It started, as most viral purchases do, with a swipe. A TikTok creator with flawless skin and fluorescent lighting demonstrated a compact beauty gadget that promises salon-grade results at home. The video was less than a minute long, filled with upbeat music, quick cuts, and glowing testimonials in comments. Within minutes, a viewer – perhaps a student in Manila, a young professional in Manchester, or a stay-at-home parent in Chicago – clicked through the in-app link and completed the purchase.

By the time the package arrived a few days later, the product had already lost its mystique. A single-use, maybe two, followed by quiet abandonment. The device now sits in a drawer, a fleeting artifact of a momentary high. It’s a pattern playing out on repeat across millions of screens and households.

Welcome to the world of #TikTokMadeMeBuyIt, a phenomenon that has exploded to over 80 billion views and counting. Entire product categories – skincare tools, cleaning gadgets, oddly shaped kitchenware – are being built and sold off the back of short-form content engineered to trigger impulse buys. For brands, the promise is irresistible: high engagement, lightning-fast conversions, and instant exposure to global audiences.

But with that promise comes a growing problem. Post-purchase regret is creeping in, and repeat purchase rates remain elusive. Products go viral, but not necessarily for the right reasons – or to the right audiences. Shoppers buy on a dopamine rush, not because of need or brand loyalty. When the dust settles, many never buy again.

This is the paradox of TikTok commerce: it’s brilliant at driving desire but shaky at sustaining satisfaction. As marketers lean into creator campaigns and trending formats, a harder question emerges: What happens after the impulse fades? How can brands transform a fleeting moment of virality into lasting consumer value?

The answer requires looking past the algorithm – and into the mindset of the modern, post-swipe shopper.

The Rise of Social-First Shopping

The act of shopping has always been tethered to some form of discovery – what’s new, what’s desirable, what solves a problem. Traditionally, that discovery began with intent. Consumers searched for what they needed – on Google, Amazon, or a brand’s own website – then navigated through specs, reviews, and comparisons to make a decision.

But today, especially among younger demographics, the discovery process is being rewritten – and TikTok is the new front door.

According to a 2023 survey by Adobe, over 40% of Gen Z users in the U.S. now use TikTok as a search engine, turning to short videos for everything from product reviews and tutorials to restaurant recommendations and tech hacks. A Google executive famously acknowledged that nearly half of Gen Z prefers TikTok or Instagram over Google for local search and ideas. And it’s not limited to the West – DataReportal’s 2024 global digital trends report shows similar patterns in Southeast Asia, where TikTok is already a leading platform for beauty and lifestyle discovery in markets like Indonesia, the Philippines, and Thailand.

This shift from intent-based to content-led shopping represents more than a change in channel. It marks a transformation in the psychology of the buyer journey. Consumers aren’t searching because they know what they want. They’re swiping through content, waiting to feel something. The algorithm does the rest – serving a stream of product demos, creator endorsements, and “must-have” items that feel personal, unscripted, and trustworthy.

The mechanism driving this new model is emotional storytelling – often through creators who speak directly to their audience as peers, not salespeople. There’s no hard pitch. Instead, there’s relatability, humor, vulnerability. A creator casually shares how a sleep spray changed their nighttime routine, or how a multi-use blender made morning smoothies easier. The product isn’t the focus – it’s part of a lifestyle narrative. And because the platform is optimized for short-form engagement and rapid feedback, the reward loop is instantaneous. Users like, share, comment, click – and often buy – without leaving the app.

This is particularly powerful in categories that lean into aesthetics, performance, or transformation. Beauty, fashion, wellness, gadgets, and kitchenware dominate the #TikTokMadeMeBuyIt trend because they demonstrate well on video and promise immediate change or convenience. A pore vacuum that clears blackheads in seconds. A wearable fan for summer commutes. A viral foundation that “melts” into your skin. These products are engineered for visual impact – and often experience a sales spike within hours of trending.

Brands are scrambling to meet this shift. In the U.S., retailers like e.l.f. Beauty and Glow Recipe have embraced TikTok not just as an advertising platform, but as a product incubator. Viral feedback is used to iterate faster, launch new SKUs, or create limited drops tailored to what’s trending. In the UK, Boots and ASOS have established creator partnerships and in-app shopping hubs designed specifically for TikTok users. Meanwhile, in Southeast Asia, TikTok Shop has integrated payment and delivery into the app itself, offering a seamless purchase experience – and challenging traditional ecommerce giants in the region like Shopee and Lazada.

Yet this rise of social-first shopping is not without friction. What works in a 60-second video doesn’t always translate to long-term product satisfaction. And while the buying journey may begin in a feed, it doesn’t always end in a positive review – or a second purchase. The next challenge for brands is not just to capture attention in the scroll, but to justify the decision after the impulse fades.

The dopamine of discovery is real. But for brands, it’s what happens next that determines whether a TikTok sale becomes a customer – or just a view that briefly converted.

TikTok-Made-Me-Buy-It

The Retention Cliff: From Click to Regret

For brands riding the wave of TikTok virality, the first 24 hours can feel like a triumph. Products sell out, follower counts spike, and warehouses scramble to restock. But beyond the euphoria of the initial surge lies a less glamorous truth: a vast number of these purchases don’t lead to loyalty. Many don’t even lead to usage.

Return rates for impulse-driven social commerce are difficult to pin down, but anecdotal reports from retailers and logistics firms suggest a growing pattern of disappointment, disuse, or buyer’s remorse. A 2023 survey by Coresight Research found that 35% of Gen Z consumers regretted at least one purchase they made via TikTok or Instagram – not because of price, but because the product didn’t live up to the hype, was rarely used, or was simply forgotten.

The psychology behind this regret is well-documented. Neurologically, impulse buying activates the brain’s reward system, delivering a short-lived hit of dopamine. The problem is that platforms like TikTok are engineered to optimize this very sensation – quick visuals, emotional narratives, and social proof in the form of comments and likes. Consumers experience the thrill of discovery and the convenience of one-click purchasing simultaneously. But once the package arrives, the context disappears. The content that made the item feel urgent is gone, and the user is left with a product that may not fit their life – or their expectations.

This dissonance is particularly acute in categories like beauty and wellness, where perceived effectiveness can vary dramatically by individual. A trending skincare serum might go viral for its packaging or influencer endorsements, but fail to deliver visible results. A portable blender could be lauded for design, but prove impractical in daily use. These mismatches feed into a broader trend of one-time TikTok purchases that rarely lead to second sales.

For businesses, this is more than a retention problem – it’s a strategic misalignment. The traditional ecommerce funnel assumes that satisfaction leads to loyalty. But in the TikTok ecosystem, the funnel is often truncated. Discovery and conversion happen in seconds, often without critical evaluation or consideration of product fit. Post-purchase, there’s often no follow-up, no onboarding, and no effort to transition the buyer from intrigued to invested.

Consider the case of “miracle” gadgets – a segment that consistently trends on TikTok. From LED face masks to handheld fabric shavers, these products generate excitement because they solve specific problems quickly, and they look satisfying on camera. But many of them fall into what analysts call “low utility, high novelty” territory. They may work, but they rarely become essential. Without repeat use, there’s no brand affinity. Without brand affinity, there’s no return visit.

Even the most experienced marketers are struggling with how to measure value in this environment. A viral video might generate millions in sales, but if the average customer doesn’t return, the cost of acquisition outweighs long-term gain. This is particularly risky for startups that build their entire go-to-market strategy around influencer momentum. When the virality fades, so does the revenue.

To navigate this cliff, brands must expand their thinking. The point of conversion is no longer the endpoint – it’s the beginning of a new challenge: how to turn a moment of entertainment into a meaningful, lasting consumer relationship. This requires more than a clever TikTok strategy. It requires rethinking product positioning, support systems, and post-purchase engagement.

Because if the first purchase ends in disappointment, it won’t just be the product that gets left in the drawer – it’ll be the brand.

What TikTok Teaches (and Misleads) About Product-Market Fit

In the traditional product development model, product-market fit is discovered through cycles of research, iteration, and real-world validation. Success is measured by sustained demand, positive feedback, and repeat purchases. But TikTok has disrupted that rhythm – catapulting products to viral fame before they’ve had a chance to prove long-term relevance.

TikTok doesn’t reward utility or staying power. It rewards novelty, visual appeal, and story potential. Products that go viral tend to be those that photograph well, demonstrate instantly, or slot neatly into an aesthetic. That doesn’t necessarily mean they solve real problems – or that they’re designed to endure.

Consider the wave of viral beauty tools: ice rollers that promise depuffing, LED masks that hint at spa-quality treatments, pore vacuums that visibly extract blackheads. These products generate enormous buzz because they produce quick visual results on camera. But behind the screen, many lack clinical efficacy, are inconvenient to use, or break easily. A purchase may follow a single swipe, but it’s not often followed by a second.

This isn’t to say TikTok can’t uncover genuine product-market fit. Some brands have used it as a real-time feedback engine. Stanley tumblers, for instance, didn’t go viral for being flashy – they went viral because users demonstrated their durability and insulation performance. Real utility was amplified by real stories. In another case, COSRX’s snail mucin skincare product surged globally because users documented consistent results, not just cute packaging or influencer endorsement.

Still, these examples are the exception. More often, TikTok leads brands to confuse buzz with validation. A video’s reach can feel like a green light, prompting restocks, ad spend, and even new product lines before customer satisfaction has caught up. The platform’s velocity compresses timelines and encourages decisions based on engagement metrics rather than behavioral insights.

This misalignment is particularly dangerous for early-stage brands. A viral product can mask foundational weaknesses – limited product testing, supply chain fragility, or unclear positioning. By the time returns spike or negative reviews roll in, it’s too late. The algorithm has already moved on.

Brands that rely too heavily on TikTok as a market validator risk losing touch with their core consumer. Metrics like view counts, shares, or comments provide signals, but not substance. They don’t replace the discipline of product testing, customer interviews, or retention analysis.

The real opportunity lies in combining TikTok’s reach with traditional rigor. Use viral attention as a signal to dig deeper: Who is buying? Why? Are they returning? Would they recommend the product without the hype?

Because TikTok can light the match – but product-market fit is still the fire that must burn long after the trend cools.

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Designing for the Second Purchase

The first purchase may be won by a scroll and a swipe. The second is earned – slowly, deliberately – through trust, value, and consistency. For brands seeking sustainable growth beyond the TikTok boom, retention is no longer a back-end metric – it’s a product design imperative.

The most successful consumer brands on TikTok are not those that simply sell well in a 15-second clip. They’re the ones that understand the post-viral customer journey and intentionally build for re-engagement. This starts with setting expectations early. In an environment where storytelling trumps specification, it’s tempting to lean into aspirational content or exaggerated claims. But overselling a product, even indirectly through creator enthusiasm, leads to a trust deficit if the product underdelivers.

That’s why transparency has become a powerful retention strategy. Beauty brand Function of Beauty – which customizes shampoo and skincare based on user profiles – leans into detailed user education across its platforms. TikTok may drive the click, but the website follows up with quizzes, how-to videos, and community reviews, helping buyers understand what they’re getting and why it matters. This reduces post-purchase doubt and creates more informed, loyal users.

Similarly, the unboxing and onboarding experience has become a crucial moment for loyalty. What happens in the first 10 minutes after the package arrives often determines whether the product will be used again. Packaging that educates, instructions that are intuitive, and apps or QR codes that reinforce usage habits all play a role. Brands like Glow Recipe include usage tips and layering instructions in their packaging inserts – offering a tactile bridge between online excitement and offline satisfaction.

Customer support is another pivotal lever. In the TikTok era, customer service is not a cost center – it’s content. A quick, empathetic response to a complaint shared publicly can diffuse tension and even boost brand favorability. A user who feels heard is far more likely to return, even after a misstep. Some brands proactively monitor TikTok mentions to identify potential issues before they escalate – a form of customer care that feels organic, not outsourced.

But perhaps the most overlooked retention strategy is narrative continuity. Too often, brands treat each TikTok moment as a one-off campaign. Instead, successful companies develop a story arc that encourages repeat engagement. Korean skincare brand COSRX, for example, has built TikTok content around long-term skincare routines rather than single products. This strategy not only keeps users coming back but also positions the brand as a partner in progress – not just a purveyor of trends.

Product ecosystems also matter. Brands that offer bundling, refills, or complementary products increase the likelihood of repeat purchases. A consumer who buys a viral water bottle may return for accessories, cleaning kits, or seasonal drops. A wellness brand that offers a subscription model – accompanied by timely reminders and rewards – can convert impulse buyers into habitual users.

Ultimately, designing for the second purchase requires a mindset shift: from campaigning to cultivating. It’s not enough to convert interest into sales. Brands must convert experience into trust, and trust into habit.

That means the real work begins after the trend peaks. When the influencers move on and the algorithm shifts, what remains is the quality of the product, the clarity of the experience, and the commitment to serving customers beyond the first impression.

Because in the long arc of brand building, it’s not the first click that matters most. It’s the one that comes after they’ve already tried you – and decide to come back.

Virality Is a Spark, but Trust Is the Flame

If TikTok has taught us anything, it’s that attention is no longer scarce – but intention is. In a world where discovery happens in seconds, brands can no longer afford to confuse visibility with viability. The speed and scale of social commerce have made it deceptively easy to move product. But moving product is not the same as moving people.

The brands that will endure are not the ones that win the algorithm today – they’re the ones that understand why the algorithm worked in the first place, and what happens when it doesn’t. That requires more than creative output. It demands input – specifically, research that maps impulse against behavior, and curiosity against conversion.

Strategy in this new era must be grounded in consumer foresight, not just content performance. Which products trigger regret? Which creators sustain trust? What conditions turn first-time buyers into lifelong customers? Without this insight, brands will remain reactive – chasing trends that spike but don’t stick, and mistaking engagement for endorsement.

Social commerce is not a trend. It’s a fundamental restructuring of how consumers find, evaluate, and commit to brands. But the platforms themselves are still evolving, and consumer expectations are outpacing the infrastructure that surrounds them. What’s needed now is a deeper layer: systems for listening, testing, validating, and optimizing – before, during, and after the trend hits.

This is where market research is no longer a support function – it becomes a strategic core. The ability to test message resonance, prototype digital experiences, and measure post-purchase satisfaction in real time is what will differentiate high-growth brands from high-churn ones. Those who invest in insight will adapt faster, course-correct smarter, and build the emotional capital that virality alone can’t deliver.

Because in the economy of attention, the spark may come easily. But it’s the slow, intentional burn – fed by relevance, reliability, and research – that keeps consumers coming back.

That’s not the algorithm’s job. It’s yours.

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In India, a financial revolution is quietly taking shape. Over two-thirds of Gen Z and Millennials in India now use neo-banks—digital-only platforms built for a mobile-first world—demonstrating a major shift in youth banking habits.

Data from our study, “Gen Z and Millennials’ Trust in Neo-Banks Across Southeast Asia,” conducted in partnership with PureSpectrum, indicates that convenience and digital services rank highest among the factors influencing bank selection among Indian youth. This preference signals a shift away from traditional banks, where legacy and reputation—a cornerstone for earlier generations—were ranked as the top priority by only 3% of respondents.

Setting the Scene: India’s Youth and Financial Ecosystem

With a median age of 28, India has one of the youngest populations globally. According to United Nations data, Gen Z and Millennials together account for over 50% of the country’s 1.4 billion people. This demographic weight has profound implications for industries across the board, but nowhere is its impact more visible than in banking.

Younger generations’ demand for tech-driven solutions has paved the way for a neo-bank boom. With 750 million internet users and growing smartphone penetration, India’s digital infrastructure provides a solid foundation for this transformation. For many of these young consumers, the appeal of neo-banks lies in their ability to sidestep the inefficiencies associated with traditional banks, including long queues, cumbersome paperwork, and limited operating hours.

Historically, India’s banking sector has been dominated by well-established institutions like the State Bank of India (SBI) and ICICI Bank, whose extensive branch networks were critical for trust and accessibility. However, these legacy systems are now struggling to keep pace with the demands of a digital-first audience. While traditional banks have introduced online services, they often lack the seamless user experience and agility that define neo-banks.

This shift reflects broader global trends but is particularly pronounced in India, where financial innovation is meeting the needs of an increasingly mobile and tech-savvy population. The question is no longer whether neo-banks can compete with traditional institutions but how quickly they can capture market share in a country ripe for digital disruption.

Cultural and Behavioral Insights

India’s youth are redefining banking, favoring innovation and convenience over the legacy markers valued by previous generations. For Gen Z and Millennials, 24/7 accessibility and personalized experiences take precedence. These consumers expect banks to function like their favorite apps: intuitive, always accessible, and personalized.

This cohort values the integration of banking with other digital services, such as wallets, investments, and financial analytics. For instance, many neo-banks provide seamless connections with UPI-based payments and budgeting tools that allow users to track expenses in real time. These features align with the preferences of a generation accustomed to managing their lives digitally.

Traditional banks, with their reliance on physical infrastructure and slower adaptation to technological advances, are increasingly seen as outdated by India’s youth. Legacy and reputation, once cornerstones of trust, no longer hold the same appeal. The generational shift reflects a broader trend: trust is now built through convenience, innovation, and transparency, rather than through long-established institutional histories.

Key Finding #1: Digital-First Banking is the Norm

For India’s youth, banking is no longer tied to physical branches or traditional methods. Research shows 67% of Indian respondents currently use neo-bank services, reflecting a strong shift toward digital-first banking. This trend is driven by convenience, speed, and accessibility—factors that resonate strongly with a generation accustomed to on-demand services.

India’s adoption of neo-banks aligns with a global shift toward digital banking, but the country’s growth trajectory stands out. With India ranking among the largest online populations in the world, affordable smartphones, and low-cost data plans have accelerated this shift, extending digital banking to remote regions.

Another key enabler of this shift has been the Unified Payments Interface (UPI), a government-backed platform that has revolutionized financial transactions. In 2023, UPI processed over 10 billion transactions in a single month, underscoring the scale of its adoption. Neo-banks have seamlessly integrated with UPI, offering users a one-stop solution for payments, savings, and account management, making them a natural choice for digitally native consumers.

Globally, countries like Singapore and South Korea have led the way in digital banking adoption, but India’s unique combination of demographics and infrastructure is positioning it as a leader in this space. Unlike many developed markets, where traditional banks still hold significant sway, India’s younger population is less tied to legacy institutions, giving neo-banks a competitive edge.

This rapid shift is reshaping India’s financial landscape, making digital-first banking not just an option but the norm for millions of young consumers. As neo-banks continue to innovate, their role in India’s economic ecosystem is set to grow even further, challenging traditional banks to adapt or risk obsolescence.

Key Finding #2: What Matters Most to Indian Youth

For India’s young consumers, banking priorities are clear: convenience and digital services rank as the most important factors when selecting a financial institution. According to our study, these attributes consistently outpaced traditional criteria like reputation or customer service, reflecting a generational shift in expectations. Neo-banks, designed for app-first, seamless experiences, have become the go-to choice for Gen Z and Millennials seeking efficient financial tools.

Low fees and attractive interest rates further enhance the appeal of neo-banks. Unlike traditional banks, which often charge maintenance fees or impose minimum balance requirements, many neo-banks offer zero-fee accounts and competitive savings rates. For price-conscious users, these features are game-changers.

Several players have emerged as frontrunners in India’s neo-banking ecosystem, each targeting the youth market with tailored solutions:

  • Jupiter: Designed for digital natives, Jupiter offers intuitive money management tools, including personalized expense insights and instant account setup.
  • Niyo: Focused on global travelers and professionals, Niyo provides multi-currency accounts, competitive forex rates, and seamless integration with international payment platforms.
  • RazorpayX: Catering to freelancers and small businesses, RazorpayX combines traditional banking features with advanced analytics, enabling users to manage cash flow and automate transactions effortlessly.

These neo-banks distinguish themselves by addressing pain points that traditional banks have struggled to resolve. Whether it’s the ability to open an account in minutes or access detailed spending breakdowns at a glance, these features align with the tech-savvy expectations of India’s youth.

By prioritizing innovation and user-centric design, neo-banks are not just meeting the needs of their customers—they are redefining what Indian consumers expect from banking. For the country’s Gen Z and Millennials, convenience is no longer a bonus; it’s a baseline requirement.

Bridging Gaps in Financial Inclusion

Neo-banks are pivotal to India’s digital transformation, driving financial inclusion nationwide. While urban adoption has been swift, neo-banks are increasingly reaching underserved markets in tier-2 and tier-3 cities. According to Statista, smartphone penetration in India is projected to hit 76% by 2025, creating fertile ground for digital-first banking solutions.

Yet, building trust remains a hurdle, especially in regions loyal to traditional banks. Security concerns were cited by more than two-thirds of respondents as a significant barrier, reflecting broader anxieties about data privacy in a country that has seen its share of cyberattacks on financial platforms.

Broader Economic Impact

Neo-banks are not just reshaping how individuals interact with their money—they are also driving financial inclusion across India. Digital-first platforms have significantly reduced the barriers to accessing banking services, especially in tier 2 and tier 3 cities, where traditional bank branches are often sparse. With a smartphone and an internet connection, users in these regions can open accounts, transfer funds, and access savings tools in minutes.

Neo-banks have become indispensable for gig economy workers and small businesses. Platforms like RazorpayX offer features tailored to freelancers and entrepreneurs, such as automated payment systems and cash flow management tools. These innovations enable small-scale enterprises, which often face hurdles with traditional banks, to operate more efficiently and securely.

Government initiatives have played a critical role in fostering this transformation. Programs under Digital India have expanded internet access to rural areas, while open banking frameworks introduced by the Reserve Bank of India (RBI) encourage collaboration between fintech firms and traditional financial institutions. The growth of UPI, which neo-banks heavily rely on, is another testament to how public policy has facilitated financial innovation.

As neo-banks continue to grow, their ability to integrate underserved populations into the formal financial system has broader implications for economic development. By democratizing access to banking, they are not just meeting the needs of India’s youth but also contributing to the country’s long-term economic resilience.

Comparative Lens: How India Stands Out

India’s neo-bank adoption is part of a larger regional trend, but certain factors make its growth trajectory unique. Compared to its Southeast Asian neighbors, India has a distinct mix of demographic advantages, technological infrastructure, and regulatory challenges that shape its neo-banking landscape.

Here’s how India compares with these markets:

AspectIndiaSingaporeMalaysiaPhilippines
Neo-Bank Adoption67% of respondents use or have used neo-banks66%, led by high smartphone penetration62%, with strong focus on convenience67%, heavily reliant on mobile banking
Primary DriversConvenience, low fees, and digital servicesHigh trust in digital-first institutionsAffordable fintech servicesCustomer service and ease of use
ChallengesSecurity concerns and limited service optionsSmall market size, regulatory clarityTrust in legacy banks still significantLower internet penetration in rural areas
Government RoleUPI, Digital India initiativesStrong fintech ecosystem, MAS supportPublic-private collaboration on fintechLagging fintech adoption support
Demographic AdvantageYoung, tech-savvy population Wealthy, digitally literate populationBalanced mix of urban and rural usersUrban growth driving fintech adoption

Key Observations:

  1. Adoption Rates: India matches the Philippines in adoption rates at 67%, despite differences in population size and banking infrastructure.
  2. Government Support: India’s proactive government initiatives, such as UPI and open banking frameworks, provide a robust foundation for neo-bank growth, unlike the slower regulatory progress seen in the Philippines.
  3. Challenges and Opportunities: Security concerns are a shared challenge across markets, but India’s vast young population and expanding digital reach give it unmatched potential for neo-bank proliferation.

India’s sheer scale and demographic profile set it apart from its regional counterparts. While Singapore leads in trust and Malaysia excels in convenience-driven adoption, India’s combination of innovation and policy support positions it as a leader in the neo-bank revolution across Southeast Asia.

A Competitive Landscape

The rise of neo-banks has not gone unnoticed by traditional banking giants. Many are now exploring partnerships with fintech companies to remain competitive, while some, like ICICI and HDFC Bank, have launched their own digital offerings to retain their customer base.

Despite these efforts, neo-banks’ lean structures and focus on user experience give them an edge. Their ability to integrate with popular payment platforms, budgeting tools, and investment services makes them particularly appealing to Millennials and Gen Z, who prefer consolidated, intuitive financial ecosystems.

personas-driving-the-finance-industry

Key Finding #3: Challenges for Neo-Banks in India

Despite their growing popularity, neo-banks in India face significant challenges in their quest for widespread adoption. The most pressing concern is security and trust, cited by 67% of respondents as a barrier to fully embracing digital-only banking. For a population that has historically relied on well-established banks with physical branches, neo-banks must overcome skepticism about the safety of their platforms and the privacy of sensitive financial data.

India’s fintech space has seen its share of high-profile security breaches, which have contributed to these concerns. For instance, in 2022, the personal data of millions of users from a popular digital payment app was reportedly leaked online, raising alarms about the vulnerabilities of digital financial services. Although neo-banks are investing heavily in cybersecurity measures, such incidents make it challenging to build trust, particularly among first-time users.

Another hurdle for neo-banks is their limited service offerings compared to traditional banks. While neo-banks excel in day-to-day financial management—such as payments, savings, and money transfers—they often lack critical features like loans, credit cards, or mortgage options. For many users, these omissions make neo-banks a supplemental rather than primary banking choice.

The regulatory environment also plays a role. Neo-banks in India operate in partnership with traditional banks, as the Reserve Bank of India (RBI) does not currently permit fully independent digital banks. This dependency can limit the scope of services and innovation that neo-banks can provide.

To remain competitive, neo-banks must address these barriers head-on. Enhancing transparency around security protocols, expanding service offerings, and strengthening partnerships with traditional banks are crucial steps toward winning the trust of India’s young consumers. As the market matures, the ability to overcome these challenges will determine whether neo-banks can evolve from niche disruptors to mainstream players in India’s financial ecosystem.

What’s Next for Neo-Banks in India?

The future of neo-banks in India is bright but will require strategic evolution to sustain momentum. One key development will likely be increased partnerships between traditional banks and fintech companies. These collaborations will help neo-banks navigate India’s regulatory landscape, which currently restricts fully independent digital banks. By leveraging the infrastructure and licenses of established banks, neo-banks can expand their reach while addressing compliance requirements.

Security and trust, consistently highlighted as barriers, are also areas ripe for improvement. As neo-banks continue to invest in advanced cybersecurity protocols—including biometric authentication, encryption, and real-time fraud detection—they can reassure customers about the safety of their platforms. Transparent communication about these measures will be essential for building long-term trust.

Expanding service offerings is another critical priority. Neo-banks have primarily focused on payments, savings, and money management, but the next phase will likely include loans, investment products, and credit facilities. These additions will allow neo-banks to transition from supplementary services to full-fledged financial ecosystems, increasing their appeal as primary banking providers.

As smartphone penetration deepens and India’s digital infrastructure improves, neo-banks are also expected to play a greater role in financial inclusion. By innovating to meet the unique needs of rural and underserved communities, these platforms can help bridge the gap between India’s urban and rural economies, fostering equitable growth.

India’s journey toward becoming a global fintech powerhouse is just beginning. With a young, tech-savvy population at the helm, supported by progressive government policies and relentless innovation, the future of banking in India is undoubtedly digital—and it’s already here.

To access our insight summary from our study, click here.

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