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A neobank is a type of direct bank that operates exclusively using online banking without traditional physical branch networks that challenge traditional banks. [1] [2] [3]
The term neobank has been in use since at least 2016 [1] to describe fintech-based financial providers that were challenging traditional banks. There were two main types of company that provided services digitally: companies that applied for their own banking license and companies in a relationship with a traditional bank to provide those financial services. The former were called challenger banks and the latter were called neobanks.
The term "challenger bank" is used in the UK to refer to a number of fintech banking startups that emerged in the wake of the 2007–2009 financial crisis. Their services may be accessed by clients through their respective computers or mobile devices.
Idea of neobank started floating in Bangladesh around 2020. [4] [5] These banks would be digital only with customer accounts not connected to any particular branch. [6]
In India, a neobank is a class of digital-only or online bank that operates without physical branch locations. [7] They are different from traditional banks in that they don't have physical branches and typically have lower operational costs, which can sometimes result in more competitive fees and interest rates for their customers. Unlike Europe, the regulatory environment in India is complex, with stringent regulations that govern banking and financial services. Neobanks often partner with well-established, traditional banks to provide services and adhere to these regulations.
Neobanks in India typically offer a range of financial services, including savings accounts, current accounts, debit and credit cards, and other banking services. They focus on providing a seamless and user-friendly digital banking experience to a younger audience, with features like instant account setup, easy money transfers, and expense tracking. Some neobanks also target specific customer segments, such as millennials, and offer features like budgeting tools and investment options to that demographic.
Indian neobanks primarily operate in Indian Rupees and may have limited cross-border services. International transactions are often handled in partnerships with traditional banks.
Online banking, also known as internet banking, virtual banking, web banking or home banking, is a system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website or mobile app. Since the early 2000s this has become the most common way that customers access their bank accounts.
In the United States, Know Your Customer (KYC) guidelines and regulations in financial services require professionals to verify the identity, suitability, and risks involved with maintaining a business relationship with a customer. The procedures fit within the broader scope of anti-money laundering (AML) and counter terrorism financing (CTF) regulations.
A direct bank is a bank that offers its services only via the Internet, mobile app, email, and other electronic means, often including telephone, online chat, and mobile check deposit. A direct bank has no branch network. It may offer access to an independent banking agent network and may also provide access via ATMs, and bank by mail. Direct banks eliminate the costs of maintaining a branch network while offering convenience to customers who prefer digital technology. Direct banks provide some but not all of the services offered by physical banks.
Zopa Bank Ltd. is a British online bank which offers deposit accounts, personal loans and credit cards. It began as the world's first peer-to-peer lending company in 2005 and gained a full banking licence in 2020. The peer-to-peer side of its business closed in December 2021.
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Simple was an American neobank based in Portland, Oregon. It was recognized as the first neobank and operated between 2009 and 2021.
Starling Bank is a British bank, occasionally referred to as a digital challenger bank or neobank, providing current and business bank accounts in the United Kingdom. Starling Bank is a licensed and regulated bank, founded by former Allied Irish Banks COO, Anne Boden, in January 2014. Since its founding, it has received over £500M of funding.
Revolut is a global neobank and financial technology company that offers banking services for retail customers and businesses. Headquartered in London, it was founded in 2015 by Nikolay Storonsky and Vlad Yatsenko. It offers products including banking services, currency exchange, debit and credit cards virtual cards, Apple Pay, interest-bearing "vaults", personal loans and BNPL, stock trading, crypto, commodities, human resources and other services.
N26 is a German neobank headquartered in Berlin, Germany. N26 was founded in 2013 by the Rocket Internet incubator and currently operates in various European Union member states that are members of the Single Euro Payments Area (SEPA). N26 provides a free basic transaction account and a debit card, with overdraft and investment products and premium accounts available for a monthly fee.
Banking as a service (BaaS) is the provision of banking products to non-bank third parties through APIs.
Personetics Technologies is a financial technology (fintech) software company headquartered in Tel Aviv, Israel. The company's product uses artificial intelligence to analyze bank's customer transaction data in real-time and use this analysis to deliver financial management information.
Xinja is an Australian fintech company and former bank. Xinja was granted a full banking license by the Australian Prudential Regulation Authority in 2019. Xinja Bank was the second Australian neobank to be made an authorised deposit-taking institution. The company exited banking in December 2020 and returned to business in fintech.
TymeBank is an exclusively digital bank based in South Africa, aimed at the lower income market.
Chime Financial, Inc. is a San Francisco–based financial technology company that partners with regional banks to provide certain fee-free mobile banking services. The company offers early access to paychecks, negative account balances without overdraft fees, high-yield savings accounts, peer-to-peer payments, and an interest-free secured credit card. Chime earns the majority of its revenue from the collection of interchange fees on debit card transactions.
Azlo was an American technology neobank company which provided financial services for small businesses through a mobile app and website. In January 2021, the company announced that it was shutting down, and by the end of March 2021 it had closed all accounts.
Current is a New York City-based financial services and software development company (FinTech). It provides mobile banking services through its partner bank, Choice Financial Group, Member FDIC.
SBM Bank India is a subsidiary of the State Bank of Mauritius. It was the first bank to receive a banking license from the India's banking regulator Reserve Bank of India (RBI) to establish a universal banking business in the country as a wholly owned subsidiary. It was incorporated on 1 December 2018 as a private sector bank headquartered in Mumbai. It also operates from New Delhi, Bengaluru, Chennai, Hyderabad, Ahmedabad, and in the rural centers of Ramachandrapuram and Palghar.
Tonik Digital Bank, Inc., commonly known as Tonik, is an all-digital bank which was launched in the Philippines in 2021, notable for being the first all-digital bank, or "neobank" in Southeast Asia. Its consumer products range from deposits, payments, debit cards, and loans. It operates with its own bank license issued by the Bangko Sentral ng Pilipinas (BSP), with deposits insured by the Philippine Deposit Insurance Corporation (PDIC). Its holding company is Singapore-based Tonik Financial Pte Ltd.
bunq B.V. is a Dutch fintech and neobank licensed in the Netherlands within the European Union and operating in 30 European countries. It was founded in Amsterdam where its headquarters are currently located.
The development of neobanks in Europe is a trend in the European financial landscape beginning in the 2010s. Neobanks are a type of digital-only bank that offer financial services primarily through mobile and web applications, with little or no reliance on physical branches. The trend was driven by advancements in technology, changing consumer preferences, and supportive regulatory frameworks. Neobanks provide a range of services, including personal accounts, loans, and payment services, with a focus on user-friendly interfaces, low fees, and innovative features. In 2022, European neobank market have generated over 570B transactions.
