In today’s fast-paced world, the thought of traditional banking often brings to mind images of long queues and unreliable ATMs, especially for the younger generation.
This is where the innovative concept of ‘Neobanks’ comes into play. Neobank startups work on redefining banking by providing digital, user-friendly services that cater to the needs of modern customers, ensuring a hassle-free and efficient banking experience.
However, the problem doesn’t just stop here since Indians, whether younger or older generation, worry about the security and privacy in digital banking.
Jitendra Kumar, who has experienced all the chaos people go through while working at ICICI Bank, started his journey into the realm of the Indian fintech industry.
In late 2010, Jitendra founded Citrus Pay to provide payment solutions to merchants and consumers at a time when the majority of Indians were scarcely using the Internet for their payment needs.
After selling Citrus Pay to PayU in a landmark deal worth $130 million and joining the company as the Managing Director, Jitendra aspired to make another significant impact in the Indian fintech sector.
While at PayU, he realised how the Jio Revolution had accelerated internet penetration in the country, yet people struggled with traditional banks for their financial needs.
Though people were using digital payment apps like Paytm and PhonePe at that time, these platforms weren’t actually offering full-fledged digital banking services.
Jitendra Gupta started Jupiter Money to address this issue, raising $24 million in its seed round from Matrix Partners, Sequoia, Greyhound, 3one4 Capital, and others. As the startup emerged from stealth mode, it secured an additional $2 million in funding from British venture capital firm Hummingbird Ventures and US-based Bedrock Capital.
These two funding rounds attracted the attention of the fintech ecosystem and market observers. Even before the product launch, Jupiter had gotten as much funding as most startups may not see until their growth stage.
“Banking is undergoing massive change. In these tough times, it has become evident that digital banking will be the way forward for consumers who are really looking for an experience that is consumer-centric and friendly,” Jitendra Gupta said during the COVID-hit lockdown.
Interestingly, these two rounds alone valued Jupiter Money at $100 million, a number that was then an ambition for several growing startups.
How do neobanks operate?
Running a bank in India is no easy feat, as it involves navigating through multiple regulations and operating under the watchful eye of the Reserve Bank of India (RBI).
Then there’s another question comes in. Are neobanks legal? In RBI’s words, The central bank doesn’t recognise neo banks as ‘banks’, so the customers might get into legal trouble in case of an issue.
It’s worth mentioning that neo banks, even Jupiter Money, don’t offer services themselves. They are like fintech companies that partner with traditional banks to provide a digital banking experience.
One should not confuse digital banks with neobanks. Digital banks often exist as online subsidiaries of established banking and financial institutions, possibly backed by larger entities and maintaining a few physical branches. In contrast, neobanks operate exclusively online and do not have any offline branches.
Basically, neobanks are financial institutions with only an online presence and function digitally. However, since the RBI does not allow 100% digital banking operations, they cannot apply for a banking license.
What is Jupiter Money?
Jupiter Money, an Indian neobank startup, offers a range of services, including savings accounts, debit cards, credit cards, salary accounts, and recently launched mutual funds.
The startup boasts a feature allowing users to invest in mutual funds through a zero-penalty SIP, meaning there are no fees for missed Systematic Investment Plan (SIP) contributions.
While Jupiter Money facilitates these services, customer accounts are hosted by its partner banks, Federal Bank and Axis Bank. Additionally, It has partnered with with NPCI and VISA.
The platform also integrates unique facilities for customers to monitor their wealth, offers real-time spending breakdowns with insights, and assists them with convenient savings inlets for customers to save for their purchases.
Furthermore, all of these things can be managed in real-time. Jupiter claims it does not charge any hidden fees, as many banks do. Jupiter is currently set against the challenge of maintaining the “fine balance between compliance and agility.”
“We wanted to deliver a personalised banking experience with the mindset of an internet company. Our customer service is not differentiated based on a customer’s balance, and we give them an instant resolution to their needs,” said Jitendra Gupta, Founder of Jupiter
Funding and Investors
Jupiter has raised a total of $155 million in funding throughout its four funding rounds. Jupiter’s most recent round was in January 2023, when it raised about Rs 100 crore in debt, mainly to build and scale up its lending products.
Before this, The fintech startup had raised $86 million from QED investors and Sequoia Growth Fund, Tiger Global, and Matrix Partners, among several others. Until now, Jupiter has only acquired one company, EasyPlan, which is an AI-powered financial savings app.
According to CrunchBase, Jupiter Money is backed by 19 investors, including Peak XV Partners, Nubank, BEENEXT, Matrix Partners India, Rocket Internet, MUFG Bank, Mirae Asset Venture Investment, and Alteria Capital, among others.
Business Model
Jupiter uses the mobile-first model to differentiate itself by introducing new products and services. Jupiter’s business model is based on Monzo, a digital mobile-only bank in the United Kingdom, and Nubank, a bank in Brazil. If I have to break down what a mobile-first model is.
A “mobile-first” strategy is building a desktop site first with the mobile version, which is subsequently adapted to larger screens (contrary to the traditional approach of starting with a desktop site and then adapting it to smaller screens).
In general, a mobile-first approach involves designing your website with mobile users in mind, with the primary purpose of improving their experience on your site.
Jupiter earns the majority of money from selling services and commissions when a customer uses a debit card, takes out a loan, or buys an insurance policy through its platform.
The growth
So far, Jupiter’s app has garnered over 5 million downloads on the Google Plays store. Apart from this, The startup also launched the Bullet Money app, a micro-lending (‘Buy Now Pay Later) app to provide customers with small-ticket loans of up to Rs 10,000 to use for UPI-led purchases.
Bullet, like LazyPay, which Jitendra launched at PayU and later integrated into Jupiter Money, received more than a million downloads. However, The company later shut down the app following the change in RBI guidelines.
What’s unique about Jupiter Money?
According to Gupta, What sets Jupiter apart is its approach to customer goals. Traditional banks often disconnect savings activities from specific outcomes, but Jupiter adopts a more personalised and contextual finance app approach.
This method tailors financial goals to individual needs, moving away from the one-size-fits-all model. Jupiter’s vision is to guide customers towards their financial goals and instill financial discipline, a significant challenge globally.
The issue is particularly acute in India, where there’s a lack of early education in financial management and wealth maximisation. Young Indians typically focus on academic education and securing well-paying jobs, often neglecting financial literacy. This gap in financial education is something that banks have historically exploited.
Gupta said that Jupiter aims to change this by educating and guiding its users towards better financial management and achieving their personal financial goals.
How well is Jupiter Money performing financially in contrast to its competitors?
While the Indian neobank space is still in a nascent stage, The country does have a dozen of neobanks looking to disrupt the BFSI sector, including key players such as Open, NiYO, Hylo, PayZello, InstaDApp, YeLo, ChqBook, FamPay, Walrus, epiFi, Finin and RazorPay X among others.
NiYO is regarded as one of Jupiter’s major competitors, given the amount of revenue it generated in FY23 compared to Jupiter’s FY23 numbers.
NiYO has shown impressive financial performance in FY23. Its revenue from operations soared to Rs 131 crore in FY23, up from Rs 47 crore in FY22. Additionally, NiYO reduced its losses by 14.08%, from Rs 206 crore to Rs 177 crore. This revenue growth, a significant 178% increase, highlights NiYO’s strong market presence since its inception in 2015.
On the other hand, Jupiter Money has experienced a challenging financial year. The startup’s losses doubled from Rs 156.3 crore in FY22 to Rs 327 crore in FY23. Despite this, there was a notable increase in operating revenue, which jumped over 1,500% to Rs 7.1 crore in FY23 from just Rs 42 lakh in FY22.
The financial trajectory for Jupiter Money is not entirely surprising, considering NiYO’s earlier establishment in 2015 and its slightly higher fundraising than Jupiter.
Neobank scene in India
According to a report by KBV Research, The global neobanking market is expected to be worth $333.4 billion by 2026, expanding at a compound annual growth rate (CAGR) of 47.1%. However, neobanks, like all financial institutions, have advantages and disadvantages.
Here are a few advantages of neobanks for a quick rundown:
Neo-bank Customers include tech-savvy people, SMEs, and the low-ticket salaried class, which are not the focus areas of traditional banks.
Lower costs due to the lack of physical branches and low capital investment.
Lower fees/charges and easier customer acquisition.
Also, if we speak of the disadvantages, of course, this new banking style will not appeal to everyone, and that is understandable.
The disadvantage of not having physical branches is that you cannot speak with someone from your bank face to face. Without proper communication, a lot of trust issues arise.
The progression is not that fast because most people are still not used to the concept, and thus the industry is still at its nascent stage but in the upcoming years, neobanks are expected to create revolutionary disruption.
“With the current momentum, neobanks are likely to leapfrog in the coming years and become a financial services behemoth, and have a positive impact on the overall growth of the financial services sector in India”, said Jitendra Gupta, Founder of Jupiter.
Is Neobanking a greater future in India?
While the reports indicate a brighter future for the Indian neo-banking sector, some concerns can negatively affect the growth of new-age startups that wants to revolutinize how people interact with banks for their financial needs.
Traditional banks, recognizing the shift in consumer preferences, are increasingly adopting digital strategies similar to those of neobanks. They are introducing services like online account management, branchless banking, and digital loan processing, aiming to provide a more convenient and efficient banking experience.
However, while these efforts by traditional banks are commendable, there remain specific areas and services where they fall short, creating opportunities for neobanks to excel.
Traditional banks often struggle with offering highly personalized and user-centric services due to their large-scale operations and legacy systems. This is where neobanks, with their agile frameworks and innovative technologies, can step in to fill the gap.
These startups can leverage data analytics and AI to offer tailored financial advice, create more intuitive user interfaces, and provide financial services that are more aligned with the individual goals and lifestyles of modern consumers.
Furthermore, neobanks have the potential to tap into niche markets and underserved segments, such as gig economy workers or small business owners, who require more flexible and customized banking solutions.
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