Neo banks, along with mid-sized banks, are establishing global capability centres (GCCs) in India, mirroring the expansion strategies of larger global counterparts.
This trend is being seen as the next major wave in the country’s banking, financial services, and insurance (BFSI) sector.
Neo banks exist solely online and operate independently or in partnership with traditional banks.
Their market size is expected to grow to $395 billion in 2026, up from about $19 billion in 2018, according to PwC.
Such banks, spread across the United States (US), the United Kingdom (UK), Australia, and Japan, are looking to tap the huge number of engineers in the country and work in some high-value, cutting-edge technology and finance operations with fewer people than what behemoths such as JP Morgan, HSBC, and Goldman Sachs need.
Often the number of people in these small banks is a tenth of the larger peers, or even less than that.
Some prominent names that have set up or are likely to set up GCCs include First Citizens Bank, PNC Financial, and Fifth Third Bank from the US; Nataxis, Credit Agricole, and Santander from France; UniCredit from Italy; and Revolut and Monzu from the UK, according to people familiar with knowledge of the matter.
“Not only is there a cost advantage but also the talent is there.
"The presence of large players has a ripple effect on the vendor partner ecosystem,” said Nilesh Iyer, managing director and chief executive, Nataxis Services, India.
The French bank started operations in 2021 and has about 300 people in corporate investment banking, trade lifecycle, global market operations, having customers on board, credit analysis, and risk management.
“Headcount is not the predominant measure of success anymore,” Iyer added when asked if the bank would ever scale up to the size of HSBC, Wells Fargo, or Deutsche Bank in India.
Simar Singh, partner and national sector leader, KPMG India, said BFSI GCCs in India started with a minimum of 10,000 people nearly two decades ago.
It previously needed a solid business case and an established presence.
The situation, however, has evolved and matured over time.
“Banks are now able to set up what they need to do in a bite-sized manner.
"So if you want to solve one particular problem of the bank with 200-odd people, you can set up a GCC, which is available as a service.”
The other reason that has nudged these banks to set up an entity in India is the high levels of attrition which hit service providers just as the pandemic was ebbing out.
"Attrition at that time peaked at vendor levels with many teams hit with close to 70 per cent, which meant a lot of talent and knowledge were lost.
"That is when these banks decided to bring a lot of their activities inside.
"They felt they were not resilient enough and put the bank at risk when the providers were not able to service properly,” added Singh.
There are 130 BFSI GCCs operating in India, employing over 537,000 people, according to an EY-Wizmatic study last year.
Of these 22 operate with fewer than 500 people, which highlight a more sophisticated, technology-driven approach where smaller, agile teams can deliver a significant global impact.
In comparison, the top 10 banking capability centres employed 285,553 people as of March 31 last year.
JP Morgan’s more than 21,000 engineers in this country are engaged in cloud computing, artificial intelligence, and digital banking with innovation across real estate commercial management platforms, tools which augment organisational efficiency, blockchain, and advisory insights, according to Vibhavari Jahagirdar, head of Global Technology for India, and co-lead for Global Post Trade Technology.
Neo Banks in a Nutshell
- They only have an online presence with no physical branches
- Operate independently, or in partnership with traditional banks
- No. of employees are a tenth or lesser than those of larger peers
- Market size expected to grow to $395 bn in 2026
- Neo banks are looking to tap into India’s engineering talent, and work in high value, cutting-edge tech & finance ops
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