Freecharge announces rollout of neo-banking platform

Axis-bank owned payments firm, Freecharge, said on Tuesday it is rolling out its neo-banking platform on 17 November. The company claims to have received 18,000 sign-ups during the pilot phase of the project.

Neobanks are digital banks, which operate without any physical branches but offer traditional banking products by leveraging technology. In India, regulations require companies to strike deals with traditional banks in order to operate a neo-bank.

In an interview with Mint, Siddharth Mehta, managing director and chief executive office (CEO) of Freecharge, said the company seeks to turn its existing users into neo-banking customers using the platform. Freecharge has been rolling out digital first features on its app over the past year. Mehta said the neo-banking platform will allow customers to enroll for fixed and recurring deposits through Freecharge’s apps right now. 

Going ahead, Freecharge also plans to launch digital iterations of traditional banking services like mutual funds, personal loans and more. It already offers buy-now-pay-later (BNPL) services as well, and will add tools that allow customers to see their financial health score.

“We launched BNPL, the first of the (digital) products in the first quarter. The second one was small ticket lending for small businesses,” Mehta said. “The extension of this is that we will launch the consumer financial services platform, or the neo-bank. Then, eventually, we will move to the merchant,” he added.

Mehta added that insurance is another service that Freecharge aims to add in future, and it will tie-up with traditional insurance providers for the same. In January, Freecharge aims to add digital credit and debit cards, where customers will be able to complete the onboarding process on the app and also start using the cards on their phones. At the moment, it offers a phygital version of this, where customers can apply on the app and then have to go to the bank to submit documents.

“The way we are building our neo-banking platform is that the customer will have a comprehensive platform, where he can come and transact with Freecharge across the financial needs,” said Mehta.

Mehta noted that while the term ‘neo-bank’ is used often, fintech companies are essentially building digital platforms. He noted that Axis Bank also has its own digital offerings and customers joining Freecharge’s neo-bank will be serviced by Freecharge, while Axis Bank’s customers are serviced by the bank.

“The way we look at neo-bank is that it’s a digital, comprehensive financial services platform for the digitally native customers, who want their banking and financial needs on the go,” he said. He noted that India’s regulations require larger banks in the backend, so customers in neo-banks will always be serviced by the larger banks on the backend.

Freecharge will be using Axis Securities to offer mutual funds, and will partner with the Axis Bank subsidiary for broking services in future too. “When you want to become a banking service provider, compliance and regulations are important factors, because that also defines the customer’s trust in you. So, that and the knowledge base on products, customer profiling, there are lots of those advantages that Axis Bank brings to us based on their experience over the years,” he said.

India’s neo-bank space has been registering healthy growth over the past year, driven by the growth of digital transactions because of the pandemic. In a blog post in March, PwC said that the country had recorded over 48 billion digital transactions during the 2020 calendar year. Tiger Global-backed neo-banking platform Open said, in May, that it was registering 60,000 new small and medium enterprises (SMEs) every month.