Neobanks

A neobank is a financial institution that provides banking services primarily through digital channels, with little or no physical branch network. Neobanks usually offer mobile apps and online platforms, and may operate on a banking license of their own or under a partner's license, depending on the country.

Origins and scope: The term emerged in the 2010s as fintechs sought to simplify retail banking. Early models focused on basic current accounts and payments; many later expanded into savings, loans, and other services across Europe, North America, and beyond.

Operations and regulation: Some neobanks hold full banking licenses; others partner with established banks to underwrite deposits and payments. Regulation typically covers AML/KYC, consumer protection, and access to deposit protection schemes, with frameworks varying by jurisdiction; PSD2 in the EU facilitates open banking.

Products and services: Core accounts, debit cards, real-time notifications, budgeting tools, and international transfers are common. Revenue sources include card interchange, subscription tiers, and cross-selling of financial products, while costs are partly reduced by limited branch networks and automated processes.

Global landscape: Notable neobanks include Starling Bank, Monzo, N26, Revolut, Chime, and Nubank. They operate in multiple markets through direct licensing or local partnerships, and often emphasize rapid onboarding and user-friendly interfaces.

Criticisms and challenges: Neobanks face profitability pressures, customer-service challenges, technical outages, and regulatory scrutiny. They compete with traditional banks on convenience and cost but must balance growth with compliance and funding.