety of services between consumers and banking
institutions by offering an online platform. The IT Act and the Information
Technology Rules, 2011 define the Indian data privacy regime (SPDI Rules)

• Privacy policy establishment

• It is necessary to disclose before collecting any information
• Companies have to employ a grievance officer and put across his details
• Enable data subjects to update and review their personal information.
• Ascertain that the information gathered is not kept for any longer than is
required by applicable law.
• When collecting personal data from any individual or entity, obtain the data
subject's prior consent.
• Under the law of the land, implement reasonable security procedures and
standards to protect sensitive information.
• Ensure that the requirements for the transfer and disclosure of sensitive
personal information to third parties are followed.

2.2 Neobank’s Structure

Neo Bank is a totally digitally controlled institution that uses artificial intelligence and
information technology to provide a cutting-edge network for consumers that
guarantees a smooth banking experience. Neo bank is based on Application
Programming Interface (API), that is a type of computer programming that allows
one piece of software to interface with another to complete tasks. APIs help banks
open up their systems so that service providers can supply services using their own
infrastructure.

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Neobank does not operate independently in India; they must have a partnership with
a licensed bank or NBFC to operate. As a result, API assists Neobanks in acquiring
users and developing its customer base through third-party platforms. Neobank is
focused on the platform rather than the product.

There are three primary aspects to the neobank structure:

• Core infrastructure
• B2B/ B2C modules
• Customers

2.2.1 Core Infrastructure

Because neo banks can supply their services through a variety of bank partners, this
layer is largely used in the backend. They've set up a payment gateway with typical
bank partners.

Figure 1 describes the core infrastructure of Neobanks

2.2.2 B2B/ B2C modules

As per the targeted customers of neobank, B2B/B2C module is built, basically this is
the front-end or in other words interface of the neobank

Figure 1 describes the demarcation of frontend as well as backend

Figure 1. Frontend & Backend structure of Neobanks

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2.2.3 Customers

Neobanks in India are not only are disrupting the banking industry by taking away
the customers by providing better experience but also catering the underbanked and
unbanked population of India. According to PwC report on Neobanks in India are
targeting various segments –

• Blue & grey collar workers: Owing to low-ticket size and frequency of
transactions, this accounts for around 250 million of India's population and is
largely underbanked by traditional banks. Savings accounts, small loans, and
payments are among the services offered by Neobanks, which use a mix of
online and offline strategies to reach these demographics
• Gig economy workers: Nearly 15 million Indians work in the gig economy,
which includes those who engage on brief as well as on contracts. This is a
market that neobanks can enter into to provide financial services. The current
spike in businesses adopting gig-tech models for specific activities has
created an opportunity to standardize this client group and automate their
relevant transactional data, which financial services companies can use to
develop customized products.
• MSME’s: MSME neobanks have recently gained traction in India. These
FinTechs are focusing on MSME customers who have struggled to obtain
traditional finance. Despite the fact that India's MSME sector boils down to
around 30% of the country's GDP, traditional banking has mostly overlooked
it because of the fear of NPA's
• Millennials: In India's population of over 130 crores people, millennials are the
largest age group consisting of around 40 crores. For neobanks, they might
represent a significant potential consumer base. Numerous digitally enabled
consumer-facing enterprises are growing as a result of these digitally linked
folks
• Rural population: Although there is a huge challenge in onboarding rural
population digitally but keeping in mind the fact that the rural population is
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 highly unbanked in India, it is one of the segments which has the greatest
potential

Figure 2. MSME credit exposure and potential

2.3 Pillars of Neobanks

2.3.1 Personalized & targeted experiences: The neobanks with advanced

technological stack and with the help of artificial intelligence and machine learning
develop prescriptive & real time personalization

2.3.2 End to end two-way communication: Customer support which is close to

having an omni-channel presence and offline and online interactions using chatbots,
in app customer support and prompt resolution is one of the key pillars on which
success of neobanks depends. Extremely supportive customer support counters the
overall fear of no physical presence from consumers consciousness

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2.3.3 Consistency: India as a country still struggle in providing seamless
connectivity to a huge population. Hence, building APIs that perform well in areas of
lesser bandwidth connectivity is absolutely crucial for Neobanks

2.3.4 Seamless UI/UX: In today’s world seamless customer experience is not a

customer delight anymore but a necessity. Along with RPA, NLP and other machine
learning techniques to reduce friction in bank interaction

2.3.5 Transparency, protection against risks: The biggest fear of customers for
neobanks is the fact that they have no physical presence as having some physical
presence ensures a sense of security. So, extremely heightened cyber-security
measures using blockchain, IOT to ensure transparency and protection in
transaction in absolutely necessary

2.3.6 Value added offerings and products: The growing number of fraudulent
operations in the financial market prompted the KYC adoption. Financial
organizations will be able to learn about their customers' backgrounds with complete
KYC. Financial organizations can also refuse or approve consumers' applications
based on their background.

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 Figure 3. Pillars of Neobanking in India

2.4 Indian Neobanks & partners

Following images and portrayal are exhaustive of Indian neobanking and their
partnership ecosystem:

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3. LITERATURE REVIEW

I have conducted literature review to address the above objectives. The first part
aims at defining the characteristics of neobanks. The second part reviews and lists
Figure 4. Neobanks of India
literature on Neobanks in Indian context.

3.1 Characteristics of neobanks

The primary drivers of the neobank disruption can be divided into three parts.
changes in the economic and regulatory environment, a rapidly changing
technological landscape and increasing customer expectations are all mentioned by

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Arslanian & Fisher (2019). The final two factors are in accord with Vives' (2019)
viewpoint, is that the disruption is caused by supply-side technological
advancements and demand-side changes in customer expectations.

The second driving force is the ever-changing technological environment. These

improvements in technology have altered how businesses might use technology to
generate new services or business strategies. Incumbent firms can embrace latest
technology as well, but they are typically entrenched in traditionally obsolete
systems, and shifting may be difficult and expensive. Hence, staying up to the mark
has been difficult for traditional banks. These technologies enable the development
of innovative components, which are frequently seen in neobanks.

Finally, the last but not the least enabler behind the neobank revolution is customer
expectations. Companies like Uber, WhatsApp, and Facebook, according to
Arslanian & Fisher (2019) and Vives (2019), have raised customer wants from
companies in terms of experiences. Existing incumbent customers are becoming
increasingly dissatisfied with the archaic user experience and hidden expenses. By
providing a convenient and straightforward client experience, Neobanks aim to meet
this unmet need. According to Valero. (2020), neobanks focus the majority of their
attention on mobile customers.

3.1.1 Neobanks defined

There are various definitions of Neobanks which are all in consistence with Larisa
(2019) which quotes –

"The term "neobank" can be defined in a variety of ways. Neobank, for example, is a
type of direct bank that is completely digital and services consumers using mobile ap
ps and personal computers.
Neobanks are totally digital and operate independently of traditional banks, whereas
digital banks are only the internet arm of a larger bank in the financial sector.”

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There are two kinds of neobanks, licensed and unlicensed. In Indian context, RBI still
hasn’t allowed Neobanks to lend and deposits over a certain limit.

Figure 5. Characteristics of Neobanks

Neobanks mainly differ from traditional banks in several areas, in addition to their
digital-first orientation. Hopkinson, Klarova, Turcan, and Gulieva (2019) identified
four areas where they have significant advantages:

Innovative features: Neobank's applications typically provide clients with greater

capabilities than legacy or legacy bank applications. Real-time expense notifications,
advanced money management and analysis capabilities, bill splitting, and the ability
to set up automatic money savings are just a few examples.

Customer experience: Neobanks' value proposition revolves around providing a

great customer experience. They offer convenient products and services that are
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always available. Online account opening takes only a few minutes, and the mobile
app's user interface is basic and easy. Customers also benefit from the Freemium
model's cost-effectiveness and lower transaction fees, as well as the lack of monthly
payments.

3.2 Theoretical study for Indian Neobanking context

Author Research Paper

“What do neo banks offer and should you
Tinesh Bhasin try them?"
“India’s Neo-Banks: What’s So ‘Neo’ About
Advait Rao Palepu Them?”
"Neo Banks that are changing the way
Vanita D’souza India Does banking”
Gabriel Hopkinson,
Romeo V. Turcam,
Diana Klarova and “How neo banks business models
Valeria Gulieva challenge traditional banks”

3.2.1 “What do neobanks offer and should you try them?”

According to the research paper “What do neobanks offer and should you try
them?” by Tinesh Bhasin, neobanks are developing a new concept to simplify
financial products through the use of IT & AI. In his paper, it is mentioned about the
corporations that are taking the initiative to come to India. He went on to say more
about the services they provide and how they provide them .

3.2.2 “India’s Neo-Banks: What’s So ‘Neo’ About Them?”

In Advait Rao Palepu’s research paper “India’s Neo-Banks: What’s So ‘Neo’

About Them?” The reasons for the Central entity on various domains that neobanks
are not authorized put focus on have been examined, as well as the set of
regulations for neobanks in India. He also claimed in the thesis that neobanks have a
great chance in India since they target a specific client group with entirely digital
services that are considerably superior than those provided by traditional banks.

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3.2.3 “How neo banks business models challenge traditional banks”

In the research paper “How neo banks business models challenge traditional
banks” by Gabriel Hopkinson & Romeo V. Turcam it has been stated about
disruptive change that has been brought by the neobanks and the reasons are
mentioned in detail. It is also emphasized in the paper about how neobanks have
made investing accessible to anyone. Everyone now has the ability to figure out
shares and invest without difficulties. Customers are drawn to neobanks because
they offer the freedom of switching in and out at any time, which is attracting them to
invest. Not only that, but customers also receive a better rate of return than they
would with traditional banks. They have also concentrated on the future of the
banking sector in this paper.

3.2.4 “Neo Banks that are changing the way India Does banking”

According to the article “Neobanks that are changing the way India does
banking” by Vanita D’Souza, the CAGR of neobanks from year 2017 till 2020 is
mentioned with the forecast till 2028. The study also discusses customer perceptions
of neobanks and their preferences.

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Figure 6. Overview of growth rates of Neobanks across the globe which can be replicated in Indian
context – Source Bloomberg

4. RESEARCH PROBLEM

The study design that was utilised to investigate the answer to the following questions
will be discussed in detail in the following section -

1. Relevant customer experience parameters in Neobanks through hypothesis

formulation

Customers assess a neobank based on its perceived benefits. These advantages

have an impact on the consumer experience. We want to look into the following
aspects of the neobank customer experience: convenience of use, value perception,
consumer assistance, operational speed, and perceived bank innovativeness.

2. Using the parameters mapped in the 1 st question, benchmarking Indian

Neobanks

After mapping top customer experience parameters, accounts in top 10 neobanks

offering retail banking were opened in order to measure them for their customer
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experience competence. The four parameters resulting from first question are very
critical standards for consumer growth and involvement.

5. RESEARCH DESIGN
a. Research Methodology

This study used a quantitative descriptive methodology, with questionnaires

administered to people who had bank accounts and were potential or present
consumers of neobanks services. The sampling method was incidental sampling,
which is based on chance and allows anyone who meets the researcher by accident
or by chance to be utilized as a sampling if he is deemed adequate as a data source.
A hypothesis driven research was done to prove/disprove the first part of the research
and case-based research was done in order to gather qualitative insights for the
second research question

b. Data Source

Questionnaires were used to collect data and 193 samples were obtained. For
secondary research, data was collected from research journals and independent
reports of various Neobanks

c. Hypothesis Development

1. Relevant customer experience parameters in Neobanks through hypothesis

formulation

The relevant experience possesses four attributes: it has an impact, is remembered,

has significance, and elicits a reaction. Because of the reactions from the customer
side, relevant consumer experience is actionable for businesses. Taking into account
the aforementioned factors, a higher score on a customer evaluation indicates that
the relevant experiences are more valuable than other experiences, and that
organizations should seek out and recreate these experiences.

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If the below mentioned hypothesis is proved and validated though extensive survey,
it will indicate the disruption potential of Neobanks.

Hypothesis 1. Customer experience is positively related to value perception

The quality and pricing of a service can be linked to understand value perception.
Costs can be referred to both time and money for neobank customers. The
consumer’s advantage is quantified in monetary terms by the value perception. The
more relevant the consumer experience, the better the perceived value. Financial
savings are one of the most frequently mentioned advantages of Neobanks globally.
Due to an effective cost structure focused on innovation progress, fintech
organizations are able to offer services at much reasonable pricing. The value
perception of banking services, especially digital financial services, is a key factor of
behavioral intentions to use them.

Hypothesis 2. Customer experience is positively related to convenience of use

The ease with which fintech apps can be used is measured by their convenience of
use. Convenience of use contributes to a sense of control, which in turn has a
favorable impact on the customer experiences. Customers do not like to waste any
time learning how to use a neobanks service. Customers' financial environments are
influenced by perceived ease and control, with the latter being more significant for
those who are technically inept. Less tech-savvy users will be hesitant to engage
with neobanks unless the app's perceived convenience of use does not result in
reasonable levels of mastery. Because acquiring or trying a different technology is
stressful for them, the engagement with the latest tech may not be as positive, at
least in the beginning.

Hypothesis 3. Customer experience is positively linked to a great customer support.

Organizations that provide customer care assist customers when they have
problems and are also responsible for providing a relevant customer experience. In
the event of a prospective problem, as in a potential monetary loss, the consumer

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must be comforted by the neobanks' help. This necessitates immediate action to
ensure the security of the consumers' investments. Other areas of concern include
privacy concerns and financial factors. Neobanks must develop a relevant
experience in order to overcome unfavorable outcomes and gain customers' trust
and loyalty. Neobanks are pushed to build the most creative innovation services with
flexibility while retaining a significant emphasis on customer journey through ongoing
dialogue with their clients. In comparison to the traditional banks, neobanks' success
is also due to superior and individualized customer service.

Hypothesis 4. Customer experience is positively related to bank's innovativeness.

Customers' perceptions of a company's generating new experiences and products

are captured by perceived business innovativeness. Neobank is frequently seen as a
fundamental component of innovation. Consumers that view a company as creative
give its products higher evaluations, benefit from increased consumer involvement,
and are more likely to become loyal customers. Customer experience is stimulated
by the development of novel products. Consumers' affective and cognitive behaviors
are influenced by innovation. A creative organization is thought to be technologically
advanced while also generating positivity among customers. A possible cause of
perceived innovation is market impact, which is represented by offerings that
combine better answers to customer issues

2. Using the parameters mapped in the 1st question, benchmarking Indian

Neobanks

After mapping top customer experience parameters, accounts in top 10 neobanks

offering retail banking were opened in order to measure them for their customer
experience competence. The four parameters resulting from first question are very
critical standards for consumer growth and involvement.

The four parameters are listed below and each neobank was awarded a score on
Harvey Ball analysis-

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 i. Perceived Benefit/value –
Perceived Benefit (PB) is the degree to which someone believes that utilizing
a specific system will improve its performance, effectiveness, and linkage. In
other words, the extent to which people can gain from employing technology
systems. Flexibility (time and place), assistance to consumers in completing
activities, and a speedier transaction procedure are all characteristics of PB.
ii. Ease of use & account opening –
Perceived Ease (PE) refers to the opinion that the platform is useful at all
times and facilitates transactions, as well as the ability to understand services
and access speed. Ease of use, reliability, and the ease with which e-banking
services can be installed are all included in the PE indicator.

iii. Security measures, trust and authentication –

One of the biggest hurdles in neobanking is the fact that there is no physical
presence of Neobanks. In Indian context, people trust what they can see or
visit. Although, cost structures are optimal due to no physical presence but
that comes with challenges in maintaining trust. In order to establish a sense
of security and confidence with the neobank, the customer's identification
must be verified.

iv. Innovativeness –
It is critical to integrate old technology with cutting edge technologies to
guarantee a positive consumer experience for all generations. Fintech
innovation may have a greater impact on the customer experience of
prospective new users for whom financial services are becoming more
inexpensive as a result of innovation.

d. Data Collection
A survey questionnaire was designed and floated via Microsoft Forms online
and responses were noted.
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 Following questions were asked in the survey:
i. Age
ii. Where do you live?
iii. How frequently do you visit your bank physical branch?
iv. What attributes you look at while choosing a bank?
v. Is it difficult for you to approach your bank for queries?
vi. Are you happy with customer support of your bank?
vii. Do you feel your bank is innovative in generating hyper personalized
experiences, products & services?
viii. Are you willing to try a financial entity without any physical branch if it
provides lesser interest rates and are value for money?
ix. Are you aware of Neobanks?

e. Data Cleaning
After collection of enough responses, I performed the following steps to clean
the data so as to have only reliable and valid data amongst the 161 raw
responses. Since our data had no missing response values, no removal of
responses and mean-filling was performed.
To check for unengaged responses, response values and item values with a
standard deviation < 0.5 were to be removed (10% of the scale value 5 = 0.5).
A total of 3 responses were removed in this step.
Next, to remove outliers for the categorical values of the survey, I referred to
the Mahalanobis distance method, in which I found a further 2 responses to
remove before performing our statistical analysis. Hence, out of the 161 raw
responses, after cleaning, a total of 156 remained.

6. DATA ANALYSIS & RESULTS

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For addressing the 1st question “Relevant customer experience parameters in
Neobanks through hypothesis formulation” survey was floated and there was a
total of 156 valid responses

Gender-
64.2% of the respondents were male
35.8% of the respondents were female

GENDER
Male Female

36%

64%

Age-
Over 95.2% of the total surveyed population belonged to GenZ & Millennials
category as the survey was primary floated across various colleges

Demography-
69.4% of the respondents belonged to Tier 1 city
24.2% of the respondents belonged to Tier 2 city

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6.4% of the respondents belonged to Tier 3 city

Frequency of visits to bank’s physical branch-

• 78 people visit bank only once every year
• 65 people visit bank once quarterly
• 13 people visit bank one every month

Ranking of attribute preferences-

• 38 people have preferred Seamless Experience as their 1st preference
followed by 42 people preferring Ease of Use as their 1st preference
• 35 people marked Security & Control as their 2nd preference and 29
people marked presence of physical branch as their 2nd preference
• 47 people marked Innovativeness as their 3rd preference while 39
people marked Physical presence as 3rd preference

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 • 42 people marked Innovativeness as their 4th preference while 38
people marked Seamless Experience as their 4 th preference

Approachability
• 90 respondents felt approachability issue with their banks

Satisfaction with the bank’s customer support

• 80 respondents were happy with customer support of their bank

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Personalized experience

• 97 respondents felt their banks provide moderate personalized

experience
• 47 respondents delt their banks provide no personalized
experience
• Only 12 respondents felt their banks provide hyper personalized
experience

Willingness to try Neobanks

• 109 respondents were extremely willing

• 26 respondents were not sure about it
• Only 21 respondents were hesitant to try

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t-Test: Paired Two Sample for Means

Ease of Use Security & Control

Mean 3.0483871 3.161290323
Variance 2.60417768 2.235854045
Observations 62 62
Pearson Correlation 0.59456759
Hypothesized Mean Difference 0
df 61
t Stat -0.6332824
P(T<=t) one-tail 0.26445825
t Critical one-tail 1.67021948
P(T<=t) two-tail 0.52891651
t Critical two-tail 1.99962358

With a p value of 0.26 which is more than 0.05, we reject the hypothesis and conclude that customers
have an equal preference for ease of use & security

t-Test: Paired Two Sample for Means

Ease of Physical
Use Presence
Mean 3.0483871 3.338709677
Variance 2.60417768 1.735854045
Observations 62 62
Pearson Correlation -0.0155452
Hypothesized Mean
Difference 0
df 61
t Stat -1.0890499
P(T<=t) one-tail 0.14020786
t Critical one-tail 1.67021948
P(T<=t) two-tail 0.28041572
t Critical two-tail 1.99962358

With a p value of 0.14 which is more than 0.05, we reject the hypothesis and conclude that customers
have an equal preference for ease of use & physical presence

34
With a p value of 0.052 which is more than 0.05, we would ideally reject the null hypothesis but in this
case since the p value is pretty close to the critical value, we can conclude that customers give more
preference to ease of use than innovativeness

t-Test: Paired Two Sample for Means

Ease of Use Seamlessness

Mean 3.048387097 3.177419355
Variance 2.604177684 2.345055526
Observations 62 62
Pearson Correlation 0.666476644
Hypothesized Mean Difference 0
df 61
t Stat -0.789710183
P(T<=t) one-tail 0.216378065
t Critical one-tail 1.670219484
P(T<=t) two-tail 0.43275613
t Critical two-tail 1.999623585

With a p value of 0.21 which is more than 0.05, we reject the hypothesis and conclude that customers
have an equal preference for ease of use & seamlessness

For addressing the 2nd question “Using the parameters mapped in the 1st question,
benchmarking Indian Neobanks” accounts were opened in all the banks and the
following banks were rated on the basis of mapped parameters
• Instant Pay
• Finin
• Slice
• Open
• Niyo
• Fampay
• Digibank by DBS
• Fino Payments Bank
• Paytm Payments Bank
• Airtel Payments Bank

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 • 811 | Kotak Mahindra

The analysis is shown below –

Ease of use and account opening Security measures & authentication Innovativeness
Direct Competitors Mobile App No. of steps to open Authetication
account at home Customer support Debit card features Innovation in services
InstantPay Yes 11 Yes Email 5 1
Finin Yes 14 Yes Call, WhatsApp, Email 5 1
Slice Yes 11 Yes Email 5 1
Open Yes 8 Yes Chat & Email 2 0
Niyo Yes 4 No Call, WhatsApp, Email 4 1
Fampay Yes 8 Yes Email 2 1
Digibank by DBS Yes 8 No Call, Chat & Email 3 0
Fino Payments Bank Yes 8 Yes Call & Email Support 3 0
Paytm payments Bank Yes 4 Yes Call & Email Support 3 1
Airtel Payments Bank Yes 10 Yes Call & Email Support 0 0
811 | Kotak Mahindra Yes 8 No Call 1 0

7. CONCLUSION

Using t-statistic, we tried to prioritize the strongest correlation between the

parameters and customer experience. It was chosen because it would help
determine which parameters mattered the most to a consumer when they made a
choice between banks.

After the analysis, following conclusion were made –

The parameter preference in decreasing order

Ease of Use

Security & Control over assets

Physical Presence

Innovativeness

Seamless Experience

On the basis of above parameters, I tried to cover Indian Neobanks and

benchmarked them.

Niyo Bank topped amongst all the variable and came out to be clearly the best
Neobank in India in terms of customer experience.
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8. LIMITATIONS

This study although covering most of its bases has a few limitations which hinder
what can be taken away from it. Firstly, given the depth of the theories, there could
be interrelationship among sub-constructs, e.g., safety and presence of physical
branch can be easily confused for by respondents. This should be further supported
by the appropriate mediation or moderation analysis. Secondly, this study is
conducted in large metropolitan Indian cities, hence there might be a lot of diverse
features at play which might not be the same if we apply the learnings to any tiers of
cities in India, let alone some other country. Moreover, the results might well vary in
a rural setting because of the difference of neobanking application penetration in the
rural areas about the quality of service being propagated. Hence, if results are to be
used and applied to a different cultural and demographic setting, caution must be
ensured while conducting survey taking care of individual sensitivity.

Due to the social distancing measures in place due to COVID-19 pandemic, focus
group interviews were not possible to be conducted. If conducted, it could have
addressed some of the errors that might creep in the responses received through
online survey form.

Although it is recommended to have at least 300 responses on a form for sampling

and data analysis, I was able to collect 161 responses, 5 of which were discarded to
create a data sheet of 156 responses

9. BENEFITS & DRAWBACKS OF NEOBANKS

9.1 Benefits of Neobanks

9.1.1 Quicker technological deployment

If we talk about the largest investment made in IT, traditional banks were amongst

37
the one spending the most. According to Arslanian & Fisher (2019), this has caused
in a substantial amount of debt on inflexible and outmoded systems.

These legacy systems have kept traditional banks back, making them unsuited to
deal with modern-day consumer banking concerns. Despite the fact that traditional
banks have acknowledged that new technologies have huge potential but however,
implementing new technologies is difficult due to traditional banks' reliance on old
systems. Large banks' organizational complexity makes the shift to utilize new
technologies more difficult.

9.1.2 Lower operating costs

Traditional banks are at a disadvantage in terms to the physical network of branches,

in addition to costs of moving away from outdated technologies. Because their goods
/ services are offered online, Neobanks do not have physical branches. This reduces
the need for branches, offering neobanks a cost-cutting advantage over incumbents.

9.1.3 Operating Model

One of the most tempting features for neobank clients is the pricing. The cost-
leadership approach, in which neobanks offer lower pricing and greater interest
rates, is the most common operating model.

9.1.4 Entry barriers

New entrants used to face substantial barriers to entry, such as massive balance
sheets and large customer bases. The capability to source IT infrastructure through
cloud services significantly reduced this barrier.

9.2 Drawbacks of Neobanks

9.2.1 Trust building

Consumers continue to see existing banks as safer, according to Arslanian & Fisher
(2019), and remain wary of start-ups, even when authorities authorize them.

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9.2.2 Requirement of large customer base

These entities can obtain an edge by providing penetration pricing, loan rates much
lower, and increased interest rates to their customers, as previously indicated. One of
the disadvantages of this business strategy is that in order to be lucrative, it requires
a much larger base of customers.

39
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