Future of Banking - Reflections from Niyo’s Vinay Bagri

Banking opportunity in India is tremendous, with overall banking assets expected to reach $3T by 2025, with deeply under-penetrated private credit markets which account for ~50% of GDP (vs. 150%+ for developed economies).

Despite this large opportunity, customer experience and engagement in traditional consumer banking in India is broken, and been so for over a decade.

With the increasing digital penetration in the country, customers armed with their smart phone are looking for an easy, seemless, quick and personalised experience and their expectations are ever-evolving.

In a survey we ran, we learned that more than 80% of respondents who shifted to digital banking solutions did so for ease of usage.

Given India’s demographic dividend, banking ecosystem will see a huge impact with 300M new accounts being created in the next 5 years. We expect many of these to be opened in the private banking ecosystem, as has been observed in the last decade with a steady shift to private banking.

Digitally forward players will capture this net new market growth, given incumbents are not well set up to service customers in a digitally first manner as evidenced by the inability of existing banking infrastructure to handle digital loads along with sub-par user experiences.

This combination of a large pre-existing market, latent need for credit coupled with poor customer experience makes us excited about the disruption neo-banks can bring to the banking ecosystem in India.

Neo-banks attempt to fix the broken customer journeys and provide a superior banking experience, serving as a layer over traditional banks. What this means is, that customers no longer need to spend hours at their physical bank branch queues, mired in paperwork for everyday banking needs. While doing so, a neo-bank improves access to a whole suite of financial products across wealth management, lending, and insurance through a single platform.

When customers are offered high quality digital experiences, they tend to make permanent behavior changes at unprecedented rates as we saw through rapid UPI adoption, where India now leads globally in digital payments with ~3.5B monthly transactions, 7x up from last year.

As Accel, we’ve always believed that technology can revolutionize banking and attempted to enable that ecosystem, first through our investment in Monzo in 2018, then through our investment in Zolve in 2021, and recently through a growth investment in Niyo - Niyo is a leader in the consumer neo-banking segment in India with a base of 5 million users.

To understand this new era of banking which is fast unfolding, we spoke to Vinay Bagri, Co-founder and CEO of Niyo, who is a long-standing veteran in the banking industry in India.

In this conversation, Vinay talks about how Niyo came into being, shares some of his reflections on the ongoing changes in the banking ecosystem, draws parallels from other fintech segments and discusses the need for regulatory support.

Key segments

Large market opportunity for a neobank in India - 18:05 - 19:48
How neobanks provide a completely new banking experience - 20:22 - 22:41
Success of neobanks globally - 24:00 - 25:20
Customer segmentation in neobanking - 30:25 - 32:12
State of neobanking regulations in India - 36:28 - 39:10

We thank Vinay for coming on and sharing these insights with us and we wish him and Niyo team all the best for this amazing journey of revolutionizing consumer banking for India.