What Is a Neobank?
Definition and Examples of a Neobank
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Neobanks are financial technology firms that offer internet-only financial services and lack physical branches. Neobanks appeals to tech-savvy consumers who don’t mind doing most of their money management through a mobile app.
Neobanks don’t integrate new technology solely for the sake of being cutting-edge. By getting rid of physical branches and moving everything online, neobanks often save on the costs of banking, allowing them to cut fees and expand services to the underbanked.
Neobanks aren’t identical in their offerings or structure, but they typically differ from credit unions and traditional banks (including online banks) in that they:
- Aren’t chartered with state or federal regulators as banks
- Provide a streamlined process designed mainly for mobile devices
- Partner with traditional banks to federally insure customer deposits
- Don’t extend credit (such as overdrafts) 1
How Neobanks Work
From a customer’s perspective, a neobank might amount to nothing more than an app you use to manage your money and make decisions. For those who are comfortable with technology, neobank accounts are easy to quickly set up. You can often establish a relationship with a neobank and start using its services without signing any physical paperwork; just sign up for an account and download the app.
Neobanks don’t replace traditional banks for all customers. Some neobanks allow you to link your traditional bank accounts to the neobank so you can enjoy the best of both worlds.
Neobanks offerings are similar to those at traditional banks and credit unions, albeit more limited. They generally include:
- Checking and savings accounts
- Payment and money transfer services
