Neo-banks have redefined financial services through technology-driven platforms, offering seamless, low-cost, customer-focused solutions. Despite being digital natives, Generation Z (Gen Z) demonstrates inconsistent adoption of neo-banking services. Our study identifies and models critical barriers to neo-banking adoption among Gen Z using Interpretive Structural Modelling (ISM) and MICMAC analysis. Surveying a sample of Gen Z respondents in India, our findings emphasize hierarchical linkages among seven key barriers: digital inclusion, security concerns, trust deficit, regulatory ambiguity, reluctance to technology, value–cost perceptions, and interpersonal interaction discomforts. Our ISM results reveal that structural enablers like inclusion, regulation, and trust deficits cascade into surface-level deterrents such as cost concerns and lack of relevance. MICMAC classification further distinguishes foundational independent barriers from dependent ones, offering theoretical clarity and practical insights. This research offers theoretical contributions by extending existing models to an emerging-market ecosystem, highlighting policy implications for policymakers, researchers, and neo-banks to improve financial literacy, enhance trust, and promote sustainable digital inclusion amongst the new generation consumers.