The Wallet That Vanished

The Wallet That Vanished

Rohan Sharma, a 28-year-old software engineer in Bengaluru, woke up one morning to find his Jupiter app frozen. He'd parked 50,000 rupees there—his emergency fund—lured by zero-fee transfers and cashback on UPI swipes. No warning, just a generic error: "System maintenance." Hours turned into days. Customer support? A chatbot loop that ended in "We're escalating this." Turns out, it was a glitch tied to their backend partnership with a traditional bank, one of those invisible strings neobanks dangle from. Rohan wasn't alone; social media lit up with similar stories, people scrambling for rent money while their "digital bank" play

hide-and-seek.

By the time it resolved, Rohan had dipped into his credit card, racking up interest. He switched back to another, muttering, "At least they have branches I can yell at." This is not a rare glitch—it's the everyday grind of India's neobanking experiment, where flashy apps are masking shaky foundations. Users like Rohan chase convenience, only to crash into reality: these aren't real banks. They're tech wrappers around old-school lenders, and when the wrapper tears, your money's exposed.

But here's the hook that's already unfolding: If neobanks keep limping without proper licenses, will millions like Rohan wake up to empty wallets, or will a regulatory flip turn this mess into India's fintech gold rush?

Neobanks promised to kill the queue, the paperwork, the banker smirk. In India, they exploded post-2016 demonetization, sucking in billions in funding and millions of users with slick interfaces and zero-balance accounts. But if you strip away the hype, you're left with glorified middlemen. They partner with licensed banks for the heavy lifting—deposits, loans—while skimming fees on the edges. No digital banking license means no independence, no scale, no profits.

Take Jupiter: Backed by Tiger Global, it raised over $170 million but posted a ₹276 crore loss in FY24 on just ₹35.8 crore revenue. Users love the app—8 million strong—but most treat it as a side hustle account, low balances, quick exits. Fi Money? Laid off 50+ staff in months, bleeding ₹14 crore on ₹111 crore revenue. Open hit unicorn status with $250 million raised, yet lost ₹169 crore last year. These aren't outliers; they're the norm.

Cashback hooks pulled in users, but when funding dried, so did loyalty. "Most customers we acquired came through heavy cashback offers," an ex-Fi employee admitted. "Once the funding dried up... it became clear that the cohorts were low-LTV ones."

Growth masks rot.

The market's projected to hit $156 billion by 2032 at 42% CAGR, fueled by UPI and smartphones. But that's aggregate fluff—individual players hemorrhage cash because they can't cross-sell like real banks.

"For neobanks, it’s much tougher" to monetize without infrastructure.

Regulation strangles innovation. RBI's no-license stance keeps them leashed. Jupiter snagged a PPI license in 2024 for wallets, even eyed a stake in SBM Bank India. But full banking? Dream on. It shut down after RBI killed co-branded UPI. Users feel the pinch—trust erodes when your "bank" can't stand alone.

Pivots save some. Slice merged with NESFB to become a small finance bank, dodging the neo trap. Fi partnered with PocketHRMS for HR integrations. But for most, it's a scramble from core banking to loans, insurance—anything to survive.

This isn't new; it's progress's ugly underbelly, buried under "digital India" cheers.

Pre-2016, banking was brick-and-mortar hell—queues, fees, exclusion. Demonetization forced digitization; UPI exploded. Neobanks rode the wave, raising $1 billion total since 2018.

2018-2021 was funding frenzy. Fi ballooned on VC cash on pandemic demand.

Then, what changed the slope? 2022 funding winter exposed cracks—no profits, high burns.

RBI tightened: Banned prepaid cards in 2022, hit hard.

Traditional banks digitized—big banks app upgrade feels better than neos: "There’s no reason for my users to go to a neobank," a regional head said.

India's incentive traps, Cashbacks bred churn, not loyalty.

Gen Z wants fun, fast finance. Neos delivered apps, but sans licenses, they're stuck in 2010s limbo.

UK's Monzo (8M users, profitable),

Starling (3.6M, thriving).

Revolut £1.1B profit in 2024, 40M users across 48 countries.

Brazil's Nubank: $58B valuation, 100M+ users.

They got licenses early, built balance sheets, integrated crypto/RWAs for yields.

India's neos: 20% retail market by 2025, but losses galore. No licenses mean no autonomy. Global neos hit $7.36B transaction value by 2025; India's share? Stunted by red tape.

TheBrinks Predictive Analysis

Stagnation. More pivots to lending/insurance; losses continue without licenses. RBI holds firm. FY26 sees 20% market share, but 50% players close.

If this continues, Mass failures. Funding crunch + glitches = user flight; scams spike up in banking. Another PMC-like blowup coming soon. 2026 sees neo market shrink further.

Special thanks to Raj, a Bengaluru fintech analyst who funded this research after watching many savings vanish in a 2023 neo-glitch—wedding fund gone, education tuitions cancelled, House, cars, vacations buying cancelled, in a digital black hole, forcing them to borrow from family or high interest lenders. These cases hit him hard.

-Chetan Desai

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