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Start a Neobank in 2024. Ultimate Guide: Business Model, Costs, Core Features, Obstacles

Neobanking is one of the brightest FinTech trends. In 2021, 59 new players entered the global market. In January 2022, there were a total of 397 neobanks worldwide. Just imagine, all of them serve almost 1 billion customers.

But only 5% of digital banks in the world are profitable. If you want to create your own business from scratch and have success, you have to put in a lot of effort. To become recognizable, you need to develop a truly valuable solution for users. 

We have prepared a guide on how to launch a neobank that the audience will highly appreciate. Learn about key features, legal requirements, main challenges and other essential points in the article.

What is a neobank?

Neobank is a FinTech company that provides banking services exclusively in digital format. It uses a mobile app and a website for this purpose. It is often referred to as digital banking .

Simply put, it is a bank that exists only online and has no physical front offices to work with clients. The app and the website play the role of branches and offices. They are where all the key processes and interactions with clients take place.

Depending on the type of activity, the company can:

• Have a financial license and provide banking services independently by the law and the orders of the national bank.
• Be a partner of a conventional bank to provide financial services in a remote format.

Neobank offers non-traditional banking services (money transfers, bill payments, deposits, investments, subscription management) and sometimes budget planning tools. Extending loans is not as common due to high operating costs and financial risks.

Thus, the business model is aimed at the user looking for simple cash flow management. The emphasis is on modern technology to handle large volumes of data and provide access to neobanking solutions to a wide audience.

Neobank market size is $66 billion in 2022

Grand View Research reports that the global neobanking market size was USD 66.82 billion in 2022. It is projected to grow at a CAGR of 54.8% over the period 2023-2030.

The following factors will stimulate the market growth:

• The desire of customers to maximize the convenience of receiving services.
• Active use of smartphones and the Internet for online banking;
• increase in partnerships of banks and organizations to launch neobanking platforms.
• Growing demand from retail customers and small and medium-sized businesses.

In 2022, more than 51% of revenue came from the enterprise app segment. We are talking about credit, transaction, and asset management services. Personal apps will show impressive growth.

The market evolves constantly, and its players grow along with it. This business model will benefit you in the long run. The first step is to invest in the development of a decent app.

There are many reasons why this direction has earned popularity which grows every year.

Why has neobank become so popular?

According to Forbes , the value of neobank from a customer perspective is as follows:

• Instant access to financial services.
• Clear and transparent banking processes.
• Low costs of using financial instruments.
• Round-the-clock online services.
• Fast money transfers, including international ones.
• Availability of third-party services integration.

All necessary solutions in one app.

These are the reasons why more and more people are using neobanking instead of visiting physical branches. It is a more convenient alternative to conventional banking services. This means that your startup has a good chance of gaining the attention of a wide audience.

Five reasons to open a neobank:

• Cost efficiency. Costs are low due to not working in the offices and the absence of financial risks. How do neobanks make money? Among the sources of income are transaction fees, premium subscriptions, integration of third-party services, exchange fees, account maintenance, and fee-based services.
• Individual approach. The company provides its services remotely and interacts with users continuously. The company can serve more customers and offer exactly what they need. All this maximizes revenues.
• Analytical capabilities. Digital platforms allow you to collect and analyze customer data and understand how they behave in the banking ecosystem. These observations make it easy to tailor services and functionality to users
• Innovation. Digital technology is evolving rapidly. Neobanks are the first to adopt and use them for development purposes. Even more opportunities to both improve the customer experience and optimize internal processes.
• Scaling. The app and website can be promoted online and adapted to market trends. This increases the company’s visibility locally and globally.

Thus, building a neobank means creating a foundation for continuous development and increased competitiveness. There are much more opportunities for this than in the case of a usual bank.

Difference between a neobank and a traditional bank

It would seem that the difference is obvious. A neobank works mainly through a mobile app. A traditional bank serves clients in the branch and, in some cases, on the website and in the app (mobile banking).

Besides, the former chooses to consult with chatbots, and the latter can use several communication channels with customers. These are chatbots, messengers, telephone communication, and personal meetings.

There are other differences:

• Licenses. A conventional bank is required to have a banking license. A neobank can be without one, e.g., if it is a partner of a traditional bank. You need a permit to operate independently and offer many services.
• Affordability to customers. Neobanks’ costs are much lower due to operating online. This will allow them to charge minimal fees and make higher interest rates on deposits . Another competitive advantage in the eyes of customers.
• Number of services. It’s only natural that traditional banks offer more financial services. They can issue physical cards (debit, credit), checkbooks, and cash deposits. But neobanks are rapidly developing and adding more services, such as card issuance, loans, and BNPL.
• Integrations. Neobanking emphasizes integrations with third-party financial tools. For example, connecting to accounting software opens access to every transaction and makes bookkeeping easier.

The key difference is related to the business model. Banks offer various financial services to legal entities and individuals. Neobanks offer non-standard opportunities that banks do not have. They also target more active Internet users.

If your goal is to open a neobank , you should first of all study all the legal nuances.

Legal requirements for a neobank

Financial services are strictly regulated. Restrictions may apply to the scope of activities, capital, interest rate caps, etc. There are also reporting requirements.

All this is necessary to maintain the stability of the economy, protect the interests of clients and achieve societal outcomes. That is why financial licensing is so important.

Local regulators and governmental bodies grant licenses. Requirements depend on the type of financial service and jurisdiction. Licensing is chosen according to your value proposition and business model.

Let’s talk about various licenses below.

Full banking license

You must get a banking license to be called a bank. Then you can take deposits, issue loans, and provide a wide range of services. 

As a rule, it is issued by the Central Bank. It all depends on where the company is registered and your target markets. In Europe, the ECB is the national regulator; in the USA, it’s the Fed. Examples of local and national regulators are SAMA (Saudi Arabia) and HKMA (Hong Kong). 

Obtaining a license is complicated and costly for a startup. The application process takes up to 15 months (depending on the jurisdiction). Regulatory and compliance obligations, as well as capital requirements, are high.

However, there are many advantages. Launching a neobank with a license means opening broad prospects for doing business.

Fintech license

Due to the rapid development of the industry, new licenses appeared. We can call them light versions of full banking licenses. They allow companies to provide services similar to banking ones. But the eligibility threshold is lower. 

There are other options. Among them is EMI for electronic money management. Companies can offer the same options for daily payments as with a full license. 

But there are limitations. For example, you can’t give out loans or store customer funds. There are also limits for the transactions and the amounts on the e-wallets.

Getting an EMI license is a cost-effective option for a new neobank. Plus, the application process takes between 6-12 months.

The partnership model

Previously, we looked at the legal nuances of creating independent digital banks. But who does not need a license? Someone who cooperates with a traditional bank.

This is a chance to avoid the long application process and save money on the first step. You can work with the bank until you have the funds and strength to operate independently.

It is essential to understand that this model is less flexible than the previous ones. The startup remains dependent on a third party and cannot fully control the financial flows.

Choosing the license depends on your business’s scale, long-term goals, and financial capabilities. But you should decide on this before contacting developers.

How to hire a development team for building a neobank

Neobank app development is a complex step-by-step process that requires a professional approach. Your task is to conclude a partnership with a software development team that can be trusted to implement the idea. 

Three steps to hiring an outsourced team to work on a project:

1. Find a company using proven methods:

• Search engine: choose from search results on Google.
• Business listings: research information about software development companies on Clutch and other catalogs. 
• Freelance platforms: look for services on Upwork, Fiverr, and Toptal.
• Social networks: search for skills and experience on LinkedIn.
• Online meetups: talk to experts on OnlineGeniuses, etc.

2. Make a choice by researching:

• Carefully examine the portfolio.
• Ask about expertise in the industry.
• Read reviews on reputable platforms. 
• Find out the company’s location and rates.
• Discuss in person the work processes and desired outcome.

3. Sign documents:

• NDA to protect confidential information.
• Contract, indicating hourly rate, terms of work, deadlines, invoices, payments, and guarantees.

Following these steps, you can hire a team to develop a neobank as quickly as possible without sacrificing quality.

When you know all the details of preparing for development, it’s time to analyze trends, choose a niche, and develop a business plan. First things first.

Neobank market trends

To develop a neobank from scratch, you need to delve into trends in the field:

• AI and Adaptive ML. Introduce smart technologies to create the best possible digital experience: virtual consultants, personal recommendations, and suggestions.
• Internet of Things. Many neobanks offer their services to small businesses. The Internet of Things (along with AI) helps business clients track their revenues and payment of loans.
• Process transparency. Neobanks need to inform the customer about everything that happens to their account in real-time. Notify about services, show financial calculations, and keep a history of expenses.
• Emphasis on security. We’ve already mentioned tech measures to protect client data. But there is something else. It is essential to allow users to block and freeze accounts at any time, if necessary.
• Quick transfers. People are looking for faster, more reliable ways to transfer money. According to FinancialIt , this is especially true for tech-savvy millennials. The pandemic has spurred the use of such digital platforms.

How to choose a market for a neobank?

Traditional financial players focus on all clients to get a better chance to scale. Neobanks, on the other hand, can provide both general and niche services.

Focusing on a niche allows you to tailor your operations to meet your customers’ needs. In this case, traditional banks (and neobanks from other niches) cannot compete with the company.

Here are some examples of niche customer segments :

• Women: GoWomen, Sheroes.
• LGBTQ+: Pride Bank, Daylight.
• Ethnic groups, minorities, immigrants: MoCaFi, Cheese.
• Specific professions: Uber Money, Nerve.
• Elderly: Longevity Card
• Minors: Copper, Kard.
• Newly-weds: Hitched.
• People with disability: Sibstar.

It is easier to personalize the customer experience when working in a specific segment. This determines what the branding strategy, app appearance, and functionality will be.

However, choosing one niche slows down the scaling. If it’s in your plans, it’s better to provide various services.

Neobank Business plan

When drafting a neobank business plan , focus on four aspects: business model, costs, core features, and obstacles.

Business Model

The first step is to create a solid business model.

What needs to be done:

• Research the market, including an analysis of the target audience and competitors.
• Make a plan for attracting and retaining customers.

Give a realistic forecast of the company’s expenses and revenues (whether it be through interest on loans, fees for services, or other means).

The cost of establishing a business depends on size, scope, location, and services. 

Among the main costs are:

• Legal and regulatory compliance.
• Technology infrastructure and software systems.
• Staff salaries and benefits.
• Marketing and advertising expenses.
• Premises and equipment.

Core Features

The next step is to determine the core features of the neobank. We will tell you what you need to implement in your app.

Secure transactions and data access

Security is key for FinTech businesses. Your app must be protected from fraud, data leaks, and hacks. It is also essential to ensure the server’s security where customer data is stored. 

It’s up to you to increase the cybersecurity of your digital solution . Use biometric verification for account access and KYC-based identification. 

Encrypt financial flows with 3-D Secure. Create a real-time fraud detection system to detect irregular behavior.

Opening an account

This is a key feature of the app. Users should be able to create an account to manage their financial flows and receive and withdraw funds.

Some companies allow not only to open a virtual account but also to get a card. For example, let’s take Current, an American financial tech platform. Its users can use a debit or credit plastic card.

Basic financial transactions

We’re talking about money transfers, paying bills and taxes, and debiting/crediting accounts. These are the main operations that you should implement in the app and provide to clients.

It is also useful to implement currency conversion and offer a number of additional banking products. For example, savings accounts, deposits, and investment accounts.

Several payment options

Ideally, the app should have different payment options. You can implement it through API integration with third-party financial services.

Add the following transfer methods to your banking :

• A2A : direct transfer from one account to another without additional intermediaries or payment instruments.
• P2P : direct funds transfer from the sender’s card to the recipient’s card, phone number, or account (individuals).
• ACH : a B2B payment method where funds are transferred between the sender’s bank and the recipient’s bank.
• Services like PayPal : transfer funds in a few clicks domestically and abroad.
• QR code : an opportunity to make a payment using a QR scanner built into the app.

Push notifications

This is an important tool to inform customers about actions with their accounts, such as crediting and debiting funds. Your users should be aware of everything that happens with their finances.

You can also set up automatic newsletters about new services and products, changes in functionality, etc. Another option is to send customized offers.

Personalization

Use innovative technology and automation for neobank app development . These can tailor offers according to each client’s preferences and give instant answers in chat.

Here are a few more examples. The client can transfer money to a frequently used number in two clicks, see the history of expenses, have quick access to favorite services, and automatically accumulate a certain amount each month.

The dashboard contains valuable information for the user, e.g., analytics of the latest income/expenses with systematization by sources/categories. 

Dashboards present data in a visually appealing format. It can be graphs, charts, or tables. Thus, much textual information looks as simple and understandable as possible.

Gamification

use unique pics/icons. For example, mark receipts related to communication expenses with a “phone” icon. Each transaction has its own visual representation.

And that’s not all. You can create a digital character to “communicate” with the user. Teach them how to use the app, answer questions in the chat, give hints on each operation, and even calculate virtual points for activity.

Referral system

With the referral system, customers can receive bonuses for inviting friends and relatives. For example, free access to a premium feature.

This opens up several opportunities for you at once: expand your customer base, keep the attention of those who have been using your app for a long time, and increase your company’s visibility.

Customer service

Since the user cannot go to a physical branch, all questions must be resolved remotely. Add chat to your mobile app to communicate with a consultant, as well as a button to contact technical support.

Neobank development Obstacles

Creating a neobank involves some barriers associated with the specifics of its activities.

Some of the main challenges:

• Obtaining necessary licenses and approvals from regulatory bodies. You’ll need to get a license to have a lot of growth opportunities. Requirements may differ from country to country and fall under several jurisdictions. Be prepared that obtaining a permit is a long and expensive process. If you want to work in partnership with a bank, also be prepared for difficulties. It will take a lot of time to negotiate terms and prepare documents.
• Meeting capital requirements. The goal of the financial regulator is to prevent the risk of insolvency. You must ensure that you have sufficient capital to bear operating losses while honoring withdrawals.
• Competitive landscape. There is an increasing number of people who want to open a neobank. To succeed in such circumstances, it is necessary to offer the audience something unique, for example, non-standard conditions of the referral program and issuance of plastic cards.
• Cybersecurity risks. The financial industry is attractive to fraudsters and hackers. But you can minimize risk with smart user identification and encrypted financial flows.
• Managing interest rate risk. This is one of the strategic directions of any bank. You should develop a clear strategy in this area and the area of corporate governance, already at the first stage.
• Neobank solution development. The app must fully meet users’ requirements and trends of the target market. This is the only way to attract attention to yourself. Ensure a perfect UX, including through personalization and gamification.

With the right approach and a clear understanding of the potential challenges, starting a NEO bank in 2023 can be a viable and rewarding endeavor. It’s important to have a well-researched and well-thought-out plan, and to be prepared for the challenges that may arise along the way.

How much would it cost to develop a neobank?

The amount depends on your project’s specifics, as well as the location of the developer. Let’s look at the cost of a product with key features.

Next, we calculate based on the hourly rate of mobile developers from Eastern Europe. Most of them charge $41–60 . The minimum rate will guide us.

Implementing a project for one operating system can cost you around $52,890. If the app is developed for both iOS and Android platforms, the amount may be twice as much.

The comprehensive work on the project also includes backend development, UI/UX Design, business analysis, project management, and testing. Based on our experience, the full development cost can be up to $150,000.

Consider all factors when making your calculations. To find out the exact cost, feel free to consult with an RNDpoint specialist. 

If you want to reduce time to market and save resources, use the white-label model.

Why choose a white-label neobank solution?

A white-label solution is off-the-shelf software. Everything you need for your company’s operation is already developed. All that remains is to customize the product to your individual needs.

A white-label neobank solution might include three layers:

• UI/UX Design. The layer consists of pre-designed screens, layouts and templates. All you should do is customize the design to your corporate branding.   
• Backend core. This layer should contain ready-to-use authentication and registration functionality, funds transfer and withdrawal, currency exchange, card issuing, user management, automated business processes, and reporting.
• Integrations. The white-label solution should contain an integration layer to perform important integrations for neobanks: KYC/AML services, card issuing partners, banking partners, payment providers, broker and stock trading platforms, notifications, analytics, and others.

RNDpoint provides such a white-label solution for eWallets and neobanks development. Also, we have our own backend low-code platform ProcessMIX , which supplies ready-to-use backend elements.

The value of the white label model for neobanks

Startups do not always have enough finances, development resources, and experience to create their product from scratch. Testing a hypothesis, e.g., to develop a niche bank, is also problematic because you need a license and infrastructure. The white-label model eliminates these barriers.

Neobanks choose these solutions due to:

• Flexibility. The solution is customizable to the business needs and the target users of the app.
• Comprehensive approach. Rebranding, onboarding, technical support, maintenance, and upgrades as needed. 
• Better customer experience. Software is available for all OSs and browsers and has all the necessary integrations.
• Fast time-to-market. Deployment and customization of new features take little time, speeding up a product launch.
• Transparent costs . Cost is known at the start and depends on the selected modules, number of integrations, and budget.
• Variety of services. Account management, balance tracking, deposits, virtual cards, mortgages, transfers, payments, etc.

If you are interested in such neobanking solutions , pay attention to the global arena. One of the industry’s TOPs are RadarPayments, Optherium, CurrencyCloud, Limepay, Mbanq, and SatchelPay.

Let’s get familiar with the brightest representatives.

Top neobank apps in the world

NeoBanks.app has highlighted the best neobanks and digital banks for 2022. These are apps for individuals and commercial entities.

Leaders in the Personal category:

• Revolut. A multifunctional financial service to solve all monetary issues.
• Wise. Online service for sending and receiving money internationally.
• Bunq. An app that gives users from all European countries accesses to accounts.
• Quontic Bank. An adaptive digital bank that offers vast financial opportunities.
• Chime. A banking app with an emphasis on security.
• Monobank. A Ukrainian neobank, operates entirely through its mobile app.

Leaders in the Business category:

• Everestcard. A platform for managing business payments and expenses.
• Go Solo . A financial platform with digital banking services for businesses in the UK.
• Soldo. A solution for efficient enterprise expense management.
• Starling Bank. A digital challenger bank providing both personal and business banking. 
• Qonto. Online payment system for small and medium-sized businesses and freelancers.

As you can see, neobanking apps are top-rated. The key is to provide users with the features they are looking for, from basic account operations to trading and cryptocurrency support.

Concluding remarks

Do you want to work in a promising field and earn a decent profit? Neobank development will be the right solution. Start with market research, study the legal requirements, and create a business plan. 

Next, find professionals you can trust with the essential thing: the success of your project. The RNDpoint team is ready to help you implement both neobank and other FinTech solutions .

Explore your business and technical capabilities with RNDpoint

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How to Start a Neobank: Your Startup Guide to Alternative Banking

Previously, bank services were inaccessible without paying one a visit. Account management, money transfers, and various other services, were delivered in-person, oftentimes after standing in a queue. Today, no-one likes waiting, as more and more things have become accessible on smartphones. Enter neobanks – all-digital solutions to the problem of outdated banking.

Needless to say, the worldwide neobanks market is growing and expanding in 2023. It went from $79.1B to 118.51B in just one year with the CAGR of 49.8%. In 4 years’ time, it is expected to reach an impressive $556.66B in value. This only proves that the digitalization of banking services will be enjoying high demand in the foreseeable future.

How does a neobank work – and in what ways does it outclass the old-school banks? Let’s explore this trend and its benefits in more detail.

What is a neobank ?

Neobank definition is fairly simple when you compare it to a classic bank. Neobanks and the classic counterparts have one major difference: a neobank is always online-first.

In simpler words, it provides the services solely via an app or online. No banking establishments or branches – neobanks don’t require real-world locations. This turns them into a 21st century alternative to old-school banking that combines mobility and a client-centric approach.

Let’s cover the main differences of neobanks and classic establishments:

• Neobanks are digital-first. Classic banks provide their services either in person or via an online platform. Neobanks are unlike this and operate only via a digital platform. This business model eliminates the need to spend costs on maintaining physical branches.
• Neobanks are client-focused. Yes, traditional banks can offer online solutions that are user-friendly. However, neobanks make user experience their top priority, opting for more intuitive apps and platforms. They also focus on delivering advanced digital features with account management, transactions, and other services.
• Neobanks set lower fees. Without physical locations, neobanks can offer competitive or, in some cases, fee-free services. Classic banks need to sustain their locations; hence the greater fees and charges. However, they can also offer in-person assistance, whereas neobanks presuppose a certain level of digital literacy.
• Neobanks are innovative. Yes, these banks are called “neo” for a good reason. Some offer smart assistance with money-saving depending on the financial habits of their clients. Others provide personalized banking insights, such as recommendations or alerts, by utilizing data analysis and AI tech.

Are neobanks as efficient as the old-school competitors? Let’s check the figures: neobanks are expected to attract as many as 376.90M users by 2027.

Moreover, 53% of the Gen Z population are currently using neobanking services for their needs. One of the top drawing factors is managing funds from anywhere, in a smartphone app. It’s modern, convenient, and can be even faster than the classic banking.

Now, let’s review the core advantages of neobanks that cemented their popularity.

• Key benefits of neobanking

The cutting-edge neobanking solutions are attracting more and more users – and here’s why:

Convenience

Not so long ago banking services were unimaginable without physically attending a local branch. But as more services are going digital, banks are keeping up with the pace.

Neobanks utilize mobile platforms for providing their financial services. This means no queues, no visiting hours, and no lunch breaks for the managers. The clients can manage their funds anytime, anywhere.

The mobile-first approach of neobanks is effective and time-saving. Just a few taps, and one can access their profile, make transfers, and manage funds. Unlike some of the banking apps, neobanking services are generally simpler and more accessible.

Customization

What really sets neobanks apart is the potential for customization. They not only provide access to services, but also personalize them. This, in turn, increases client engagement and retention; after all, who wouldn’t like a tailored banking experience?

Here’s how neobanks enhance the customer experience:

• personalized accounts (savings, checking, etc.);
• personalized budgeting (spending limits, tracking expenses, etc.); and
• smart alerts (AI notifications based on user’s spending patterns and setup).

Classic banks are offering the online versions of services, but neobanks are doing more than that. Fresh AI technologies, customized insights, and above-standard services are what make these banks stand out. The clients can save up, manage their funds, and enjoy the tailored banking experience.

The top neobanking examples in terms of innovation comprise of the following:

• Expense tracking and built-in budgeting solutions;
• AI and chatbots for instant client support and recommendations;
• Virtual/disposable cards with instant generation;
• Fee-free/low-cost international transactions; and
• Shared/sub accounts for managing group expenses.

Accessibility

Neobanks are generally more affordable than their traditional counterparts. Lower-costing services and smaller fees appeal to a broader scope of clients. The latter accumulate savings, get tailored financial advice, and avoid hefty transaction charges. The lower (or minimum) deposit/balance requirements are also an incentive to install such apps.

Another visible advantage of neobank apps is quick and simple account opening. Classic banks would (most probably) require one to visit an offline branch and do some paperwork.

Neobanks, on the contrary, simplify and streamline this process. An account is set up entirely online and virtually in no time. This effectively removes the entry barriers, granting swift access to services.

• Examples of popular neobanks

Not every neobank is top-tier by default, but there are examples of great successes in this field. Let’s look at some of the best neobanks – and what made them so popular.

Chime (USA)

This neobank took on the overdraft charges issue, striving to build a healthy financial service. Its various account types and the branded debit card are online-first and client-centric. The bank offers a reasonable APY with no overdraft fees, helping its customers to save up.

Chime also provides micro credit opportunities to clients who may not be eligible for a credit card. The users gain access to SpotMe with up to $200 fee-free overdraft. This service helps prevent debt and eliminates the necessity for loans with high interest.

Due to its clever neobank business model, Chime now has over 14.5M customers. More than half of them are using it as their primary bank of choice.

A neobank for everyone, Varo is fully committed to providing the superior banking experience online. It offers a non-contact debit card and many other digital services (charge-free transfers, insured deposits, cashback, etc.).

Even those who have low (or no) credit scores can benefit from its premium services. Secured cards and cash advances make banking more convenient, boosting the client base.

Another impressive achievement for Varo was receiving the national bank charter back in 2020. It was the first neobank to gain full regulatory approval and receive the “national” status. Varo is predicted to reach #2 in the USA among the top neobanks in terms of account holders in 2023.

Monobank (Ukraine)

This all-virtual bank has been a sweeping success since it started in 2017. It provides a broad scope of services with decreased fees and an up to 20% purchase cashback. The app is decidedly user-centric, and the bank is always seeking customer feedback for improvement.

Monobank has been actively implementing gamification in its app. It added the funny mascot-based achievement system to brighten up routine fund management tasks. As a result, the number of daily users and retention went up, cementing its popularity.

As of June 2023, Monobank reached the #3 spot among the top finance apps in Ukraine.

• Core and additional features of neobanks

What are the core functions to implement when building your own neobank? Speaking overall, they need to cover the essentials of online banking and fund management.

The list of such features is provided below:

• accounts (checking, savings);
• cards (credit/debit);
• payments and transfers;
• transaction record;
• safety features (changing PIN, blocking a card, etc.);  and
• immediate support.

However, a neobanking app is not a copy-paste solution and should have some additional features. This will allow it to stand out among competitors and bring in more invested clients.

Here are the extra features you should consider for creating a neobank:

Cross-border and crypto payments

In the older days, clients couldn’t skip visiting the branch to make cross-border transactions. Today, neobanks allow clients to initiate such payments online – and nearly in no time.

What’s more, clients can track such transactions in real time, unlike the lengthy manual processing. This allows for faster payments and boosted customer satisfaction.

As for cryptocurrencies, neobanks are already incorporating them into their digital platforms. Buying, selling, and storing cryptocurrencies via a neobanking app unlocks faster, more economical, and more secure transactions. For instance, SEBA , a Swiss neobank, supports cryptocurrency accounts and crypto cash conversion.

Gamification

Transforming routine tasks into exciting challenges will definitely offer unique user experiences. Points, badges, mascots, and contests improve investment and retention. Neobanks and their focus on digital technologies can really level up the engagement with these techniques.

A good example of gamification is Monobank , a Ukrainian neobank app. It gives the clients an opportunity to win the mascot-based achievement badges for completing tasks. The latter include spending funds in specific categories, making cross-border transactions, and splitting bills with friends.

QR code payments

Today’s clients want their financial services to be customized to their lifestyle. QR codes are fast, accessible, and user-centric – in other words, up-to-date. Neobanking apps can easily incorporate the QR code payment functionality, as well as QR code generation. The safety measures may include payment data encryption, biometrics or PINs, and more.

Revolut is a neobank which actively utilizes biometric authentication (fingerprint or facial scans). Thus, the app and QR code payments become even more secure.

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• 6 Things to consider for neobank app development

Developing a neobank from scratch is not a particularly easy task. It requires a lot of planning to make your neobanking solution fully compliant and functional.

Let’s review the main challenges you may face when developing such an app:

1. Adherence to legal requirements

Neobanks are financial institutions and thus must be regulated. A banking license is to be received from the corresponding local authority (OCC in the USA; EBA in EU). This process is not easy, which would involve meeting certain financial requirements.

Upon obtaining the license, neobanks must abide by the standard banking regulations. These embrace the counter-money laundering, counter-financial terrorism, and know-your-customer standards. The prudential regulations that solidify a bank’s stability apply as well.

2. Data protection and safety

With the amount of private client data, neobanks must enforce the highest level of security. Data encryption and proper authentication are a good starting point, and biometrics is a sound reinforcement. The more protected the transactions are, the more the clients are inclined to trust a neobank.

Cyber attacks are another risk factor for digital banks. To prevent them, every neobank must employ cyber security experts and implement constant monitoring. A good contingency plan for a possible safety violation is also necessary.

3. Fast payments

Ensuring high transaction speeds is vital for neobank development. Yes, being an online app solves part of the problem with streamlined processes and quick transaction initiation. However, neobank developers must also think of real-time payment processing, swift P2P transfers, and instant payment schemes.

By utilizing these solutions, neobank owners will be able to create more efficient financial ecosystems. As the demand for real-time payments grows, offering such technologies is a pathway to success.

4. Correct business model

Neobanks bring profit in different ways, with charging fees being the most widespread one. These fees may include transactions, cross-border payments, maintenance, and more. Membership charges, interest income, value-added and B2B services are also among the money-makers.

It is crucial to think about the best neobank business model for you in advance. The success of neobanking apps depends on choosing the correct strategy from the take-off.

5. Intuitive UX

Neobank apps are generally more user-focused than traditional digital banking. Delivering a top-tier user experience is a cornerstone in neobanking solutions’ development. A neobanking app must be simple and smart to be attractive.

Practically speaking, a neobanking solution should have a clear and user-centric interface, push alerts, and customization options. The textual content must be concise and to-the-point for more engagement.

6. Easy onboarding and go-to-market strategy

New clients should enjoy their online banking experience from the get-go. Consequently, neobanks should provide a smooth and fast account setup with fast verification. Gamifying the onboarding process is a viable idea to make it less routine.

The go-to-market planning serves the purpose of placing and introducing the solution at the market. Neobank owners can draw in and retain more clients by conducting a thorough marketing survey. Pinpointing the target groups and tailoring the marketing tactics to their needs is essential for neobanking startups.

• Neobank marketing tactics

Neobanking apps won’t fly without the right marketing. The good news is that these tactics are often the same for neobanks and FinTech.

Let’s cover some of the best ways to market a neobanking app – and make bank:

Reliability and transparency

Potential clients may be on the fence about neobanks for reasons of trust and safety. It is important to win their trust by offering maximum transparency in financial operations. As the old banks are catching up with new technologies, neobanks could start losing their competitive edge. Providing more transparency for clients is a viable tactic to overcome this obstacle.

A good idea for a neobanking app is adding a quote calculator or exchange rate breakdown. This way, the clients won’t be put off by sudden (and possibly ambiguous) fees.

Influencer marketing

Everyone has heard about affiliate marketing, but social media influencers shouldn’t be ignored as well. They can put a neobanking solution in the spotlight – and create lots of leads. A sponsorship or commission would be a typical reward for bringing in new clients.

Influencers win the day with building trust in the brand. Just like the classic celebrity commercials, they can “validate” a product, service, or offer. Gen Z clients, who favor neobanks, will definitely pay attention.

Brand community

From in-app contests to social media groups, neobanks can build brand loyalty by creating a strong community. These days, a lot of clients expect their communication with the brand to be more personal. Banking is not an exception, and a good provider must come up with a community building strategy.

One of the applicable techniques involves creating a system of ranks or badges for the customers. The more successful a client is in banking challenges or contests, the higher the rank.

Gamification (again)

Prizes, rewards, and interactive elements are always a nice incentive. Gamified solutions do well in attracting new customers and keeping them on board. A clever gamification tactic can do more than dozens of retention emails – so why not use it?

Looking to develop a banking app?

Take a look at our portfolio of fintech software projects and contact us to build your own custom solution for the banking and finance industry!

• In conclusion

Neobanks are all-digital solutions that boast a number of benefits over the classic banks. User-centric and advanced, they establish lower fees owing to the absence of maintenance costs for real-world locations.

Neobanking apps can be accessed at any time and provide personalized accounts and budgeting. Modern technologies – AI assistants, virtual cards, and fund management tools – make them more accessible and versatile.

How to create a neobank? Its development is an intricate process with a few factors to account for:

• legal compliance;
• data security;
• intuitive UX;
• correct business model; and
• easy onboarding and go-to-market strategy.

Would you like to entrust the neobanking app development to the professionals? Contact us – and enjoy the perks of our vast experience and tailored approach to every project.

• How to Start a Fintech Company: Things Every Startup Owner Should Know
• 13 Fintech Startup App Ideas to Consider in 2023
• How to Create a Digital Wallet App: Features, Types & Tech Details
• Gamification in Banking: Best Practices to Drive Customer Engagement

About the author:

Alexey Shalimov, CEO at Eastern Peak

As CEO at Eastern Peak, a professional software consulting and development company, Alexey ensures top quality and cost-effective services to clients from all over the world. Alexey is also a founder and technology evangelist at several technology companies. Previously, as a CEO of the Gett (GetTaxi) technology company, Alexey was in charge of developing the revolutionary Gett service from ground up and deploying the operation across the globe from New York to London and Tel Aviv.

• What is a neobank?

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What’s the difference between the neobank and the bank?

The first banks appeared about 2,500 years ago, and, despite the centuries-old changes, the bank’s functions have remained the same: they lend, store, and transfer money. We can say that the digitalization of the economic environment has added convenience to the entire system of traditional banking services. Today coming to the bank office on any issues is customary, but not necessary! There is no problem paying a bill and transferring money to another person in the bank application. Even getting a card, issuing cash, filing a fraud complaint, or consulting is possible via apps, online consultants, and ATMs.

Here come neobanks — a new step in the finance sector and a potential booster for the growth of banking. How are they different from regular banks? Firstly, the trend towards switching to online is clear : neobanks do not have offices, but there are ATMs where people can independently receive services, withdraw or deposit money.

Secondly, unlike conventional banks, neobanks can be specialized . It is an important reason for the neobank building because they can both be habitual and render regular online banking services, or narrowly focused, for example, to serve entrepreneurs, to lend only to organizations, and so on.

Thirdly, the government models differ . To be more specific, the Central Bank or the Fed is the governing body of a conventional bank, whereas a neobank can use business models that differ from traditional ones because it does not need to comply with strict state banking rules. As a result, neobanks differ in their offerings and structure from conventional banks.

Lastly, digital-only neobanks raise the accessibility of financial services. People that for some reason cannot receive a bank card in the office, gain a golden opportunity to open an account remotely.

Must-have neobank features in 2022

Now neobanks have both unique functions for the target audience and attractive solutions for the layman. If you are interested in how to start a neobank, check out its core functions that you will need to implement in the application.

Secure transactions and data storage

The number one thing you need to take care of when it comes to finances is security. Your application must protect customer data from fraudsters, potential hacks and data leakage. You also need to secure your server, where all customer information is stored.

Sometimes, neobanks are not protected in the same way as conventional banks, for example, they are not included in the guaranteed insurance fund, but they can establish a high level of cybersecurity, for example, using biometric verification and data encryption. If a digital organization is independent, it also must meet such requirements as ensuring the protection of user accounts, insuring clients’ money, and not using clients’ funds in business turnover.

If you use payment gateways that connect you to Visa or Mastercard, make sure everything is trustworthy and verified. Financial flows also need to be encrypted, here the 3-D secure protocol will help you. The overall sign-in flow should be simple, but safe. For your users, create an additional layer of protection by offering them to set a PIN-code to log into the neobank application.

Basic financial operations

The most basic financial operations are money transactions, payment of bills and taxes, and debiting and crediting funds to the account. You can add currency conversion and additional banking products, such as savings accounts and deposits or an investment account.

Push notifications

Push notifications are a great tool to inform the user about their debits and credits or other actions with their account. Via push notifications users can also receive messages from the neobank itself about news and offers.

Nice-to-have neobank features 

A useful banking application can be built only with basic functions. However, if you add optional but convenient and innovative solutions, it will help you stand out from the competition. Here are some popular additional features .

Personalization and use of AI algorithms

Companies are expanding the use of adaptive machine learning and artificial intelligence technologies. Machine learning and AI are real tools that select offers for each client individually and give them an accurate answer in a chat to reduce the time of contacting the bank during servicing. Personalization includes the ability to transfer money to a frequently used number, use a regularly needed service, and view up-to-date spending analytics. Ultimately, these instruments are supposed to increase conversion and bring you more customers.

Payment by QR code

QR code is one of the fastest payment methods. To boost the user experience, many companies already accept payments made using QR-scanner in the banking app. The buyer just needs to click a QR code button in the app interface. While China was the first to implement QR codes, the United States will catch up very soon. Going forward, QR codes use in the US will likely increase.

What to consider before opening a neobank

Neobank is a FinTech company app, therefore, it interacts with money and must comply with the requirements and international standards. There are many laws regulating the industry , Including:

• Anti-Money Laundering Policy (AML),
• Payment Card Industry Data Security Standard (PCI DSS),
• Know Your Customer (KYC)
• General Data Protection Regulation (GDPR).

One more point to consider is a banking license . This is not a mandatory requirement, but an important signal that the bank has been verified by government authorities and can be trusted. The license gives the right to attract funds for deposits, payments via open bank accounts, and currency transactions.

Also, ensure that:

• Your banking services comply with the norms of the banking industry;
• Your app is protected from fraudsters and can run under high load;
• You use a suitable interoperable technical stack.

Define the set of programming languages, software development kits and frameworks that will fit your app, for example, use React Native for cross-platform development to make an app for both Android and iOS at once.

5 steps to start a neobank from scratch  

Digital banking software development is not much different from other app development processes. To start a neobank, you need to go through several vital steps. Mind that it is always better to go for creating a neobank with an experienced team. It is also worth noting that it is rational to start with MVP (Minimum Viable Product). We’ll look at the steps of MVP development below.

Step 1: Define the project’s idea

You should start by choosing a niche and determining a target audience that potentially needs your services. Perhaps you should consider opening your neobank with the help of a partner bank. Think over the ideas, the concept, and the logic of the work. If you have any questions at this stage, contact experts who will help you with market analytics and estimation of the potential costs and time frames.

Step 2: Create a design 

When developing an application, you need to think about the user experience. Find several references that the design team will use to create the best interface for the application. Take the time to analyze competitors’ solutions and user reviews about app convenience. Create a mindmap to make your design process easier. Then develop your neobank application together with the UI/UX team.

Step 3: Develop the app 

Your next step is to build a neobank application. Our experienced team has identified the most convenient tools, but there are other options. To develop a desktop application, we recommend an Electron.js framework, for the web version — React.js and Node.js JavaScript libraries, and for the mobile app, React Native will suit you best. Don’t forget to take into account the subtleties of the banking industry, as they are strictly regulated.

Step 4: Test the app

After many years of experience, we realized that the ideal approach is to test the application in parallel with development. So, errors can be detected early, and not after the hard and time-consuming work stages. QA (Quality Assurance) will help to remove all bugs so that your application works efficiently.

Step 5: Release the app and get feedback

At this stage, your application is completely ready, and you need to open it to users. Ask the first of them to evaluate your application and rate some aspects of its operation. Offer your clients to leave comments and suggestions. Thanks to the feedback, you will have ideas about what can be fixed and improved.

What to consider before opening a neobank?

Ensure that your app complies with the norms of the banking industry and is highly protected from hacks and data leakage. Provide user security and allow all the necessary financial operations.

How long does it take to build a neobank from scratch?

It will take you about 18 weeks to develop a neobank app.

How to prevent a neobank failure?

It’s reasonable to work with an experienced team of developers that have a vast portfolio of projects. Make sure you’ve found your niche and your product will be in demand. If in doubt, don't hesitate to ask for help.

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The journey of building a neobank from the ground up

The British digital challenger Starling Bank has attracted much attention since its launch in 2014, given its audacious start with a full banking license. In this episode of Talking Banking Matters , Starling Bank’s founder and now former CEO, Anne Boden, talks about why she chose that strategy and how she made it work. Our discussion took place earlier this year. Recently, Anne announced that she would hand over the reins to a successor, Starling COO John Mountain. She remains a nonexecutive director on Starling’s board, in addition to her work as chair of the UK taskforce on women-led, high-growth enterprises. The following edited transcript presents highlights from the conversation.

Matt Cooke, McKinsey: Starling Bank rapidly gained market share since its launch, with 2.4 percent of all UK retail bank accounts and 9.4 percent of the United Kingdom’s small and midsize enterprise banking customers so far. For comparison, the big, established banks that Starling competes with have at most 10 to 25 percent of retail banking market share in the UK. In addition to going up against some of the oldest banks in the world, Starling seeks to also partner with those institutions by selling them the technology on which Starling is built.

Starling’s founder, Anne Boden, is a big reason for the buzz the start-up generates. A technology enthusiast with a gregarious personality, she came up through the ranks of established banks, including ABN AMRO and AIB. The experience of the financial crisis of 2008 spurred her to begin looking around at fintechs, including a brief stint as an advisor at [the British payments start-up] GoCardless, and she became fascinated with the future of banking technology. What resulted was not just a new bank but also a second business, Engine by Starling, a cloud-native banking SaaS [software-as-a-service] company.

We started by having Anne explain her journey from traditional banks to founding a neobank.

Anne Boden, Starling: I’d already spent a whole career in banking technology. I was head of transaction banking at ABN AMRO Bank when RBS bought it. So I was in the transaction banking field. But then I stepped away from that and spent a year going around the world talking to organizations after the 2008 financial crisis.

I tried to find out what they were all doing, and everybody was giving me the same story: “We’re going to refurbish the branches. We’re going to move on to mobile.” I came to the conclusion that none of those strategies was going to work, because they weren’t fundamentally looking at the technology and reinventing. So in January 2014, I quit what I was doing to start a new bank based on everything I’d learned.

… Everybody was giving me the same story: ‘We’re going to refurbish the branches. We’re going to move on to mobile.’ I came to the conclusion that none of those strategies was going to work, because they weren’t fundamentally looking at the technology and reinventing. Anne Boden, founder, Starling Bank

One of my main reasons was that I thought lots of big banks have lost confidence in change and doing projects. These big organizations have forgotten that life and technology have moved on, and it all moves faster now.

One of the things I did after I left AIB was to serve as an advisor at GoCardless. When there were really only four of us there, they’d tell me, “Oh, we’re going to write the risk report this evening,” and I’d say, “But that’s a month’s worth of work,” and they’d answer, “No, no, we’ll do it tonight.”

Technology has moved on. Things are much more doable now. One of my big challenges when I started this journey was old knowledge. I had been absolutely 100 percent certain that I knew how to run projects and how technologies would run. I was wrong. I had to advance with the technology and learn to move faster.

Now I’ve got the best of both worlds. I have the history of the old world, but I can convince people who only know the old world that the new world is possible.

Matt Cooke: Starting a whole new bank, as Starling did, is an unusual approach. On the face of it, this would seem to be a tough choice, given the competition. Anne described why she chose the monetization model and how Starling became a sustainable business in a crowded field.

Anne Boden: When we started, the press was constantly writing about how the way we were doing it was counterintuitive: we went out and got a proper banking license, which made us later to market than others, who were starting smaller with prepaid cards and all that.

I understood the economics of retail banking, though, and I came to the conclusion you had to have new technology and a new way of engaging to make it all happen. However, the first time I used the words “I’m starting a bank,” I shocked myself, because it didn’t seem possible.

I started knocking on doors of law firms and various organizations, looking for help. But the pitch was a bit too audacious. I’d go in and say, “I’ve spent my whole life in technology in banks and in operations, and I’m a transaction banking specialist. I think if I started a new bank based on new technology built from scratch, I could be as big as Barclays one day. You’ve only got to give me the money, and I’ll do it.”

And guess what? Nobody believed me! People thought building new technology was impossible and also impossible to build from scratch. We would go back and forth. They would ask, “So you’re going to build a bank. What are you using as your core banking tech?” And I’d answer, “We’re going to build that.” Then, “How are you going to use card processing? What about the apps?” I’d say, “We’re going to build those. We’re going to build the whole thing.”

And it went on like that. “How are you going to get customers to switch to you?”

“They’ll switch because the product will be so good.”

“How will you make money?”

“The product will be so good we won’t have to pay to acquire customers.”

“How fast can you build it?”

“We’re going to do it in five years’ time, and we’re going to have a full banking license.”

“Do you have any money for this?”

“Not yet, but there are enough people who believe this is possible, and they’ll join the journey.”

I spent two years doing this. Then one day, an article came out about the coming transformation in banking, and an investor who read it contacted me, and we spent three or four days talking. I was looking to raise $3 million; he invested $48 million.

Matt Cooke: In addition to being undeterred by the enormity of the task before her, Anne was also dauntless when it came to naming the new bank.

Anne Boden: Starling birds are quite noisy and confident, and they work very elegantly together as a team. They also invade other birds’ territory, and they win. That resonated with us. We also did a lot of research about trust, and we wanted a name that meant something.

Matt Cooke: Along with its banking business, Starling also provides the core banking technology it runs on to others, meaning that sometimes its competitors are also its customers. Engine by Starling, as the company is called, is no mere side business. Rather, it addresses a key pain point for most established banks, which have many layers of legacy technology that slow their attempts to compete with fintech disruptors. Anne talked about why she is keen to serve this core technology transformation market, too.

Anne Boden: I’m a technologist at heart, and I’ve been in banking and banking technology for many years. My vision for Starling was to build a great new tech stack and then offer banking technology services on a SaaS basis to banks all around the world.

We’ve always believed that if you build the technology from scratch in an API-enabled way, it can be plugged together easily or pulled apart as needed and linked into other providers in our marketplace. That was important to our strategy.

When we started Starling, I made a list of 17 areas where existing technology was holding us back: having the right data structures, systems that are highly permissioned, the ability to do lots of different things on this platform, and data to enable prompt decisioning. And we’ve built it all. We intend to sell the technology to banks in the UK because this is our home market, but we want to provide it as software as a service, rather than banking as a service, which I define as having a banking license component. Providing the software, whether to the biggest banks in the world or the second tier, is where we’re focused.

Matt Cooke: We wondered how Engine by Starling’s customers think about using the technology. Are they migrating their customer base onto it right away? Or are they moving more cautiously by starting a separate business to see how it works before moving more of their business onto the platform?

Anne Boden: Flanker brands are very popular. Established banks often want to start a new digital bank to see if it works for them, and after that, they will migrate their platform onto it. Or they’ll launch a new product on the new platform to move into an adjacent line of business; maybe a retail bank decides to move into business banking, and they decide to use us for that. Or some want to update individual parts of their core technology, rather than doing it all at once. Maybe their KYC [know your customer] and AML [anti-money-laundering] compliance procedures need replacing.

Whatever their needs, for us it’s all about explaining, being confident about doing things, and showing how it can be done. We get people up and running in nine months, so it’s also a matter of giving them confidence that things are going to move at this pace.

Matt Cooke: Starling’s product design and target segment choice helped the new company acquire a customer base quickly and build trust with a core group of customers. This is typically a tricky needle to thread for new banks and fintechs, which often end up offering some kind of incentive to attract customers. Here, Anne talks about how Starling’s approach let them avoid this.

Anne Boden: From day one, people knew they were dealing with a real bank, and our KYC and AML were bank standard. We picked up people who are families, people who are older and have a bit more money. Those customers tend to be easier to serve and more profitable. We have less fraud, fewer chargebacks, and there’s a higher trust value.

Being highly trusted means we can acquire customers quite cheaply. Other organizations have actually paid people £5 per account. We’ve never given any money for an account, because we believe doing so devalues us. This way, we have fewer but higher-value customers.

We started with retail, then built business bank accounts, and now we have half a million business accounts. And we offer a wide array of features. That’s the liability side. On the asset side, we have the usual overdrafts and lending, but we also buy mortgage books, and we own a buy-to-let lender.

Matt Cooke: When we asked Anne to talk about how she keeps innovation going and maintains the confidence to do things like begin making loans, she talked about Starling’s culture, how the company views talent.

Anne Boden: We have quite the culture at Starling. We all love learning, and we love building technology. We are very capable of doing regulatory applications, or building models, or doing analytics. Our staff are highly qualified and highly paid. Lots of start-ups hire inexperienced people and cheaper people. We pay well. We don’t pay bonuses; everybody gets stock.

The senior team and I are very visible, very involved in the detail. We tend to hover and dive, but we also let people get on with their jobs and have a lot of responsibility for execution. When there’s an issue, we all dive into the problem. We don’t have regular one-on-ones with anybody.

All of us may be working on a document together or in the detail. We all love numbers, love the intricacies of doing the job, and are very hands-on. We believe that decisions should be made at the right level in the organization, where people actually have knowledge. We’re very open and transparent, and we don’t mind mistakes, because we correct them very quickly, learn from them, and move on.

It’s a really odd thing to say, but everybody at Starling is quite pleased with themselves. We’re all happy about what we’ve managed to do, and it’s very fulfilling.

Matt Cooke: Given the core technology challenges faced by long-established banks and the increasingly rapid pace of change in financial services generally, we asked Anne to talk about how she sees the next five to ten years unfolding in banking and payments.

Anne Boden: Let’s put it in the context of fintech. I think the first iteration of fintech was taking certain parts of the value chain—international payments, whatever—and doing it better than the banks, at a lower price. The big banks can respond just by dropping their price, and then you’ve got fintechs addressing the underserved at high cost. But Starling is going head-to-head with the big banks for their principal customers, with a different cost base. And that dramatic difference in cost base allows you to take market share and improve service.

The conversations on the boards of big banks have changed from “We’re worried about these fintechs taking a bit of our business” to “They’re actually competing head-to-head for mainstream business.”

That said, I think there’s going to be a shortage of newcomers in the next couple of years because of the stock price crashes in the tech sector. The big banks are going to be making lots of money from higher interest rates. There’s a gap. And how are those big banks going to use that gap? Are they going to use it just to sit on their laurels, or are they going to use it to take the resources available to them to transform? Because the new banks are not just coming after the business the big banks don’t want. They’re coming head-to-head, and therefore you have the gap and the time to do something now.

If you look across Europe at present, the people who’ve been trying to provide those services in those retail verticals are having difficulty finding the additional revenue. Conceptually, it seems like a good idea. But who pays for it all? Lots of financial institutions can provide rails; all those models have been created in order to keep the cost down for the retailer. But nothing actually gives real added value to the customer.

Although there’s a lot of activity and a lot of capability in that space, I see much more potential—money to be saved and value to be delivered—in tackling the billions and billions in costs that are sitting with the major players. That is where the revenue streams are going to come from.

Matt Cooke: It’s probably not unexpected that Anne’s advice for others is as unconventional as the rest of her start-up story. To date, Starling is the only bank in British history founded by a woman, in a country where women were only allowed to open their own bank accounts beginning in 1975. And 40 percent of Starling’s leadership team is female—an unconventional statistic in the banking world.

Anne Boden: Somebody asked me yesterday, “Who is your mentor, Anne? Who do you discuss things with?” I said I’ve never had a mentor. If I’d gone to somebody as a 54-year-old woman who’d spent her whole career in banking tech and said, “I’m going to start a tech company and a bank,” people would have said, “No, you’re mad. Don’t do it.”

If I’d gone to somebody as a 54-year-old woman who’d spent her whole career in banking tech and said, ‘I’m going to start a tech company and a bank,’ people would have said, ‘No, you’re mad. Don’t do it.’

When I said, “I’m going to write a book about the whole experience and be honest about what happened,” they said, “No, you can’t do that. It’s too much of a risk.” But I did it, and it was serialized in the Sunday Times . If you try hard enough, and you’re brave enough, and you’re audacious enough, I think you can pull things off. So the next target is, I’d like to be the organization that powers the world’s bigger banks on a SaaS basis. Nobody has ever done it. I think it can work, and I’m already working with people who are trying to make it happen.

Matt Cooke: Throughout her own personal journey, Anne Boden found success through what seems to be daring innovation and fearless curiosity. Similarly, her creation, Starling Bank, has proven itself a formidable force and disruptor in the UK banking space. We, along with many of you, have questions yet to be answered about Starling’s future: When will the bank go public? Will it be able to continue challenging incumbent banks? We did ask Anne about whether Starling will hold an IPO, but she said they’re in no hurry to do so, given their current funding, but eventually they would “do something.” In announcing her decision to step down as COO in May, Anne said she had decided that Starling’s current position as an established bank put her dual roles of CEO and large shareholder in conflict, and that she had chosen to focus on her role as a shareholder.

Anne Boden is the founder and former CEO of Starling Bank. Matt Cooke is director of communications for the McKinsey Banking & Securities Practice.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

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Embedded Finance

How to accelerate your neobank launch.

One of the most common requests we get from customers is, “how can I launch my neobank quickly?” The secret to launching a neobank with little delay is to ensure your neobank is thoroughly prepared to go through the implementation and bank due diligence process. We wrote the "How to Accelerate Your Neobank Launch" ebook to demystify these processes and help you launch your neobank as quickly as possible. 

This guide walks you through every step of the neobank launch process from start to finish. You’ll learn how to select a BaaS provider, how to prepare for bank due diligence, and what to expect before going live. It contains lessons learned from over one hundred successful embedded banking implementations and advises how to avoid common mistakes that can slow a launch. Organized chronologically, use the guide’s major milestones to ensure your neobank launch is progressing smoothly. 

To download the full guide click below. 

Below find an excerpt of the Accelerating Your Neobank Launch ebook.

Accelerating your neobank launch 

From planning to accepting deposits — how to get to market fast , introduction.

In this guide you will learn how to prepare your organization to efficiently launch a neobank via embedded banking. 

Included in this guide: 

• What to expect during the implementation process
• How to select the right BaaS Partner and bank partner
• How to prepare for the bank due diligence process
• Common pitfalls to avoid for a quick implementation
• Project milestones

Note: This guide takes neobank leaders through the process of setting up a neobank via embedded banking. It does not advise readers on the business aspects of designing a neobank offering such as feature set , economics , and marketing. This guide is informational only and does not purport to serve as legal advice.

Phase 1: neobank preparation

Pick a baas partner, bank introductions, prepare for due diligence, test in sandbox environment.

In the first phase of your neobank implementation journey you will be preparing for your bank partnership. This phase is critical to ensuring a smooth and efficient implementation as you’ll use this time to select the right partners, align on your requirements, prepare for the bank due diligence process, and begin building your UI. Alignment with your partners is critical here as changes to your requirements can lead to delays down the road. 

Finding an experienced BaaS partner can help greatly during the preparation phase. You’ll want to ensure you select a BaaS partner with not only the experience, but also the technology and compliance methodology that fit your neobank’s requirements. In this phase, the BaaS platform will help you select the right bank partner to fit your requirements. Note that this is only the case if the BaaS platform facilitates direct relationships between neobanks and sponsor banks, which is an important aspect of fintech bank partnerships .

1. Select the right BaaS partner for your business needs 

Your first step in this process will be to select a BaaS partner that fits your business needs. We advise taking the time to select a partner that can scale with your business. Check out this blog post for ten questions you should ask your BaaS provider before entering into a BaaS partnership. The following best practices will help you identify the right BaaS platform for your neobank. 

Check for neobank-essential features:

• FDIC-insured bank accounts with unique account numbers
• Payment rails : ACH , same-day ACH, wires
• Account funding: account funding via ACH, debit card
• Monthly statements

New account funding methods including ACH pull via Plaid and instant debit card funding via Astra provide user-friendly methods to make the initial transfer of funds into a bank account.

Nice to have features: 

• Checks, remote deposit capture (RDC)
• International wires
• Debit cards : issuing, program management, premium cards
• Additional deposit capacity — ask the BaaS vendors what your options are for adding deposit capacity if your neobank exceeds its deposit capacity at its first sponsor bank
• Additional FDIC insurance coverage

Good to know: Treasury Prime customers can add deposit capacity by adding a new bank to their programs with OneKey Banking . This obviates the need to switch sponsor banks as your program scales.

Spotlight on MVPs: You can get to market and revenue fastest by launching with an MVP and adding on additional products later. We recommend creating a list of must-have vs. nice-to-have features. At Treasury Prime, we generally advise founders to go to market with an MVP composed of bank accounts, ACH, and wires.

Check technical availability

‍ Are the features you want available via the BaaS platform’s API, natively integrated partners, or non-integrated partners? Be sure to ask how the feature availability will impact your implementation and the experience of your customers. 

Check feature availability at the bank

It is possible that some banks might not offer all your requested features. Be sure to ask the BaaS provider the following questions at this stage: 

• Are all the features I want to make available to customers at one bank? 
• If the features are not available at just one bank, how does the platform handle working with multiple banks? 
• If I must work with multiple banks will I be required to manage multiple ledgers? 

Spotlight on feature availability through multiple banks: A problem you might face is finding a bank partner that supports the entire range of features you want to offer in your product. At Treasury Prime, customers can use OneKey Banking to develop a wider range of products with multiple banks using a single technology integration and ledger. On the back end you might be working with 2 or 3 banks, but on the front end, it will feel like working with just one bank.” 

Inquire about onboarding and compliance

‍ Onboarding is one of the very first interactions a customer has with your company and is deeply entwined with compliance. The Know Your Customer (KYC) check, which is the process of verifying the client’s identity when opening an account, is one of the pillars of regulatory compliance. KYC is executed during the onboarding process, and can impact your customers’ experience with your business. Here are some questions you should ask your BaaS provider about compliance at this stage: 

• How do you handle compliance and onboarding? 
• Am I able to create a custom KYC onboarding experience (waterfall) tailored to my customers? 
• How are manual reviews handled? 
• Can I handle my own manual reviews? 
• How long does it take to execute manual reviews? 
• How are manual reviews handled outside of normal business hours?
• Beyond KYC, are there disclosures I need to work with the Bank to display to end customers?

Ask for customer references ‍

Selecting a BaaS provider is one of the most important decisions you’ll make. Get a sense of what it’s like to work with a platform by asking for customer references and reading case studies . 

Pick the right bank partner for your business needs 

In this phase, the BaaS provider will introduce you to potential bank partners that may fit your neobank’s requirements. In these meetings, both you and the sponsor bank will try to determine if your goals, compliance plans, and requirements align in a way that will yield a mutually beneficial partnership. Selecting the right bank partner is yet another mission-critical decision, so you will want to be able to clearly articulate your elevator pitch and business plan, and arrive at the meetings prepared with questions. We find that entering these meetings with a desire to sell your vision and a willingness to collaborate with the bank helps speed the process of finding the right partner. 

Spotlight on direct bank relationships: not all BaaS providers will introduce neobanks directly to sponsor banks. Be sure to ask if you will have the ability to have a direct relationship with your sponsor bank. Check out this blog post for more information about the benefits of a direct relationship with your sponsor bank.  

To ensure the most efficient meetings, we recommend preparing the following before the meetings: 

Pitch deck to explain your business plan to the bank

The bank needs to be able to understand your business in order to evaluate your suitability as a potential partner. Be prepared to describe your business model, financials including funding, customer geographies, and more in detail. To ensure a productive meeting the deck should include the following elements:

• Overview of your neobank business
• Current activity (if live)
• Roadmap with MVP and phase II projects (this can be organized as a list of need to have vs. nice to have)
• Financials including revenue source, projections, cash flow, and funding
• Customer acquisition and growth plan
• Usage projections such as bank accounts, payments, etc.
• Customer profile and geographies
• Flow of funds 

Questions for the bank ‍

Selecting the right bank partner is one of the most important decisions your company will make. Not all banks are the same, so you’ll want to find one that aligns with your goals and operating style. We recommend asking these questions during your meetings with banks:

• How many fintechs do you have live? 
• How long did it take to get them live? 
• What were some of the challenges going live? 
• What kind of fintechs are you looking for? 
• What is your ideal depositor profile? 
• What’s your ideal customer/fintech partner profile? 
• How fast are you trying to grow with respect to deposits? 
• How hands-on are you typically with fintech clients? 
• How do you prefer to handle transaction monitoring, KYC?

As you can see, launching a neobank, or any product with embedded bank accounts, is a rather involved process that requires a high degree of alignment between the neobank, the sponsor bank, and the embedded banking platform.

Is it possible to launch a neobank quickly? Absolutely!

With the right partners, a little bit of preparation, and a clearly defined MVP you can set yourself up for an accelerated launch. 

This is an excerpt of the “Accelerating Your Neobank Launch” guide. To learn bank due diligence, the implementation process, and more, download the full guide to get started . 

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Neobank, keys to develop a winning business plan

In our previous blog post we considered the evolution of digital banking and the types of services available. In this edition our focus shifts to the development of a viable plan.

The creation of a digital bank starts with a single idea - to create something new and better. The question is how this idea can best be brought to life. We recommend taking a structured approach for the creation of the new venture:

• First, from problem statement to value proposition, to ensure you create a unique value proposition tailored to customer needs
• Second, from value proposition to business plan, to ensure there is a suitable business case

Then, following an iterative process the idea is gradually firmed up, tested and built into a complete proposition and business plan.

Where’s the value?

A value proposition is a description of the value a company plans to deliver to customers when they use its product or service. A strong proposition tailored to customer needs is vital to be able to create a viable business.

The development of a value proposition starts with the definition of the problem statement. A problem statement is a concise description of an issue to be addressed and aims to identify the gap between the current (problem) state and the desired (goal) state of a process or product, in a specific region and to a specific customer segment.

The definition of the problem statement requires a full strategic view of the market, customer needs and pain points. This allows you to identify specific market opportunities and figure out why better solutions are not yet available.

After the initial problem statement definition, it is important to validate it. This will help you better understand the selected market and assess the financial viability early on. In parallel, the goal is to develop detailed customer profiles with key characteristics, needs, pain points and behaviour. Finally, a competitive analysis helps further identify the key players, their strengths and weaknesses, and how to potentially differentiate.

Design thinking methodology and tools are used to create a value proposition in a creative yet structured and effective manner. Potential solutions are then screened and curated based on a defined set of selection criteria, such as the problem-solution fit, user friendliness, technical feasibility, and revenue potential.

One of the key aspects of a client-centric and user friendly proposition is to offer convenience by combining multiple solutions for customers. Through economies of scale, these multi-product/multi-service propositions tend to be more financially viable.

Once the optimum proposition or propositions have been selected, a mock-up version or (if possible) a minimum viable product or MVP of the value proposition is to be created.

The goal of this process is twofold. Firstly, for the project team to get a common and unified understanding of the value proposition, since at this stage of the process it is not unusual for widely varying interpretations to exist, and secondly to test and refine the value proposition as quickly as possible following the agile adage: fail early, learn fast.

Challenging assumptions

In order to test and refine the value proposition, it is crucial to identify the most risky assumptions on which the success of the value proposition depends.

In any business development process, but especially in the digital banking arena, it is vital to address the potential monetisation of the product or service at this stage. Digital banks tend to focus on creating the customer experience but struggle to generate revenues - a focus at an early stage on the business model will help improve the chances of developing a viable business.

It is recommended to test and refine the value proposition as often as needed to arrive at a satisfactory value proposition. During the testing phase, it is important to formulate specific, measurable, attainable, realistic and timely (SMART) performance metrics.

In addition, it is important to predefine what a successful test should look like, as testing is only really effective when also considering the option that the envisioned solution does not work (yet).

In parallel with the ongoing testing and refinement of the value proposition, the business model must also be developed. This describes your propositions including the target clients and distribution, key activities, and financial overview of revenue and cost.

The business model canvas (BMC) has become a leading tool for this design, providing a well-structured way to embed your value proposition into three key business development areas:

Commercial - The customer relationship describes the type of relationship to establish and through which channels. These can range from personal to automated, transactional to long-term, and can aim to acquire customers, retain customers, cross-sell and/or upsell. The type of customer relationship influences the overall customer experience.

The customer segments include a detailed description of customer demographics, financial behaviour, values, etc.

Operational - The key activities provide a high level description of the core processes required to deliver the services. The key resources provide an overview of the financial, human, intellectual and physical resources required to operate. Typically, digital banks have a relatively low amount of physical resources (employees) and high levels of intellectual resources leveraging proprietary technology.

The key partnerships describe the level of engagement with third parties, ranging from strategic alliances (with both competitors and non-competitors) to buyer-suppliers. In recent years, the dominant partnership models have been largely shifting to platform and ecosystem approaches. Many digital banks adopt a business model heavily reliant on partners throughout all areas of the business, from commercial front- to operational mid- and back-office activities.

Financial - The financials include both the cost and revenue for the value proposition, and form the first step into a business case. It is important to understand whether you are operating a cost-driven or value-driven business as the former is based around low-priced value propositions, lean operations and economies of scale while value-driven models are based around premium priced value propositions, with better service.

While digital banks typically aim to offer a premium customer experience, at the same time they operate a cost-driven model attracting customers with competitive pricing (such as free current accounts or market leading interest rates).

While it is seemingly a simple exercise to complete a BMC and create your business model, it is important to conduct a proper exercise. The goal is to create the comprehensive business model needed to assess technical and operational feasibility, as well as the financial viability of the endeavour prior to making a sizeable investment decision.

Planning priorities

A detailed business model, backed by additional research, provides the foundation for the business case. The business plan allows for refinement of your business model and enables you to communicate your plans with investors, regulators and partners.

It is critical to build a detailed and realistic business plan, as many digital banks fail to create a financially viable business. And this is not only an exercise for the end of the process - it is a question that must be considered early to be gradually detailed with each step of the process.

The business plan is best created by a financial expert with a critical and independent view. At the same it is crucial that the business case is built upon the same foundation as the business model - which often goes wrong.

Therefore, the financial expert should be part of the process of creation from problem statement to business model development and on to the business. Similarly, the other team members should also be involved in developing the business case.

The revenue side is derived from the identified market potential and the validated value proposition in combination with the commercial inputs from your business model.

The cost side is derived from the key activities, resources and partnerships in your business model and should consider both one-off investments and operational costs. The cost structure significantly depends on the value proposition and operational set-up.

In addition to the income statement, the balance sheet with the assets, liabilities and capital structure needs to be detailed. The capital structure is especially important for financial institutions as a banking licence requires certain levels of capital.

After completion of the full financial plan, it is important to critically assess the outcome and challenge the fundamental assumptions once more. This assessment allows you to refine your business model and enhance your business case.

It is recommended to reassess the complete business model. There is almost always room for business model optimisation before changing the value proposition.

It is very likely that adjustments will be necessary in order to enhance the business case. However, it is important to note that changes to the business case also require changes to the business model.

The business should also provide a clear picture of the product roadmap, including the MVP and additional product launches until completion of the full proposition. The timing of product launches will have a large impact on the financial plan.

The MVP is often too narrow and insufficient to run a viable business. Detailed insights into the impact of new products will help decide the product portfolio roadmap. Similar to the evaluation of the business model, the product roadmap also needs to be continuously reviewed in conjunction with product development experts in the team.

After several iterations of the value proposition and product roadmap there should be a coherent business plan with a validated value proposition and business model. The business model provides the foundation for the design of the new venture. The financial plan provides an overview of the required budgets, potential revenue and (expected) time to break-even.

In the next blog in this series we will look at the implementation phase of building a digital bank with particular emphasis on the target operating model, processes and activities, and technology as well as the human resource requirements.

How to successfully build a digital bank blog series 

This blog post is part of a special series around successfully building  a digital bank .  These are all the blog posts in the series for further reading. 

The content of these blog posts was written with our exclusive guide 'How to successfully build a digital bank' in mind. 

This is a three-step guide that will take you through what kind of digital bank to build, including the value proposition and business plan; how to build a digital bank, with a detailed description of each of the key elements including the regulatory framework, organisation design, technology, and people capabilities; and finally how to scale a digital bank into a sufficiently large and sustainable business.

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How to Start a Neobank in 2024: A Complete Guide

Table of content

From what I have been observing in the FinTech market recently, I can surely say that the global banking sector has changed once and for all. The pace of progress is unstoppable, with all domains of human life transformed by technological innovation like blockchain and defi development services . Global finance is changing, and I see the following causes of this large-scale transformation: 

• Public distrust in the global financial system’s integrity after the 2008 crisis.
• Quick introduction of digital, mobile, and other remote financial services during COVID-19. 
• Growing financial inclusion of underbanked and unbanked populations with the help of digital banking and FinTech solutions. 

As a result of these massive trends, new digital-only banks, referred to as Neobanks, digital banks, or challenger banks, have taken a fair share of the global market and continue to expand. 

The service range of Neobanks is similar to that of usual banks, covering digital accounts, credit and debit cards, low-commission or fee-free transactions, loans, mobile payments, and currency exchanges. However, as they function beyond the traditional financial structures, their use is more accessible for unbanked populations. 

New digital-only banks emerged recently based on such transformation of the financial landscape and broader adoption of technology. They are referred to as Neobanks, digital banks, or challenger banks, sharing a single common feature of digital-only service provision. 

Here, I would like to share in-depth analysis of the neobank market and express my expert opinion based on many years of hands-on experience consulting clients and launching new neobank projects to uncover the ins and outs of Neobanking. Stay tuned to find out what it takes to launch your personal Neobank startup.

What is a Neobank? Famous Examples 

So, what is a Neobank? In simple words, it is a financial institution that performs the functions and renders services typical for the usual brick-and-mortar banks, but in the digital-only format. Neobanks run without any offline branches and leverage technologies that are more advanced than in most banks. A standard range of Neobanks’ services includes accounts for individual and corporate clients, credit and debit cards, mortgages, loans, deposits, and individual payments. 

The present-day differentiation of bank types has led to significant confusion about their differences and similarities. Here is a brief recap:

Traditional Banks are the physical banking establishments, government- or private-owned, serving the population with a range of conventional banking services, such as account opening, deposits and loans, credit and debit cards, and financial transactions. 

Digital Banks are backed by large financial institutions but rarely have offline offices and rely on online banking mostly. Most services are rendered via mobile or desktop apps. 

Neobanks fulfill the same functions as digital banks, but they are not backed by any large financial organizations like conventional and digital banking. Most of them are launched by private organizations and pursue the online-only model of service. 

Crypto Banks are blockchain-based institutions functioning beyond the regular scope of banking. Such banks are not necessarily tied to any fiat currency. Often Crypto Banks function on the edge between fiat banking and crypto world.

The spread of Neobanks is large-scale, with such institutions emerging all over the world and currently serving over 500 million users. The highest percentage of financial services’ adoption is observed in Asia and developing countries, with large numbers of unbanked or underbanked people. Here are a couple of famous Neobank examples. 

• Revolut – a UK-based Neobank launched in 2013 and currently serving 15+ million users. At present, the bank handles 100+ million transactions every month and provides services to individuals and businesses. 
• WeBank, Inc. – China’s first digital-only bank created in 2014. The bank is backed by Tencent and offers a wide variety of financial services to unbanked populations. 
• Alipay – China’s Neobank focused on making digital payments accessible for everyone and. It covers a broad range of payments and digital services in China and allows frictionless mobile payment solutions for individuals and businesses. 
• Nubank – a Brazilian Neobank that occupies a leading place among Latin American neobanks. It has over 80 million users in Brazil and over 1,5 million users in Mexico and Colombia. The company’s market cap by the moment of its IPO in 2021 was $45 billion, and in 2023, it was ranked as the #1 Brazilian bank. 
• Chime – a FinTech service provider with an easy online banking experience and the absence of monthly service fees. Users can open checking and savings accounts, receive secured credit cards and enjoy convenient digital banking services via the broad network of this San Francisco-based neobank’s partnerships. 
• Wirex – an example of crypto/fiat crossover, an all-in-one app for crypto transactions and a digital payment platform. It’s a new form of Web3 money app, which shares the features of usual digital banks and new, blockchain-powered functionality

Overview of Neobank Market Size 

The Neobank sector has grown significantly since 2015, mainly due to the rise of demand for flexible and more accessible financial services among masses of the unbanked population. To date, there are over 400 Neobanks registered across the globe, serving over one billion users in both developed and developing countries. Though such non-conventional banking services are popular in all parts of the world, the highest adoption levels for Neobank technology are observed in China (93%), India (50%), and Brazil (32%). So, businesses considering a Neobank launch have good chances to get a fair share of the rapidly developing market with accelerating growth and multiplying revenue streams. 

I’ve been witnessing rapid alternative banking development over the past decade, with the trend accelerating during COVID-19. In part, such trends are explained by the growing disappointment of users with conventional banking complexities, resulting in a search for simpler, less expensive solutions. Besides, massive numbers of the unbanked population get access to finance via Neobanks, thus further fostering this DeFi niche. 

Just look at these stats: 

• Transaction value in the neobanking market is expected to exceed $6.3 trillion in 2024.
• The 2023 market cap of Neobanks is $98.4 billion . 
• The CAGR of this market is over 48%, which is likely to let the market exceed $3.4 billion by 2032. 

There will be over 386 million active users of Neobank services by 2028, according to Statista. 

Features of Neobanks 

An essential feature of Neobanks one should consider first is the absence of physical offices and branches. Such banks function in the digital-only or app-only format, making such financial institutions more cost-efficient and optimally structured. As a result of spending less money on office rent and salaries of numerous office staff, Neobanks can deliver financial services at a lower cost, with their clients incurring lower fees and commissions. 

Second, all Neobanks utilize innovative financial technology , such as innovative payments processing, convenient mobile apps, flexible back office solutions (including KYC, AML and transaction monitoring), real-time balance and transaction status updates that power their apps and platforms. As a result, the financial services become faster, securer, and more accessible to populations on the go. Everything can be done in a couple of clicks, with users undergoing simplified verification procedures and enjoying intuitive, easily navigable interfaces of their Neobanks. 

Third, you need to keep in mind that though there is a word “bank” in the term “Neobank,” technically, many of them are not banks per se . Many Neobanks don’t even hold banking licenses required for such type of activity. It doesn’t mean that non-licensed Neobanks are scams or frauds; the only concern you might have about this is that central national authorities do not regulate such institutions. Thus, your affairs with that institution are more of a private contract nature. 

Overall, Neobanks are currently not meant to substitute the banking system altogether. Instead, they are an alternative for people seeking quick, affordable, and flexible solutions for commission-free or cheap transactions and personal/business accounts with low maintenance fees. The standard set of services rendered by Neobanks includes: 

• Cards issuance (plastic, virtual)
• Savings features
• Conversion fiat/ crypto
• Cross-border payments including in crypto
• Budgeting assistance 
• Push notifications.
• Contactless and QR code payments. 
• Personalized and user-friendly banking services. 
• Advanced cybersecurity measures.

Because Neobanks are not licensed in most cases, they cannot provide insurance for the clients’ deposits and can’t give credits and loans to the population. However, some Neobanks have closed this gap by partnering with traditional banks for insurance and credit guarantee provision. Thus, clients of such financial establishments should first check all the available documentation to see their protection and guarantees. 

As a result of added flexibility and lower commissions, Neobanks are known to achieve some unique benefits currently unattainable for traditional banks:

• 24/7 access to the entire service range 
• Ability to create a multi-currency account in no time
• Ability to conduct operations at any time, from any place, on the go 
• Open technical infrastructure enabling hassle-free, plug-and-play user experiences 
• Customer-oriented services and UI/UX 
• Full financial visibility (all your credit cards and accounts all in one place)
• No fees for spending or transferring money abroad
• High-level protection from card fraud and identity theft and more. 

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Strategy for Neobank Development

Once you’ve decided to launch a Neobank, you need to develop a detailed plan and strategy first. A recommended path for strategizing for a new financial product is determining a problem and working out a value proposition to address that problem. For instance, you notice high transborder transaction fees in your region and come up with an optimal solution that reduces fees and creates optimal, safe transaction services for clients. Describe in detail what value your company will bring to clients and approach the development of your Neobank’s technical specifications with these projected functions in mind. 

Determination of the problem your Neobank will solve is impossible without understanding your clients’ needs and issues. To comprehend them well, you need to develop a customer profile, thus matching your unique USP with the clients’ pains and gains. 

Next comes the development of a minimum viable product (MVP) and its field testing. Dedicate exceptional attention to testing your business model at this early stage of Neobank development. It will disclose the idea’s vulnerabilities and inconsistencies to address early in the development cycle. Test the idea against operational, financial, and commercial aspects of Neobank’s operation to see how well it matches the market demand and client requirements. Once these criteria are considered and field-tested, your business model transforms into a business plan that can go further through the software development pipeline.

What to Consider Before Developing a Neobank? 

Don’t forget that your Neobank app is a digital banking service. Thus, it will deal with user money and private, sensitive information about account holders. These procedures should be organized in line with the relevant jurisdiction’s regulations and laws and with proper respect to cybersecurity. I recommend prioritizing these aspects: 

• Compliance with the PCI DSS standard that guarantees the security of digital transactions during card payments. 
• AML/KYC procedures for the absence of legal risks and allegations of money laundering or support for terrorism or criminal activities. 
• Customer data protection (GDPR or other laws relevant to your bank’s jurisdiction). 
• Licensing is optional for Neobanks, but having a license increases your project’s reputation and trust. 

It’s also important to take proper care of the technological interoperability of your platform. It can be ensured by cross-platform tech stack – Android and iOS usage for mobile app creation – and the application of universal programming languages and frameworks like React Native. Finally, a robust cybersecurity shield from hackers and criminals will add technical superiority to your platform, giving you and your users peace of mind. 

Monetization Strategies for Neobanks 

Neobanks are different from traditional banks in terms of monetization, so you can explore a broader range of revenue streams for your new project: 

• Lending services . Many Neobanks provide loans to clients based on smarter, AI-powered credit risk evaluation mechanisms. As a result, they derive revenue from interest rate from loans and credit card usage. 
• Ecosystem fees . Neobanks can establish a broad variety of partnerships with other service providers and get revenue from users’ payments for subscriptions, streaming services, food, and other elements of a broader Superapp ecosystem. 
• Asset management . This scheme is a golden standard in the banking industry; it lets Neobanks strike the right balance between deposits and loans on competitive terms and represents an ethical monetization model. 
• Partner commissions . Many tech companies partner with Neobanks to take advantage of the product extension monetization model. You can also engage other services via APIs and negotiate commission fees from the products users pay from their accounts or cards. 

Neobank Development Step by Step 

The process of creating a Neobank may look complicated and confusing at first. However, based on my experience in this niche, I want to reassure you that a systematic approach makes a real difference. When you’re working with an expert team with advanced FinTech training, it all boils down to a clear algorithm of 7 steps.  

Step 1. Market Research and Discovery 

This initial phase involves an understanding of the market you plan to operate in. It refers both to the competitor analysis to identify your unique USP and business value and the market research for grasping compliance and jurisdictional nuances.  

By the end of this stage, you should already have: 

• A target operating model.
• A plan of compliance with the national financial regulations (a full banking license, a FinTech-only license, or the partnership model).
• A clear vision of your Neobank’s processes and activities.

Step 2. Assembling a Skilled Team 

Next comes the partnership with a skilled development team that will perform all technical tasks, starting from project specifications, UI/UX, and the bank’s actual development. I recommend thinking about this stage early on, as the skill and tech expertise of your developers can make or break your Neobank. Thus, you should find a development agency with a relevant tech stack, a sufficient number of available employees, and an in-depth understanding of your FinTech niche.  

Step 3. Design 

The following stage is UX/UI design, which is a vital part of the project. You need to have a finalized version of the design before proceeding to development, as it will become your programmers’ roadmap. The design and development phases are tightly linked with each other, affecting the functionality and effectiveness of the final software product.  

Step 4. Development 

Once the design and UI/UX aspects are clear, it’s time to proceed to software development. Creating a well-functioning back-end is the most critical task in this process. It comprises the core of your banking app and regulates all processes conducted by clients and administrators within the system. Existing core banking solutions for banks, such as Mambu, Temenos, or IBM, are pretty popular among traditional banking institutions, but they are often too costly for startups on a budget. Thus, it’s preferable to stick to custom development solutions fitting your startup scale but allowing further scaling as your business grows. 

Front-end is also a critical element of Neobank development as it contributes to user satisfaction and shapes positive customer experiences. Handy payment gateways, intuitive interfaces with minimal input from the user, mobile and online banking channels all shape positive user acceptance and heighten customer loyalty to your product. 

Step 5. API Integrations 

The development of the API layer is vital for any Neobank’s functioning as APIs unite your platform’s internal processes and services with external applications. Neobanks don’t function as separate, isolated systems; most of them thrive due to effective cooperation with other financial actors and the provision of multi-agency services. Thus, having a third-party API layer allows a Neobank to set up partnerships with other market participants, such as allowing transactions of funds to other providers, collaborating with external card issuers, partnering with physical banks for credit loans and insurance coverage, and the like. 

Step 6. App Testing 

Once the neobank’s software is ready, you need to complete a thorough audit of the code logic, bugs, and vulnerabilities. I advise doing both manual and automated QA tests for the created platform, as they can give different perspectives on its weaknesses and strengths. 

Step 7. App Deployment and Updates 

Once all the bugs are corrected upon the QA testing results, your neobank will be ready for deployment. However, it’s not the end of the project; instead, it’s the beginning of a long-term partnership with your development team that will conduct maintenance and introduce vital system upgrades.  

Reasons for Neobank failure 

Once the strategy is ready, and a team is set up, you might think that your Neobank project is doomed to success. However, it’s frequently not the case as your Neobank can face several challenges, which sometimes even lead to the project’s failure. The reasons why your project may fail or under-deliver include: 

• Financial issues 

The primary purpose of a Neobank is to generate revenue for its creator, so many clients expect incredible returns in the first years, if not months, of their project’s operation. In fact, a financial project like Neobank needs time for maturing and winning its loyal customer base to generate stable revenue streams. Even digital banks with a name in the industry have experienced financial problems, such as a lack of investment or insufficient investor funds at critical project stages. So, it’s better to have a detailed financial plan to avoid such emergencies.

• Regulatory problems

Though representing an alternative to conventional finance, Neobanks should still comply with regulations of their relevant jurisdiction. Neobanks should implement rigorous security measures, conduct user authentication, and hold continuous financial monitoring, which requires extra resources and technical features.  

• Stringent competition 

The Neobank industry is still in the germinal stage of development, with the 2020s being a momentum for its acceleration. However, Neobanks started emerging over two decades ago, and there are a handful of strong national and international market players in most regions today. New Neobanks may find it challenging to differentiate their business USP and win a share of the existing customer base. 

• Vague expectations 

A lot of problems with Neobank project implementation comes from the vagueness of requirements or confusion regarding the project’s strategy, values, and goals. If there is disagreement in the client’s board of directors or team responsible for Neobank development, the project may stagnate until a consensus is achieved. 

• Expensive software development 

Software costs are mounting year by year, especially in the trending blockchain and DeFi industry. Thus, clients wishing to join this niche and reap the benefits of the emerging DeFi market need to spend substantial money on software development. At times, the development process gets interrupted if the development budget exceeds the initially agreed one and the client lacks funds for its completion. To avoid such a situation, you need to stipulate all costs and expenditures in a contract with your software development provider, preventing hidden costs and budgetary vagueness.

How We Can Help

Once you’ve made up your mind to set up a Neobank, it’s time to find a reliable, experienced software developer for the task. The 4IRE team of fintech developers and software engineers is at your service, offering 10+ years of DeFi expertise and an extensive tech stack for smooth and cost-effective Neobank development. 

Our company partners with many large banks to guarantee a smooth head start for your Neobank project in the market. I have personally launched such projects from scratch and led them to the first 100,000 users, so 4IRE is really a place to get a turnkey Neobank service. We can also speed up the entire development and launch process with the help of the proprietary ProcessMIX platform for low-code back-end creation.  

Our experts have dozens of successfully finalized DeFi and FinTech projects, able to design custom solutions in line with your individual business needs. Talk to 4IRE managers today to discuss the project and get a quote; you may be just a footstep away from an innovative, user-friendly, and lucrative Neobank.

The modern global finance industry is getting increasingly digitalized. That’s why you can benefit from a neobank as an innovative, digital-only banking product. Users are adopting digital banking solutions at a faster pace today, which creates an optimal moment for digital bank development and launch today.

There are many strategies for turning your neobank into an additional revenue stream. You may provide deposit and credit services to clients, integrate your banking solution into a larger financial ecosystem for a lucrative commission, derive revenue from advertising and promos, and engage in profitable partnerships with other businesses.

The main determinant of your neobank’s cost is the project’s complexity and number of features. A simple app may cost from $40,000 to $60,000, while a highly complex neobank will already exceed the $100,00 mark. Depending on the location of your team, you should expect to pay anywhere from $40,000 to $250,000+ for this software product.

The timing, as well as the cost, of your neobank depends on the project’s scope and complexity. Besides, it differs depending on the team’s composition. As a rule, software development projects are calculated in hours, and the size of the team will determine how quickly it will cope with all tasks. On average, you may need from 3 to 8+ months for building a neobank from scratch and launching it.

4IRE is one of the indisputable leaders in the mobile and digital banking development niche today. We have an extensive developer team, many years of experience in the banking niche, and a proprietary low-code platform, ProcessMIX, that accelerates the neobank’s development and launch processes.

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Neo Banking Business Model

We specialize in Neo banking, the digital-only banking model. Our expertise in market research, competitor analysis, revenue models, and customer experience strategy helps clients build innovative and sustainable Neo banking business models for success in the digital finance industry.

Develop a comprehensive strategy, business model, and business plan for establishing a Neo Bank specifically catering to the SME segment

• Conceptualize Neo Bank Model for SME on Top of Accounting Platform: Our client seeks guidance in conceptualizing a Neo Bank model specifically designed for SMEs, leveraging an existing accounting platform. They want to explore how the Neo Bank can integrate with the accounting platform to provide seamless financial services to SME customers.
• Guide on Creating a Stack of Banking Services as Part of the Neo Bank: Our client expects assistance in creating a comprehensive stack of banking services that will be offered as part of the Neo Bank. This includes defining the range of services such as core banking functionalities, lending solutions, payment systems, cash flow management tools, and other relevant financial services tailored for SMEs.
• Help in Creating a Business Plan: Our client requires guidance in developing a well-structured business plan for the Neo Bank. This includes conducting market analysis, defining the target customer segment, formulating a value proposition, determining the revenue model, outlining the operational and technology requirements, and preparing financial projections for the business.

Our Approach

Engaging with the Founders Team and Understanding Expectations: We initiated the engagement by closely collaborating with the founders’ team to gain a deep understanding of their vision, objectives, and expectations for the Neo Bank targeting SMEs. This allowed us to align our efforts with their specific goals.

Understanding the Current Business Model of the Accounting Platform: We thoroughly examined the existing business model of the accounting platform to understand its functionalities related to accounting, invoicing, and expense management. This understanding provided insights into how the Neo Bank could seamlessly integrate with the platform and leverage its existing capabilities.

Assessing Financial Services Needs for SMEs and Building Neo Bank Business Proposition: Through market research and analysis, we assessed the financial services needs of SMEs. This evaluation helped us in crafting a compelling business proposition for the Neo Bank, ensuring that the offered services catered to the specific requirements and pain points of SME customers.

Developing Business Strategy, Plan, Functional, and Technology Architecture for Neo Bank with a Set of APIs: We formulated a comprehensive business strategy and plan for the Neo Bank, outlining the market positioning, target customer segments, revenue streams, and operational framework. Simultaneously, we designed the functional and technology architecture of the Neo Bank, including the development of a set of APIs to enable seamless integration with the accounting platform and other financial services.

Building Customer Journeys on the Neo Bank Platform and Engagement Model for Various Financial Services: We focused on creating optimal customer journeys on the Neo Bank platform, ensuring a user-friendly and intuitive experience for SME customers. Additionally, we developed an engagement model for different financial services offered by the Neo Bank, ensuring personalized and efficient interactions.

Planning for Outreach Program and Building Awareness among the Banking and Financial Ecosystem: We devised an outreach program to raise awareness about the Neo Bank among the banking and financial ecosystem. This included strategic initiatives such as partnerships, collaborations, and marketing campaigns to position the Neo Bank as a trusted and innovative player in the industry.

Strategy for Neo Bank Platform for the SME Segment: We developed a comprehensive strategy for the Neo Bank platform, specifically tailored to serve the needs of SMEs. This strategy encompasses market positioning, target customer segments, competitive analysis, and a value proposition that sets the Neo Bank apart in the market.

Use Cases, Customer Journeys, and Roadmap for API Integrations: We created use cases and customer journey maps that outline the key interactions and experiences of SME customers on the Neo Bank platform. Additionally, we developed a roadmap for integrating APIs, ensuring seamless connectivity with relevant external systems and services to enhance the functionality and offerings of the Neo Bank.

Technology Architecture and Roadmap for Platform Development: We designed a robust technology architecture that forms the foundation of the Neo Bank platform. This architecture includes considerations for scalability, security, data management, and integration capabilities. Furthermore, we developed a roadmap outlining the phased approach for platform development, ensuring a structured and efficient implementation.

Outreach to Startups/Banks and Assistance in Onboarding Banking Partners for APIs: We facilitated outreach programs targeting startups and banks to promote the Neo Bank platform. We provided support in building partnerships and collaborations with banking institutions, enabling the onboarding of banking partners for APIs as part of the Bank’s open banking initiative. This collaboration enhances the range of financial services available to SME customers.

• The result of our engagement was the successful launch of a Neo Bank that seamlessly integrated accounting and banking services. The client was able to create a unified platform that catered to the needs of SMEs, providing them with a comprehensive suite of financial services.
• Additionally, we assisted the client in onboarding a banking partner, enabling them to extend their banking services specifically tailored for SMEs. This partnership strengthened the Neo Bank’s offerings and allowed for a broader range of services to be provided to SME customers.
• Overall, the client achieved their goal of establishing a Neo Bank that combined accounting and banking services, and successfully onboarded a banking partner to serve the SME segment. This resulted in an enhanced financial ecosystem for SMEs and positioned the client as a leading player in the market.

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What is a neobank here's what you need to know, by going digital-only, neobanks can offer customers convenience and better rates..

Many people associate banks with brick-and-mortar buildings and in-person transactions. While most financial institutions offer robust online services, a growing number of firms are skipping a physical presence altogether.

Neobanks provide digital-only banking with lower fees and more competitive interest rates than traditional institutions. These fintech (financial technology) firms are projected to generate more than 2 trillion in revenue in 2030, according to data from Grand View Research , up from about $96 billion in 2023.

CNBC Select explores the rise of neobanks, with info on popular platforms, whether using one is right for you and more.

What we'll cover

What is a neobank, examples of popular neobanks, pros and cons of using a neobank, bottom line.

A neobank is a fintech company that provides financial services through a mobile app or website, including checking and savings accounts , budgeting tools and cash advances . They typically appeal to customers looking for flexibility, convenience and transparency in their banking.

Since neobanks don't carry the costs associated with maintaining physical locations, they can offer lower fees and higher interest rates on savings accounts. They also tend to have more intuitive apps and websites with a more seamless and user-friendly customer experience.

Most neobanks aren't actually banks —they're not chartered by the Office of the Comptroller of the Currency — so they have to partner with chartered banks to aid in the delivery of products and services and to make sure deposits are insured by the Federal Deposit Insurance Corporation (FDIC) .

While neobanks are still a relatively new industry, a few platforms are already gaining traction.

With an estimated 21.6 million users in 2023, Chime is one of the largest neobanks on the market. Chime partners with the Bancorp Bank and Stride Bank to provide banking services and to ensure funds are FDIC-protected.

Checking accounts have no monthly service or overdraft charges and come with no-fee access to over 60,000 ATMs nationwide. Customers who use direct deposit can also access funds up to two days early.

Unlike Chime, Varo received a national bank charter back in 2020, so it is officially considered a bank and its accounts are directly FDIC-insured. There is no minimum balance requirement, no credit check to open an account and no monthly maintenance fees or charges for transfers or overdrafts. In addition, Varo has partnered with Zelle , so users can transfer money digitally to friends and family.

Varo Bank Account

Monthly maintenance fee, minimum balance, free atm network.

More than 40,000+ fee-free in-network Allpoint ATMs in the U.S.

Overdraft fee

Minimum deposit to open, annual percentage yield (apy), mobile check deposit.

Terms apply.

Current allows customers to create "saving pods" with annual percentage yields (APY) of up to 4%. Like other neobanks, Current foregoes annual fees and minimum balance requirements and offers early access to direct deposit payments. The company partners with Choice Financial Group and Cross River Bank to ensure its deposits are FDIC-insured.

Current Spend Account

Fee-free overdraft feature as long as you receive $500 or more in Qualifying Deposits into your Current Account over the preceding 30-day period.

Neobanks offer more flexibility than traditional banks, but there are drawbacks. So it's important to decide if they will fit your financial needs.

• Lower fees: Since neobanks don't operate physical locations, they can pass on savings by reducing or eliminating common banking fees .
• Higher rates: That lower overhead also means neobanks usually offer savings accounts with higher interest rates.
• Early access to direct deposits:  Fintechs frequently make payments available up to two days early — including payroll deposits, government benefits, tax refunds and pensions.
• Convenience: Users can make deposits and transfers anywhere at any time, with 24/7 online customer support.
• More financial tools: Neobanks offer in-app budgeting tools and real-time spending insight that traditional financial institutions may not have or charge extra for.
• Limited customer service: With no physical branches , there's no in-person customer support available.
• Fewer product offerings: Neobanks usually have a smaller menu of services, so if you're looking for a mortgage or investment account, you'll probably have to go to a brick-and-mortar bank.
• No guarantee of FDIC protection: Since neobanks are not chartered banks, funds are not FDIC-insured unless the company has partnered with a traditional financial institution.

Who uses neobanks?

A quarter of consumers have used a neobank, digital bank or FinTech with bank-like services in the past 12 months, according to a 2023 report from PYMNTS and Treasury Prime , although only 10% of respondents said their primary bank accounts were with digital banks.

Unsurprisingly, neobanks appeal to younger generations raised on the Web: The PYMNTS report also indicated about 55% of Millennials and 45% of Gen Z consumers were very interested in digital banks, while only about 13% of Baby Boomers were. (Roughly 39% of Gen X respondents said they were very interested.)

How are neobanks regulated?

Most neobanks don't have a bank charter or license and cannot operate on their own. They typically partner with a financial institution that does have a charter to ensure deposits are FDIC-insured.

How do neobanks make money?

One of the most common ways for neobanks to make money is through interchange fees, also known as swipe fees , which are paid by retailers when they process a credit or debit card transaction. This is how Chime makes most of its money : Visa collects a swipe fee from a merchant and gives a portion to Chime.

Neobanks can also make money through interest and fees for transactions and subscription services.

Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox.  Sign up here .

Neobanks are gaining popularity, especially among younger, tech-savvy consumers who care more about flexibility and higher rates than face-to-face interactions and a wide portfolio of financial products. Make sure you fit that profile — and that your money is FDIC-insured — before switching to a neobank.

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products . While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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How to Create a Neobank From Scratch: Features, Development Process & Challenges

The banking sector of the fintech industry has been actively transforming over the last five years: the number of neo-banks in the market is increasing, the classic branches are closing, and the customer is confidently moving to digital.

Today's students are a generation of people who will most likely never go to a bank branch in their lifetime. This does not mean that they will not use banking services. On the contrary - they will actively pay non-cash, take loans, and open deposits, but all the interaction "bank-client" will take place in their smartphone. And it is for this audience - Generation Z - that non-banks are already competing today.

Evolution of Traditional Banks Instead of Revolution

In the US market, neobanks have become known as Challenger Bank, as they have challenged the system and gone beyond traditional service. They differ from the classic ones, first of all, by their own high-tech IT infrastructure. This is the basis for creating innovative banking products and processes, integrating databases and collaborations with other services, which allows you to quickly adapt to change.

Important differences are also the absence of bank branches, 100% bank-client interaction online, fast client onboarding (approximately 35 clicks) and convenient UX / UI mobile application, more favorable terms of deposits and loans, and at the same time - comfortable service with customer support.

Yet neobanks have transformed the industry, albeit not in the way analysts had anticipated. They didn’t oust the monopolies from the market, but they changed the standards - thanks to them, mobile banking began to develop, the range of digital banking services expanded, and competitors began to pay more attention to the UX and design of their applications. Compare the interfaces of banking applications five years ago and today: they have become more user-friendly and responsive, although they still require additional effort from the user. For example, to open an account with HSBC, you need to make 99 clicks, while in Revolut - only 24.

Neobanks have partly stimulated the development of ecosystems in the financial sector. It would seem, why does a bank need a food delivery service or a streaming platform? And why turn a branch into a pick-up point? Each additional add-on helps to better understand the needs of the audience and offer them more relevant financial products. Neobanks, with their approach to UX and analytics, initially had an advantage: with less data, they got more value out of it because they better understood their target audience.

Another feature is flexibility and adaptability. For example, American startup Chime found that millennials prefer debit cards to credit cards, but at the same time want to improve their credit score. Then neobank launched a hybrid product that combines debit and credit functions. Much of the flexibility is due to the less developed infrastructure of neobanks: they do not operate a huge range of financial services, so they are riskless. Conventionally, one failure will not lead to multi-million dollar losses, so it is easier for them to experiment. And it is easier for large banks to integrate ready-made start-up solutions into their ecosystems than to create their own product from scratch.

At the same time, formally, both neobanks and “conservatives” still work according to a similar model, the only difference is in the “shell”. Moreover, in an effort to increase margins, neobanks are borrowing the tactics of traditional banks. So, the British startup Monzo at some stage planned to launch a financial marketplace, but after receiving a banking license, it followed the classic path: it introduced overdraft accounts and started issuing loans directly.

While neobanks are following the traditional path, new products are being launched by software development companies . They are gradually offering more and more financial services, capturing new niches, and in terms of UX and convenience, they are not inferior to neobanks. Analysts admit that the conditional Google or Apple will soon become the largest fintech company, and banks, in principle, will not be needed.

How Neobanks Work

There are several variants of models for organizing neobanks in the world.

Full Banking License Model

Some neobanks have received a full banking license, and their regulation is no different from ordinary banks. At the same time, specifically for the needs of neobanks, a number of countries have introduced a limited type of banking licenses, which are provided as an intermediate stage before obtaining a full-fledged banking license. In such cases, neobanks were able to increase their resources for a full-fledged entry into the banking sector without reducing requirements from the regulator. This type of license is available, for example, in the UK and Australia.

Example: Monzo (UK).

Cooperation Model With Another Bank

Another model is that neobanks cooperate with existing banks. In this case, all obligations to adhere to regulatory requirements, along with credit risks, lie with partner banks, while neobank provides only technological solutions.

Example: Chime (USA).

Mixed Model

Some neobanks only obtain licenses for some financial services and conduct other activities through partnerships with conventional banks. For example, in Europe, the EMI (Electronic Money Institution) license permits a neobank to issue cards, transfer funds , and issue electronic money. Other services, such as opening deposit accounts, can be provided by neobanks only through cooperation with ordinary banks.

Example: Bnext (Spain)

Neobanks in Ukraine

The number of contactless payments and online payments in Ukraine is growing. According to Mastercard, in the first quarter of 2020 compared to the fourth quarter of 2019, their number increased by 7% and 8%, respectively. Ukrainians are actively making payments online, especially now that they have to spend more time at home, in isolation, and in quarantine. It's fast, convenient, and safe. Given these trends, all businesses, without exception, are adapting and digitalizing - traditional banks are no exception.

According to the Mastercard survey conducted in 2019, Ukraine is among the top ten European countries in terms of NFC payments and ranks 4th in the world in terms of growth rate, surpassing Poland, Canada, and a number of European countries. Over the past two years, we have increased 90 times the transactions of contactless payments using a smartphone and the number of connected devices for NFC payments is growing by 25% every month. A Kantar MMI study published in October found that every 5th smartphone owner between the ages of 12 and 65 uses ApplePay or GooglePlay once a month and more often. This is about 1.7 million Ukrainians.

This situation contributes to the emergence of new neo-banks in our country. The user gets more and more opportunities on better terms and therefore increasingly prefers "banks in the smartphone". And the competition motivates the latter to develop and fight for the customer, offering him a more convenient mobile application and more favorable conditions.

For example, in Britain, which is considered the locomotive of the world's neo-bank, today more than 125 players successfully coexist. High competition in the market allows them to keep each other in shape and keep improving, which often happens in stable markets.

This is especially important in a fast-paced and volatile market, aimed at capturing a young demanding audience of millennial users (digital nomads). Therefore, non-banks "play" not only and not so much in the field of financial services, as an intermediary for the client and give him a convenient tool to meet all needs. Want to buy a train ticket - easy, order a taxi - no problem, pay utilities - please, book a table in a restaurant - two clicks. And still, get a profitable cashback for it. And most importantly - to do so could be easy.

Neobank Core Feautres

Cross-border payment.

Striving to revolutionize banking for millennials globally, neo banks are offering global banking solutions aimed to make cross-border banking smarter, faster and better.

Billions of USD are remitted abroad per annum, in terms of expenses such as overseas education fees, maintenance of close relatives, investments in foreign equity, deposit, travel etc.

A majority of these remittances happen through public sector banks. These branch-based banks, with legacy technology, involve extensive paperwork. Industry experts say, there is a lack of transparency and an inherent distrust with the banks. There are also various freelancing agents with a network of 100-150 customers. However, such freelancing agents usually end up charging as high as 2-3 percent per transaction.

Cards Issuance

Neobanking is also taking card issuance to a new level. In the sense that now physical cards are becoming optional at all. You can create a card in your application online and pay for all purchases using the phone to which the virtual card is attached.

Savings Features

Thanks to the new possibilities of online banking, it becomes unnecessary to buy a porcelain pig-box, in which money is usually saved for short-term purposes. The piggy bank function is now available in most modern banks. In doing so, you can also open long-term savings accounts.

Budgeting Assistance 

This function allows you to track your card spending for a month and adjust expenses. You can schedule mandatory payments in advance and not worry about overdue invoices.

Cryptocurrencies

And finally, in some countries, it is already available to store your savings not only in standard currencies but also in cryptocurrency, make transactions between accounts, sell and buy.

Neobank Development Process

What exactly is involved in developing a neobank from scratch? The question most often asked by our clients. They want to know how much money and time it will take from them, how the work is structured, where to start, and how to earn and not lose as a result.

Discovery Phase

Every application starts with an idea. You tell us what tasks the future service should solve, and we start collecting analytics. A deep cut of the market, analysis of existing solutions, the study of competitors and customer behavior patterns ... At each stage of the analysis, we remember the end-user and think over the customer's life cycle. This helps us together understand how people will use the new application - and make it as user-friendly, understandable, and useful as possible. This service will benefit your business as well. As a result, we get references for functionality and design.

We are compiling a detailed description of the functionality and design of the future application. We define the characters of users, describe the User Story, draw up a Customer Journey Map and form the technical requirements for the service. That is, we fix what the application should be like, what it should be able to do and how it will work.

Thanks to such a technical assignment, our team of designers and developers clearly understands what kind of service the customer wants to receive, and gradually implements the initial idea.

Development and Testing

After agreeing on the technical specification and prototypes with the customer, the stage of active development begins. In complex and complex projects, it is recommended to use MVP (minimum viable product) - the minimum implemented functionality of the product, which helps in assessing the future application on the part of the customer and in further development planning.

After development is complete, you need to test the final version on mobile devices. At this stage, they identify and clean up all the roughness and flaws of the application, prepare it for a full release.

Challenges of Building Own Neobank

As in any other area, when developing a new product, you will surely face a number of challenges that you should be prepared for in advance.

Compliances & Regulatory

On May 25, 2018, new rules for the processing and protection of personal data came into force - EU regulation 2016/679 of April 27, 2016, or GDPR - General Data Protection Regulation. This directive is a direct law and is automatically implemented through national law in all member states of the European Union. However, this legal provision is extraterritorial and affects not only companies located in the EU, but also all others that collect and process data from EU residents and citizens.

Open Banking is a fundamentally new type of banking that was originally intended to improve market competition, stimulate innovation and offer more personalized and more beneficial services to end-users.

In terms of the Second Payment Directive PSD2, which is the legal framework for Open Banking in Europe, it is a pan-European regulatory scheme that obliges banks to exchange data with third-party service providers (for example, fintech companies, various start-ups) at the request of customers via the Open API. In other words, it allows fintech companies or other third-party services to access a customer's financial information or conduct financial transactions. The more participants in this system, the higher the competition, which means that the variety and quality of services in the market will increase and prices will decrease. This will ultimately benefit the end-user.

Therefore, when creating your application, carefully study all the documentation that you need to consider building your own neobank.

Wrong Infrastructure

Neobanks have a constantly growing load as the number of users grows. Therefore, a monolithic project structure will not work, and to avoid problems it is worth breaking it down into internal subsystems.

Lack of Expertise in Team

The wrong team will not be able to deliver the expected result and will burn money. It is important to remember that the business owner wants to see the result, not the process. Since the neobanking niche is still relatively new, few of even the brightest minds in development understand exactly how to create such a product. Therefore, it is important to have an experienced CTO in the project who can select people for the team who understand what they are working on.

The Future of Neobanks

The future is not for neobanks, but for the neobank model - virtual services will become a standard in many areas, including the financial sector. At the same time, heightened competition with IT giants will lead to an even greater blurring of boundaries in fintech. Tech companies will provide financial services, while banks, on the contrary, will offer digital services.

At the same time, the development of Open Banking, namely the emergence of open programming interfaces and the creation of conditions for the free exchange of data, will provide startups with more resources for growth. This will allow them to find new niches and create fintech add-ons that will generate the bulk of the revenue. Therefore, neobanks will gradually rely not so much on end-users as on b2b services for small and medium-sized businesses, freelancers and self-employed. As startups grow, they will create their own platforms and ecosystems, this will help them strengthen their position in the market, but at the same time, it will intensify competition, as the border between traditional players and neobanks will finally be erased.

Final Thoughts

Neobanks is a promising trend in the global financial system. It is unlikely that they will completely replace the traditional ones, but, obviously, they will become more and more every year. The weak will die, the strong will become stronger. And most likely in the next few years, we will see a new trend in the banking sector: a kind of hybrid of neo and classic banking. For example, traditional banks will increase the direction of digital on their side and at the same time consider the possibility of mergers and acquisitions (M&A) with non-banks, provided the relevant value for money.

Working with the fintech industry for many years, our dedicated software development team  can help you bring such projects to life and implement them within a reasonable budget and time frame.

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How to Build a Digital Bank or Neobank in 2024: Step-By-Step

Igor Tomych, fintech expert with 15+ years of experience. He launched 20+ fintech products in the UK, US and MENA region. Igor led the development of 2 white label banking platforms, worked with 10+ financial institutions over the world and integrated more than 50 fintech vendors. He successfully re-engineered the business process for established products, which allowed those products to grow the user base and revenue up to 5 times.

OCTOBER 8, 2023

17 min read

Brick-and-mortar branches, paperwork, and long queues don’t bind the banking era. Can you imagine this isn’t a vision of the future? Today, traditional banks are no longer the only players in town. In the ever-evolving realm of finance, neobanks and digital banks are shaking things up.

The neobanking sector has witnessed an astonishing wave of change in a world driven by digital innovation. In 2022, the global neobanking market boasted a valuation of $79.1 billion , and within just one year, it soared to a staggering $118.51 billion. But still, the neobanking sensation is showing no signs of slowing down. By 2030, experts predict that the global neobanking market will reach an astonishing $2078.54 billion , maintaining an impressive CAGR of 52.4%.

These digital apps, offered by innovative digital-only banks, have transformed how we handle money. They’re the go-to alternative to traditional banks, and businesses are jumping on board to provide neobank solutions for everyday consumers and companies alike. 

If you want to learn how to build a neobank from scratch , join me in this article. I’ll share a business owner’s perspective, keeping things straightforward and informative every step of the way explaining how to build a neobank in 2023.

Source: SNS Insider

What is a Neobank and Digital Bank?

Neobank and digital bank are terms frequently used in today’s financial world, but what exactly do they mean? What is digital banking, and how different is it from the neobank definition?

A neobank, often called a digital or challenger bank, is a financial institution that operates exclusively online, without any physical branches. Neobanks offer a wide array of banking services, including savings accounts, checking accounts, payment processing, lending, and other financial products — all accessible ONLY through web and mobile applications.

Digital Bank

A digital bank is essentially a traditional bank that has transitioned its services into digital. It provides the same core banking services as brick-and-mortar institutions but primarily through online channels like websites and mobile apps. Digital banks may still maintain physical branches, but they emphasize offering convenient digital access to banking services.

Differences 

The distinction between neobanks and digital banks lies in their origin and approach. 

• Neobanks are born in the digital age without legacy systems or physical branches. 
• Digital banks are traditional banks that have adapted to the digital landscape.

While both aim to provide online banking services, a neobank takes this concept a step further. It’s not just about transferring traditional banking services to digital channels; it involves the development of something entirely new and advanced in the world of finance. 

Suppose you’re wondering how to create a neobank or looking to start a digital bank . In that case, you should understand that neobanks provide a more innovative approach since they are made from the bottom rather than on the base of traditional banking institutions.

What Are the Key Features of Neobanks?

For a competitive neobank, you should integrate user-friendly features:

• Onboarding helps your users easily navigate the app, find features, execute transactions, etc.
• Authorization enables users to access the bank or utilize its services. The time users spend creating an account or logging into your app should be minimal.
• Know your customer (KYC) system protects clients from scams, corruption, illegal gains, and funding for terrorism.
• Personal account management lets users access their account management controls, where they can change their profile and settings to fit their needs.
• Customer support should be reachable whenever users have a query or run across an issue. Messaging is a great solution.
• Card issuing schemes may vary, such as by printing them off or using virtual debit cards, obtaining a unique BIN, or even sharing one. The provider should suit the region and terms and have suitable price policies.
• Transaction history helps track customers’ spending and process their payments.
• Internet limits allow customers to control the maximum amount they may commit to an online purchase and make informed decisions about their budgets.
• Payment templates are a great way to streamline the user experience of your neobank.
• Contact database synchronization enables the use of phone numbers instead of card information.
• A notification and reminder system must inform customers about account activity, payment receipts, and app updates.

You need to add some cutting-edge features to build a neobank that stands out from the rest. Even one or two may put your digital bank on the frontline. We’ve put together the list for your neobank app development:

• Cashback is a percentage of a customer’s purchases. Typically, cashback percentages vary across product categories.
• The changeable CVV2 keeps balances safe if a customer loses their phone.
• Cost tracking can show users where their money goes (e.g., food, home, study, etc.).
• The referral system allows users to get rewards if they engage their family, friends, coworkers, and other people they know in the bank.
• The accumulating system helps to collect money for specific goals. An amount of money is automatically taken out of a checking or savings account as a rest.
• Stocks features allow users to buy and sell stocks.
• Cryptocurrencies features allow to store, send, and receive digital currencies like Bitcoin and Ethereum directly within the app.
• Budgeting helps clients get their bills, groceries, and entertainment in line by letting them set a budget for how much they want to spend on each.

Neobanks have gained popularity for their user-friendly interfaces, transparency, and agility in responding to customer needs. They are great alternatives to traditional banks, as they offer lower fees, higher interest rates on savings accounts, and a seamless digital banking experience. Neobank meaning for fintech industry development is difficult to overestimate.

In contrast to traditional banks, neobank app development is not bound by legacy systems and infrastructure, allowing them to innovate rapidly and tailor their services to the evolving demands of clients. If you are one of the individuals searching for the best neobank to build in an increasingly digital world, these fintech disruptors can become a good choice for you.

Building a digital bank or neobanking startup also means being strategically focused on rapid expansion. The main advantage lies in allocating resources towards aggressive marketing campaigns, both online and offline, to attract new users. Additionally, you will have a particular task — always coming up with new ideas, for example, offering attractive pricing packages for new customers, since that can help you be on top of the competition.

How To Build a Digital Bank or Neobank from Scratch? 

As a fintech professional and CEO of a fintech company with over 12 years of experience and real-life knowledge developing a neobank from scratch in 9 months, I’m delighted to share practical insights on creating such a product since I already have the expertise you may need.

If you are wondering how to start a digital bank , this information will be useful for you as well. The next section will delve into the critical steps, complete with practical examples and advice.

Starting neobank app development from scratch is a journey filled with challenges and rewards. Remember to stay true to your vision, prioritize compliance and security, and deliver a seamless user experience. Neo banking is all about adaptability and innovation, and by following these steps, you’re on your way to making a significant impact in the financial industry.

Step 1. Define Your Vision and Mission

Everything begins with a clear vision and mission. Take inspiration from real-life success stories of fintech companies like Monzo , a UK-based neobank that aimed to make banking simple and accessible. Define your unique selling proposition (USP) and identify the problems your neobank will solve for customers. For instance, if you’re targeting millennials, create a bank that prioritizes features that enhance budgeting and offer real-time insights into spending.

To-do list:

• Take inspiration from real-life success stories.
• Define a unique selling proposition (USP).
• Identity problems your product will solve.
• Prioritize and customize features for user needs.

Step 2. Understand Regulatory Compliance

To launch a digital bank, neobank, or fintech solution, securing the right license is paramount. However, the landscape has shifted. In the past, only a full banking license would suffice. Today, you can operate a bank-like service with an EMI (Electronic Money Institution) or PI (Payment Institution) license.

These licenses allow you to offer many banking services, except granting loans and accepting deposits. Notably, Revolut, a prominent fintech player, hasn’t pursued a banking license in the US — a testament to the evolving norms.

So, what’s the difference between EMI and PI licenses?

An EMI is an institution that’s authorized to issue electronic money. Holding an EMI license allows you to:

• Issue and distribute electronic currency, enabling customers to store funds in an e-wallet for payments.
• Execute currency exchanges.
• Facilitate direct debit or credit transfers.
• Transfer funds to other customers.
• Handle withdrawals and deposits.
• Grant customers access to their account details.

On the other hand, PI stands for “Payment Institution.” A Payment Institution is a type of financial entity that is authorized to provide certain payment services without issuing electronic money.

By obtaining PI license, you:

• Can’t issue electronic money.
• Can’t facilitate payment transactions (e.g., transfers).
• Can’t store money long-term.

In short, EMI = e-money + payments. PI = just payments.

There are distinct things EMI and PI cannot provide:

• Traditional bank accounts (only e-wallets are permissible).
• Deposit guarantees.
• Conduct international transactions.

Such services typically necessitate a banking license, which is more challenging to secure.

In essence, while a full banking license might be the traditional route, the EMI and PI licenses are viable alternatives for those looking to break into the fintech space without diving deep into traditional banking regulations.

• Start by researching the specific compliance requirements in your region.
• Seek legal and expert guidance.

Step 3. Assemble Your Dream Team

Neobank app development requires diverse expertise. Look for experts who understand fintech, such as former employees from established fintech firms or banks. Collaboration is key in this process, and an agile mindset is essential to adapt to unforeseen challenges. Consider hiring experienced professionals who have faced and conquered hurdles in fintech.

• Seek fintech experts with real experience (pay attention to projects they built — was it neobanks mobile app development or web development, which technologies they worked with, which integrations they set up).
• Prioritize collaboration and agile thinking.
• Hire professionals with a track record of overcoming fintech challenges.

Step 4. Focus on User Experience and Marketing

User experience (UX) can make or break your neobank. Take inspiration from Chime , a US-based neobank with a user-friendly mobile app. Ensure your digital channels are intuitive, secure, and accessible. Regarding marketing, remember the story of one of our customers — Pi-1 , an award-winning BaaS platform from the UK. Their product wasn’t significantly different from others, but their success was driven by effective marketing, a modern-looking app, and excellent features, targeting banks and fintechs.

Establishing your brand’s look can achieve better market results and capture a larger market share. Effective communication of your brand’s unique value proposition can set you apart, even in a competitive landscape.

• Prioritize intuitive, secure, and accessible digital channels.
• Invest in user-friendly mobile app design.
• Emphasize effective communication of your unique value proposition in marketing.

Step 5. Prioritize Compliance and Security

Don’t underestimate the importance of compliance and security for neobank app development. A great example is Monese , a UK neobank, which learned this hard when facing regulatory challenges. The company’s initial difficulties might have arisen from insufficient KYC and AML procedures. 

Compliance involves adhering to various financial regulations and ensuring your neobank operates within legal boundaries. One critical aspect is Know Your Customer (KYC), which consists of verifying your customers’ identities to prevent fraud and financial crimes. Anti-Money Laundering (AML) processes are designed to detect and report suspicious activities that might indicate money laundering or other illicit financial transactions.

It would be best to stay updated on regulations like GDPR (General Data Protection Regulation) in Europe, which also governs the handling of personal data. Security is paramount in protecting customer data from threats, cyberattacks, and breaches. Consider partnering with cybersecurity experts who can help you implement robust security measures, encryption protocols, and monitoring systems to safeguard customer data and maintain compliance with industry standards.

Although numerous security tools and measures are at your disposal, remember that they should be okay with your app users. Ideally, neobank security should work behind the scenes, ensuring a seamless and user-friendly experience, such as using video calls for identity verification or entering the last symbols of phone number calling.

• Prioritize compliance with financial regulations, including KYC and AML processes.
• Stay informed about data protection regulations like GDPR.
• Invest in robust cybersecurity measures to protect customer data from potential threats.

Step 6. Develop Your Business Processes

Start with robust business processes before diving into software development. Document how customers will onboard, how transactions will be processed, and how compliance procedures will be handled. This approach streamlines software development and ensures your operations run smoothly.

• Craft a seamless onboarding process to ensure customers can easily open accounts and use your services. 
• Define efficient workflows for processing transactions to guarantee your digital channels are intuitive, secure, and accessible.
• Prioritize KYC and AML processes to prevent regulatory challenges.
• Create a secure data management system to handle customer information (use tools like Looker, Tableau, or Power BI). 

Step 7. Choose the Right Software Engineering Approach

Engage engineers with fintech experience as they understand the intricacies. Ensure your engineering team can make informed choices and select technologies tailored to the neobanking environment. Without this expertise, engineers may inadvertently choose data types or technologies that could result in balance inconsistencies.

Choosing the right technologies tailored to the neobanking landscape is a basement for a successful product, the same as a base for the future house. Not all technologies suit fintech solutions; an ill-informed choice can lead to technical challenges. Your engineering team should be well-versed in selecting technologies that ensure scalability, security, and seamless integration.

1.  Cloud Computing

• Examples: Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP).
• How It Works: Cloud computing enables you to host your neobank’s infrastructure on remote servers, providing scalability, flexibility, and cost-effectiveness.
• Parameters for Selection: Consider data security, compliance standards, scalability options, and ease of integration when choosing a cloud provider.

2. API Integration

• Examples: RESTful APIs, GraphQL.
• How It Works: APIs allow your neobank to connect and exchange data with other financial institutions, payment processors, or third-party services seamlessly.
• Parameters for Selection: Look for APIs that offer robust security features, developer-friendly documentation, and compatibility with your chosen programming languages.

3. Blockchain and Distributed Ledger Technology (DLT)

• Examples: Ethereum, Hyperledger Fabric, Ripple.
• How It Works: Blockchain and DLT can enhance security and transparency in transactions, making them suitable for cross-border payments and asset tokenization.
• Parameters for Selection: Consider factors like consensus mechanisms, innovative contract capabilities, and regulatory compliance when choosing a blockchain platform.

4. Data Encryption

• Examples: Advanced Encryption Standard (AES) and Transport Layer Security (TLS).
• How It Works: Data encryption ensures that sensitive customer information remains confidential during storage and transmission.
• Parameters for Selection: Look for encryption protocols that are widely recognized, regularly updated, and compliant with industry standards.

5. Artificial Intelligence (AI) and Machine Learning (ML)

• Examples: TensorFlow, PyTorch, scikit-learn.
• How It Works: AI and ML can help detect fraud, automate customer support, and provide personalized financial insights.
• Parameters for Selection: Evaluate the capabilities of AI/ML libraries, the availability of pre-trained models, and their suitability for your specific use cases.

6. DevOps Tools

• Examples: Jenkins, Docker, Kubernetes.
• How It Works: DevOps tools facilitate continuous integration and continuous delivery (CI/CD), enabling faster and more reliable software development and deployment.
• Parameters for Selection: Consider factors like ease of use, scalability, and compatibility with your chosen cloud infrastructure.

7. Biometric Authentication

• Examples: Facial recognition and fingerprint scanning.
• How It Works: Biometric authentication enhances security by verifying a user’s identity based on unique physical characteristics.
• Parameters for Selection: Evaluate the accuracy, speed, and user-friendliness of biometric authentication methods.

When choosing these technologies for neobank app development, align them with your specific business goals, regulatory requirements, and user expectations.

Step 8. Architect Your System for Scalability and Security

Neglecting proper architectural planning can be a costly mistake, especially considering that the neobank app development cost is not known as being the most budget-friendly option. Try to architect your system for scalability, robustness, and security. Consider the example of Monzo, which faced challenges as it scaled. 

Monzo’s scaling challenges:

• Performance Bottlenecks: Monzo experienced performance bottlenecks as its customer base multiplied. These bottlenecks could lead to slow transaction processing, delayed account updates, and frustrated users.
• Infrastructure Limitations: The initial architecture of Monzo’s systems may not have been designed to handle the scale of users, transactions, and data they eventually encountered. This led to issues with system stability and reliability.
• Security Concerns: With more users, enhanced security measures are paramount. Monzo had to continuously bolster its security protocols to protect customer data and transactions from increasing threats.
• Integration Challenges: As Monzo expanded its offerings and partnered with various financial service providers, integrating new features seamlessly into its existing system became a complex task. This could result in service disruptions and user dissatisfaction.
• Regulatory Compliance: Monzo had to navigate complex regulatory requirements as a financial institution. Ensuring compliance across various jurisdictions while scaling posed a significant challenge.

Step 9. Consider a Banking-as-a-Service Platform

If building from scratch feels overwhelming, explore banking-as-a-service platforms like our FinTech Core . This modular solution offers licensing for its components, allowing custom development while saving time and resources.

Here are the key benefits of FinTech Core which speed up neobank app development:

• Modular Approach. FinTech Core is designed as a modular solution. It offers a range of components that can be tailored to your specific needs. This is akin to having a toolkit with various specialized tools that you can pick and choose from to build your neobank. You don’t have to reinvent the wheel for every aspect of your banking services.
• Licensing Flexibility. With FinTech Core, you can license individual components, allowing you to customize your neobank while saving significant time and resources. It’s similar to having access to high-quality building materials and hiring skilled builders to construct your dream home without starting entirely from scratch.
• Speed to Market. With FinTech Core’s pre-built components, you can significantly reduce your time to market. You will have a trusted partner who knows your destination’s fastest and most efficient routes.
• Expertise and Guidance. Neobank app development involves complex regulatory, compliance, and security considerations. With FinTech Core, you benefit from the accumulated knowledge and experience of the team behind the platform. We can navigate these challenges before and guide you effectively.
• Cost-Efficiency. Developing every aspect of a neobank can be costly. By leveraging FinTech Core, you can potentially cut development costs significantly, making it more financially viable to realize your neobank vision.

How Do Neobanks Make Money?

There are many business models in fintech, and we’ve already described some of the most popular nowadays . Among them, there are a few specifically spread from which neobanks make money.

1.  Interchange fee. A significant portion of a neobank’s revenue comes from the interchange fees paid by merchants when users use their debit cards to make purchases. Every time a Visa or Mastercard debit card is used to make a purchase, Visa adds a percentage fee to the total. In return, Visa sends a portion of the fees to a neobank.

2. Loans and overdrafts. In exchange for a fee on each purchase, they facilitate the use of credit cards. When customers go above their restrictions, they pay interest, which generates revenue for the company.

3. Additional accounts. Digital banking solutions make money from the interest that tacks on to new account balances is another source of revenue.

4. Withdrawal fee. Neobanks usually accrue interest on the ATM fees, which is another source of revenue.

5. VIP Client Services: Offering premium services for a specific fee is common among neobanks, catering to high-value clients.

How much does it cost to build a neobank app?

Building a neobank app is no small feat; it requires careful planning, development, and substantial investment. Here’s a breakdown of the potential costs and considerations involved:

1. Custom Development

Starting a neobank app from scratch can be a pricey venture. To give you a perspective, consider our experience of building Pi-1 BaaS solution, which was developed at an estimated cost of $4 million. 

It’s clear from this figure that you won’t be creating such an app for a mere $100,000. The scope and features you desire play a pivotal role in determining the cost.

It’s also crucial to understand that development costs fluctuate depending on the region. For example, North American developers might charge between $150 - $250 per hour. Contrast this with Ukrainian developers who may charge as low as $60 - $90 per hour. Given that the development phase can span 9 months to 2 years, these regional rate disparities can have a significant impact on the total expenditure.

2. Using White Label Modular Solution

White-label modular fintech solutions are an increasingly popular choice for those wanting to fast-track their entry into the digital banking and payment sector. One of the best choices is Fintech Core , which our clients easily adapt to their needs all around the world. 

With Fintech Core, all the necessary service providers and integrations come pre-configured. This means you’re not starting from ground zero; instead, you’re building on a solid foundation, which significantly reduces time and cost.

Furthermore, the inherent modularity allows for easy customization and scalability. As your neobank grows and the financial landscape evolves, you can add or remove modules as needed, ensuring your platform remains contemporary and competitive.

In terms of timeline and cost, while a custom development might take anywhere from 9 months to 2 years to fully develop and launch, a white-label solution can dramatically cut this down. You could potentially launch your neobank in as little as 3 months, starting from an investment of around $300,000.

It’s crucial to remember that these figures are approximate. Actual costs can diverge based on individual project details, vendor negotiations, and market dynamics. Direct consultation with development professionals is always recommended for precise estimations.

In conclusion, neobank app development is a complex but advantageous endeavor, as I have shared with you in this article. 

The financial industry is growing for innovation and disruption, and neobanks are at the forefront of this transformation. By harnessing technology, data-driven insights, and a customer-centric approach, you can challenge traditional banking norms and create a financial institution that genuinely meets the needs of modern consumers.

At DashDevs, we understand the intricacies of building a neobank from scratch. Our fintech development expertise and our modular solution, FinTech Core, can accelerate your journey to launching a neobank. I encourage you to take action, explore the possibilities, and reach out to us to discover how we can partner with you to bring your neobank vision to life.

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BY igor tomych

MARCH 11, 2024

FEBRUARY 25, 2024

JULY 11, 2023

JULY 6, 2023

14 min read

JULY 5, 2023

BY inna abolikhina

12 min read

What Is a Neobank?

We are committed to sharing unbiased reviews. Some of the links on our site are from our partners who compensate us. Read our editorial guidelines and advertising disclosure .

Neobanks are a type of financial institution run by fintechs, tech companies that use technology to innovate the finance industry. Also referred to as “challenger banks,” these institutions typically have minimalistic services limited to checking and savings accounts. However, what they lack in service variety and physical locations, neobanks make up for in perks like zero or low fees, convenient mobile apps, and more.

Let’s review the benefits, drawbacks, and typical characteristics of a neobank.

Table of contents

How do neobanks work, how do neobanks differ from traditional banks, how do neobanks differ from online banks.

• Examples of neobanks
• Benefits of neobanks
• Drawbacks of neobanks

Neobanks FAQ

The takeaway.

Before we dive in, let’s define what bookkeeping actually is.

Basically, bookkeeping is the process of recording and organizing a business’s financial transactions, and a bookkeeper is a person responsible for that process. Bookkeeping is the primary way business owners can figure out if their business is profitable: keeping an eye on your numbers lets you identify financial challenges early on and address them before they blossom into full-fledged crises. Bookkeeping also helps you identify areas of profit expansion—areas you might not have noticed without clear financial reports you can interpret easily.

In general, a bookkeeper records transactions, sends invoices, makes payments, manages accounts, and prepares financial statements. Bookkeeping and accounting are similar, but bookkeeping lays the basis for the accounting process—accounting focuses more on analyzing the data that bookkeeping merely collects.

By signing up I agree to the Terms of Use and Privacy Policy .

There are many ways neobanks differ from traditional banks , with the lack of physical branches being the most apparent. Rather than walking into a brick-and-mortar location to conduct financial transactions, neobank customers use an app or website to deposit a check or transfer money. (For many people, this is part of the appeal.)

Because they are run by technology companies, neobanks naturally provide a technology-forward, modern experience. Many neobank customers enjoy additional perks and benefits like low or zero fees, higher interest rates, or early access to paycheck funds.

Unlike traditional banks, neobanks aren’t chartered as banks by state and federal regulators and don’t extend credit to customers.

Neobanks are often confused with online or digital banks, since both institutions allow customers to set up financial accounts and manage money online. However, there are key ways these two institutions differ.

Online banks digitize the traditional online banking experience—essentially a transfer of physical banking services to the online realm. In contrast, neobanks are run by fintech companies and offer bank-like (but not true banking) services.

What are some examples of neobanks?

Many online financial services are actually a hybrid between traditional banking and digital banking . Here are a few of the true neobanks that are popular today:

• Chime: This well-known platform offers customers the chance to build credit, get advanced access to direct deposits, and enjoy a high annual percentage yield on savings accounts.
• Current: This fintech provides services such as mobile payments, Visa debit card, and fee-free overdrafts.
• Aspiration: Established with an emphasis on sustainability, Aspiration donates 10% of every dollar they earn to charities and offers high APY rates, unlimited instant transfers, and early direct deposit access.
• Varo: Although Varo was originally established as a neobank, the company was actually chartered as a full-service bank in 2020. The bank is free of monthly fees and overdraft fees, and does not require a credit check before customers establish an account.

Pros of neobanks

Wondering how small business owners might benefit from opening a checking or savings account with a neobank? Here are a few perks to consider.

Lower fees and higher APY rates

Because neobanks don’t have to maintain or staff a physical branch, they can offer low service fees, higher interest rates on savings accounts, or even fee-free accounts. This can offer a significant benefit to small business owners who don’t have easy access to capital.

Easy approval

Most neobanks have looser requirements than traditional banks and only take a few minutes to set up, making it easier for small business owners to be approved. Typically, you just need to provide your name, social security number, and email to get started.

Accessibility

Neobanks appeal to many small business owners because of their unparalleled convenience. Busy entrepreneurs can save time by managing all financial transactions through a mobile app or website. These transactions can be done at time, without having to visit a physical location.

Cons of neobanks

It’s important to weigh the drawbacks of neobanks too. These are a few reasons you may pause before setting up an account with a fintech company.

Limited services

Most neobanks have a short list of service offerings. And while this is fine for customers simply in need of a way to receive a direct deposit or withdraw money, it can be a big drawback to those who need to send wire transfers, deposit cash, or invest.

Online-only customer service

Of course, there’s no way to talk to a neobank employee in person, since everything is done online . You can probably reach a customer service representative via online chat, social media, or over the phone, but these options have their limitations.

What is the meaning of neobank?

A neobank is not an officially chartered bank—instead, it’s an online-only financial technology company that offers bank-like services to its customers, including checking and savings accounts.

If you're just looking for a bank that operates online, we have a list of our favorites .

What is the best neobank?

Neobanks like Chime and Current have become some of the most popular and highly-rated neobanks in the US, offering perks like mobile payments, early access to direct deposits, and high interest rates.

Is neobanking safe?

Neobanks are considered to be just as secure as traditional banks or credit unions . However, it’s always best to choose a neobank that has federal insurance—since those that lack it can present more risk.

What is a neobanking example?

Online-only financial institutions like Chime, Current, Varo, and Aspiration are examples of secure, reputable neobanks. These institutions are owned by financial technology companies and aim to eliminate many of the hassles that come along with traditional banking, such as monthly fees and in-person account setup.

Neobanks are a low-cost, convenient financial solution. Many customers see them as a welcome alternative to a traditional bank—but it’s important to note that neobanks are not actually chartered as banks. They’re owned by fintechs, less regulated than brick-and-mortar banks, and do not have physical locations, so all services must be conducted online.

Would you like to learn more about neobanks and online banking? Check out our blog post: Online Banking vs. In-Person Banking—Which Is Better for Your Biz?

Related content

• 10 Best Banks for Small Business 2023
• NBKC Bank Review: Online Banking for You and Your Business
• Axos Bank Review: Online Banking for Businesses Big and Small

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How to start a digital bank or neobank – a roadmap for newcomers

Posted on August 8, 2022

Want to start a digital bank, a neobank, or an e-wallet – read our article that provides a roadmap of all steps needed to implement your idea to the business.

Development of a business model

For any fintech entrepreneur, who wants to start a digital bank, a neobank or fintech company, it is evident that a business plan should come first. It is a living document with specific tasks to be complete to make your new business venture a success both – long-term and short-term. Furthermore, the business plan plays an important role when liaising with investors and regulators.

At the end of the day, if you don’t have a clear vision of the strategic plan and how you will implement it, there is a chance that your business idea will fail. Besides, it all starts with a well-documented business plan when you are looking to raise funds for your business idea. The strategic business plan should be laid out so that it is easy to read and understand for investors, regulators and other essential stakeholders.

The business plan is also the first thing fintech regulators ask as they use it to evaluate your business, risks, and future perspective. The strategy must contain information about in which markets the company plans to operate, its target customers, and its solutions and UVP. In addition, financial forecasts must accompany the plan for three years.

Formation the company, opening an office

Depending on jurisdiction, you may need to register the company as a legal entity and open the office before you apply for a license. Some of regulators do not require to register the company, but only to reserve a company name (e.g., Spain).

From the point of a Fintech regulator, an office is a place, where the company’s general management can meet to take important decisions. The option of coworking office spaces is long gone and all regulators require a real office with local employees. You need to show your regulator that you are ready to start operating. This is why your office is proof that you are serious about your business.

Get licensed and regulated

The next step to start your neobank, digital bank or fintech company is to obtain a license or become an EMD/PSD Agent of a licensed company.

One of the critical factors is to define how your business will be managed from the regulator’s side. Quite a few start-ups prefer to use a license shelter or so-called umbrella of other partner licenses – both e-money and payment. There are many different options available that require new players to operate and compete on their own.

Obtaining an e-money or payment license

E-money or Payment licenses are best suited for launching a digital bank or e-wallet. What are the steps of the license issuing process?

In general, depending on a regulator, the license issuing process maybe 5-12 months long, but the process may last for up to two years in some countries.

STEP 1 – Introduction to the Regulator

Some regulators, e.g., Lithuanian regulator – the Bank of Lithuania , Latvian Regulator – FKTK or Spanish Regulator – the Bank of Spain can invite candidates for a pre-application meeting and presentation to the regulator.

During this stage, the applicant answers the following questions to the regulator:

• What is the planned business model? What service do you plan to provide, and in what manner? Who will be the parties involved, and what functions, rights, responsibilities they will have?
• What will be the client base of the company?
• What is the structure of the company (group), the structure of the founders (to an individual)?
• Where does the capital come from, or what are the origins of the funds?
• Do you have any free resources (financial stability)?
• Depending on the business model and customer base – the AML topic will also be covered.

If the business meets the regulator’s requirements, then you will have to start preparing all documentation. For some countries, e.g., Lithuania, Latvia, you can have unlimited time to prepare documents. In the case of the Spanish regulator, you have only one month to submit all documents after receiving a positive response from the regulator.

Not all regulators have this step in the process, for example, the UK’s regulator, FCA , requires business to start the application with preparing all documents.

STEP 2 – Preparation and submission of all documents

During this step, the applicant fills all required forms and submits all documentation. This process requires consistent communication between the applicant and the consulting company like Advapay. The regulator usually comes with different questions regarding documents and can request additional information and documents.

STEP 3 – Formation of the team

This step begins as soon as you have a clear business model in mind and have chosen the jurisdiction. Depending on the regulator requirements, you may need to have from 2 to 8 people. Finding an experienced staff is quite a challenge and can take up to 2-4 months. And this is critical as you need to provide the information on the qualification and experience of your key personnel together with other documents. Additionally, the key personnel are obliged to go through the additional scanning procedure.

STEP 4 – Opening a business & safeguarding accounts

Opening a business and safeguarding accounts or receiving a letter certificate from the bank confirms opening a safeguarding account. The opening of a safeguarding account can take from 3 months – for this reason, we advise recruiting a consultant who can deal with this process – instead of doing it on your own.

STEP 5 – Pay the initial capital

Depending on the regulator you choose, you will need to pay an initial capital once your application is confirmed or after all documents are submitted. Some regulators may request you to pay the initial capital amount once you register your company before the application procedure.

STEP 6 – Authorisation and passporting (for EU countries)

After following through with all the steps, you will need to submit and get a confirmation from the regulator that it grants a license to provide the requested services. EU-based companies may apply for passporting to operate in specific countries.

Prepare your IT system for operations

The next important step to start your digital bank is setting up your IT system . For most jurisdictions, once you have applied for a license, you need to have a clear vision of what platform will you use – the one developed on your own or purchased from a vendor. In your answers to the regulator, you will also need to provide information about your solution, providers, security, etc.

Many regulators require to have a ready operating system to the date of the license issuing. However, some regulators give a year for Go live. After that time, they require to perform an audit, and if the audit is completed, then an operational permit is issued.

Develop your business infrastructure

When the license is received, and your IT system is ready to start your business, the next step is developing your payment infrastructure and creating partnerships.

One of the essential tasks is developing relationships with banks – opening business and safeguarding accounts. Some regulators/countries require you to open a safeguarding account before you apply for a license. For some of them, you will need confirmation from a bank. So, you will need to make sure that the bank is ready to open this account as soon as the license is obtained. You will need to get or activate your account (if you have opened the safeguarding account during the licensing stage) or open new (if you do not have the account opened). But in any case, the additional safeguarding account will be pros for your business.

To start issuing IBANs to your customers, you need to obtain a BIC number through SWIFT to connect to SEPA. But there are different ways to issue your IBANs – you can read about this in our previous article .

As soon as you have developed relationships with bank/-s and can issue your IBANs, you can start your business.

To automate some processes, to enable different functionalities and features, you will need to partner with other service providers, e.g., currency exchange providers, card issuers, AML/KYC solution providers, etc. For example, Macrobank Core Banking offers ready-to-use integrations with service providers. So, you will not need to spend some time and money on new integrations – just sign agreements with service providers and start your payment/e-money business.

In this article, we presented 5 main steps how you can start a digital bank, a neobank or fintech company. Any questions in mind – do not hesitatate to contact our team.

About Advapay

Advapay is a technology company providing the  Digital Core Banking  platform to empower fintech clients or digital banks to start their businesses and accelerate digital transformation. The platform delivers all essential functionalities, a front-to-back system and a set of tools to customise and bring new integrations. With Advapay, potential and existing customers can connect either to the cloud-based SaaS or on-premise software. Besides the technical infrastructure, the company provides  business advisory  and  fintech licensing services . Interested to learn more, please  drop us a message

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N26 Business Model: Changing banking for the better

The day I turned 18 in 2008, I went to the driving license authority and the nearby bank to open a bank account. I waited for 30 minutes just for someone to address me and hand over a bundle of forms, which themselves took another 30 minutes to fill. Opening a bank account in that era was a task in itself, involving dozens of unnecessary manual processes.

Little did I know that the entire banking ecosystem would be available at the touch of a finger. Such a banking system challenged the existing and cumbersome traditional banking and made banking accessible to millions who were excluded from the banking system. Such banks are called neo-banks (we will talk about them in detail). 

One such company N26 has been a true pioneer of neo-banking since almost the concept’s inception. That made me curious to learn the business model of N26. We will also touch upon the marketing strategy of N26.

How does N26 aim to become the   first mobile bank the world loves to use?

What is a neo bank.

A Neo bank (also known as an online bank, internet-only bank, virtual bank, or digital bank) is a financial institution that operates exclusively online without traditional physical branch networks. Users can perform their financial transactions through Neo bank’s application or website. 

Neo banks offer low fees (no infrastructure cost), better customer service (Neo banks accept users with inadequate credit history typically rejected by banks), and enhanced technology (leverage Artificial intelligence). The market size of neo banks was estimated at nearly  35 billion U.S. dollars  in 2020.

What are Neo-banks? Neobanks are digital banks without any physical branches, offering services that traditional banks and more, and doing so efficiently. They leverage technology & artificial intelligence to offer personalized services to customers. (2/17) pic.twitter.com/cEC9qMMAv3 — Aditya Shah (@AdityaD_Shah) November 10, 2021

The range of services provided by Neo banks is not as broad as that of their traditional counterparts. The business model they tend to apply also differs from incumbent banking institutions’ model—a large portion of the income of Neo banks is mainly made up of transaction fees received when customers pay with their debit card. 

Are Neo Banks the future?

What is N26?

N26 is one such leading European Neo Bank headquartered in Berlin, Germany. The company was founded as a financial technology startup in 2013 by Valentin Stalf and Maximilian Tayenthal with a vision to transform the way individuals manage money and change banking for the better. The name is derived from the 26 smaller cubes in a complete Rubik’s Cube.

N26 has a full European banking license, state-of-the-art technology, and no branch network. N26, as of 2021, had  7 million customers in 25 markets  and was valued at US$9 billion. N26 aims to offer a 100% digital banking experience that’s designed to be transparent and straightforward, managing a monthly transaction volume of ~5.5 billion Euros.

Since its inception, N26 has raised over $1.7 billion in 8 funding rounds from investors like Tencent, Earlybird Venture Capital, Allianz X, Insight Venture Partner’s and Peter Thiel’s Valar Ventures.

By 2015 N26 had launched its products for the first time, unveiling its free N26 digital bank accounts and N26 Mastercards in Germany and Austria. But as soon as N26 got a German banking license in 2016, it took a conscious decision to build in the cloud to leverage the agility and scalability of cloud and modern core banking platforms.

N26 chose  Mambu’s cloud banking platform  to transition from a newly launched single-market entity to Europe’s first pan-regional mobile bank as the platform provided the agility, customer experience, and the ability to scale. In the below video, N26’s tech lead shares their approach to development and delivery.

N26 Business Model in Detail

N26, with its product innovations, is setting the standards high in the banking industry, which is heavily regulated, and infamous for lack of transparency. N26 is offering its users a suite of products and features through mobile that is transparent, comprehensive, and inclusive. 

Let’s first understand the value proposition of the N26 business model:

Free Online Bank account – N26 in its Basic plan allows users to create a free bank account in just 8 minutes. Users can send, receive, and manage their money in one place via the N26 mobile app or the N26 WebApp. No paperwork. No queues. No account fees. Users get a free virtual debit card powered by Mastercard and can enjoy three free cash withdrawals per month from NFC-enabled ATMs.

Making security a priority – Funds in the N26 account are protected up to €100,000 by the German Deposit Protection Scheme. N26 bank account comes with three-tier security measures that protect all transactions. N26 cards are 3D Secure (3DS) enabled to enhance security during online transactions.

Insights on spending habits – With N26 Statistics, users can gain insights into their spending habits in real-time. Users can track their payments and get a clear overview of their upcoming regular payments.

View this post on Instagram A post shared by N26 (@n26)

Split the Bill –  Split the Bill feature lets users split payments made from N26 accounts with friends or family members, even if they’re not N26 customers. It provides the convenience of not asking for separate bills.

Budgeting tools – N26 Spaces is a feature in the application that allows you to budget easily and save money. You can name your space as per your goal. For ex- you want to buy an electric bike. You can create a space with the name “electric bike” and put funds aside by separating your savings from expenses.

N26 Insurance-  With N26 Insurance, users can insure their laptops, mobile, or smartwatches against theft, malfunctions, liquid damage, and accidental damage. Interestingly you can also get your bike, home and pets insured.

Mobile Transfers – Users can make free bank transfers in real-time with N26 MoneyBeam that instantly send, receive, or request money from other N26 users using just an email or phone number.

Zero Transfer Fee – When consumer purchases in another country or currency, banks, and card companies often charge fees to facilitate the transaction. At N26, all accounts feature free card payments worldwide without any transaction fees.

Then how does N26 make money? Let’s deep dive into the revenue aspect of N26’s business model.

N26 wouldn’t disclose a revenue figure for 2020 but said gross revenues doubled to nearly 100 million euros in 2019, from 43.6 million euros a year earlier, while decreasing its losses from 165 million euros to 110 million euros.

In 2019, N26 primarily earned revenue net commission income (driven mainly by subscription revenues and the provision of payment transaction services) which increased by 244%, amounting to EUR 47.5 million. N26 significantly bolstered its net interest income by 82% to EUR 9.3 million, expanding treasury activities and credit-based products and services.

In 2021, N26 expanded beyond its subscription, core banking, and payments business to new services, increasing its bandwidth of banking revenue streams. Let’s break down each revenue stream in detail.

Subscription Fees – There are four different plans for personal usage.

• The standard plan  is free of charge. You can still enjoy 100% mobile banking, up to 3 withdrawals, insights on spending, and complete account security as per the German Deposit Protection Scheme. In the free plan, you only get a virtual debit card.
• N26 Smart plan , priced at €4.9/month, along with features of standard plan offers Spaces subaccounts, two extra withdrawals, and premium partner offers. You can even round up every card transaction to the nearest euro and automatically save the difference in a space. You can choose your plastic debit card from 5 colors that best fit your style.
• N26 You plan, priced at  €9.9/month, along with features of N26 Smart plan offers travel insurance packages, mobility insurance, and winter sports insurance, 
• N26 Metal plan , priced at €16.9/month, along with features of N26 You plan, offers car rental, phone insurance, three extra withdrawals, and a dedicated support line for N26 Metal subscribers. You get a metal card in this plan.

Overdraft Interest – An overdraft allows any banking user to borrow a certain amount of money from the bank if your account is negative. As an N26 customer, users can get an overdraft of up to €10,000. N26 makes money by charging an interest rate of  8.9%  to the overdraft.

Insurance Commission – As mentioned above, N26 Insurance is a product that insurance electronics, homes, pets, etc. Unless a user has subscribed to N26 Metal, in which insurance is already included, the user can separately pay a premium. Here N26 makes a minimum of €4.76/month per insured product.

Buy Now Pay Later – Many fintech companies champion the concept of Buy now pay later. N26 allows users to split their expenses up to €500 in 3-6 months installment. N26 makes money by charging an annual interest rate of 7.49% to 11.99%, depending on the user’s internal credit score.

Klarna is another champion of Buy Now Pay Later. How do such companies make money?

Loan Interest – N26 offers loans to users of up to €25,000 with N26 Credit for education or startup or furniture, or anything else without any paperwork, with a payback period of 6-60 months. N26 has also partnered with Germany’s leading loan marketplace, auxmoney, to bring more loan options to the users. N26 makes money in this case by charging an interest rate on the loan amount, starting from 1.99% p.a.

Interest on cash deposits – How does any bank make money? Banks use the cash deposits of account holders in loans or financial markets and earn interest. They share a part of it with their users as interest on their savings. N26 does the same. N26 offers up to  1.38%  interest on the cash in its savings account.

N26 Marketing Strategy

N26 knows very well that most of its audience is millennials and Gen Z, who are intelligent and conscious of the brand they associate with. N26 has adopted a minimalist approach in its marketing strategy by keeping advertising uncluttered and straightforward. N26 wants to ensure that its users feel prestige while using its card. This can be seen in the way it has designed its debit cards.

N26, with its marketing campaigns, wants to communicate that it aims to solve the pain points that customers usually have with traditional banks: hidden fees, slow and complex sign-up process, poor digital experience. Let’s see a couple of campaigns and analyze what they signify about the brand.

#nobullshit campaign

There is a lot of bullshit flying around these days. It can be hard to filter through what’s true and what’s, well — bullshit. To target millennials who are not afraid to call out any bullshit, N26 launched an outdoor campaign with billboards around the city. Consumers are fed up with the existing banking system, and N26 wants to call on that. 

“Young, Smart and Freelance” campaign

The campaign was specifically designed for the Italian market. The percentage of young (25–34) Italians who are self-employed climbed to  16.3%  (That’s almost double the European average and the target market of N26). Through stories of freelance professionals, N26 highlighted the solutions offered by N26 business accounts to help them manage their finances, from budgeting to saving for future projects.

With a market share of over  20%  in French and German markets, N26 has become a true pioneer of the Neo Banks that aim to be loved by all. N26 has become one of the world’s fastest-growing banks today—by delivering a simple and intuitive banking experience to its customers every day.

The Neo Banking market is still nascent with many regional players (Chime in U.S. or Revolut in the U.K. or Paytm in India), and N26 has a lot of ground to cover. It would be interesting to see how N26 makes a space for itself in international markets. Let’s wait and watch!

A passionate writer and a business enthusiast having 6 years of industry experience in a variety of industries and functions. I just love telling stories and share my learning. Connect with me on LinkedIn. Let's chat...

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16 Neobanks or Banking Fintech Firms and What They Offer

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Jump to a specific neobank or category:

For credit and savings: HMBradley || Oportun

For credit building: Sesame Cash || MoCaFi || Dave

Investor-friendly: M1 || Stash || Acorns || Albert

Traveler-friendly: Monzo

Teen-friendly: Greenlight || Step

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Emerging: Bunq || Totem

List of neobanks we've reviewed

Neobanks are financial technology — or fintech — companies that typically offer banking accounts through mobile apps and desktops with eye-catching features like low-cost credit or cash-back rewards. Some neobanks offer high-yield savings accounts , loans, credit cards or investing products, too.

Neobanks generally operate without branches and, since most lack bank charters, they partner with banks to provide accounts insured by the Federal Deposit Insurance Corp. All neobanks in this article have FDIC-insured accounts, but in cases of neobanks handling investments or other nondeposit activity, not all accounts are FDIC-insured.

Member FDIC

SoFi Checking and Savings

4.60% SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

EverBank Performance℠ Savings

on Wealthfront's website

Wealthfront Cash Account

on Betterment's website

Betterment Cash Reserve – Paid non-client promotion

5.50% *Current promotional rate; annual percentage yield (variable) is 5.50% as of 4/2/24, plus a .50% boost available as a special offer with qualifying deposit. Terms apply; if the base APY increases or decreases, you’ll get the .75% boost on the updated rate. Cash Reserve is only available to clients of Betterment LLC, which is not a bank; cash transfers to program banks conducted through clients’ brokerage accounts at Betterment Securities.

Marcus by Goldman Sachs High-Yield CD

5.10% 5.10% APY (annual percentage yield) as of 04/29/2024

EverBank CD

5.05% 5.05% Annual Percentage Yield

Synchrony Bank CD

4.90% Annual Percentage Yields (APY) is subject to change at any time without notice. Offer applies to personal non-IRA accounts only. Fees may reduce earnings. For CD accounts, a penalty may be imposed for early withdrawals. After maturity, if your CD rolls over, you will earn the offered rate of interest in effect at that time. Visit synchronybank.com for current rates, terms and account requirements. Member FDIC.

5.00% 5.00% APY (annual percentage yield) as of 04/29/2024

Discover® Cashback Debit

Chase Total Checking®

Deposits are FDIC Insured

Chime Checking Account

Discover® Money Market Account

» Learn more: What is a neobank?

Our main list shows neobanks that NerdWallet hasn’t reviewed for its deposit accounts yet but that we find notable or promising (skip to our methodology for how we chose this list). The second list shows neobanks that we have reviewed, including some digital wallets like Cash App and Venmo, that can be considered neobanks based on similar features.

Neobanks: Their role, disadvantages and benefits

Fintech firms — that are also known as neobanks — have been around as challengers to traditional banks in the U.S. for more than a decade, beginning with the now-defunct Simple in 2009, long before the term “neobank” caught on. As of 2022, there are close to 400 neobanks worldwide, according to the global business consulting firm Simon-Kucher. Neobanks are often different from online banks , which are internet-based banks or divisions of traditional banks, such as Marcus by Goldman Sachs, Capital One and Ally.

Neobanks face some disadvantages: Simon-Kucher estimates that only 5% of neobanks worldwide have reached profitability, highlighting a key challenge for this newer type of banking institution. Plus, some once-innovative services like early direct deposit and free access to nationwide ATM networks have become commonplace among U.S. neobanks, upping the competition to stand out. Since many aren’t banks, there’s also a less clear process for what happens when neobanks fail than when banks do.

» Learn more: 5 questions to ask before opening a neobank account

Despite challenges, the reasons why people use neobanks are clear. Neobanks have drawn in millions of consumers to their checking or savings accounts with lower costs and more technology-driven perks than traditional banks usually provide. In fact, neobanks were early adopters in offering early direct deposit and not charging overdraft fees . They also played a key role in the COVID-19 pandemic during the first stimulus payment rollout, as a 2021 NerdWallet report found. In addition, some neobanks have emerged to focus on underrepresented communities that traditional banks often overlook, including Black and Native Americans.

For credit and savings

HMBradley lets you earn high rates on savings if you meet certain requirements. The more qualifications you meet, the higher your rate can be. Requirements include having a positive monthly cash flow, receiving at least $500 in monthly deposits and spending $500 monthly on a linked credit card. There are no monthly maintenance fees. The linked credit card also lets you earn up to 1.5% cash back on purchases. HMBradley, founded in 2019, partners with New York Community Bank, a division of Flagstar Bank N.A., to offer FDIC insurance to depositors.

Oportun was founded in 2005 and offers a variety of services in addition to its credit and savings products, including personal loans and investing. It partners with Pathward N.A. and other partner banks to provide FDIC insurance for its banking products. Customers who have a personal loan with Oportun get one free year of access to the Oportun app, which is designed to help customers with setting goals, increasing savings and reducing overdrafts. For customers who don’t have a personal loan, there is a free 30-day trial. The fee after any free trial is $5 per month.

For credit building

Sesame cash.

The online lender Credit Sesame, founded in 2010, launched a free digital banking account in March 2020 that focuses on serving people living paycheck to paycheck. The Sesame Cash account provides a way to build credit history without a credit card as well as access to credit monitoring alerts and your credit score. There’s also cash back on debit card purchases. However, the account charges a $9.99 monthly fee and a $3 inactivity fee unless you meet these requirements: Any transactions monthly for the inactivity fee and a minimum amount of direct deposits or purchases monthly for the monthly fee. And there’s no customer support number. Credit Sesame partners with Community Federal Savings Bank to offer its FDIC-insured account.

» COMPARE: Best budgeting apps

MoCaFi, or Mobility Capital Finance, is a Black-owned digital platform launched in 2016 that partners with Sunrise Banks N.A. to provide free checking to serve largely unbanked and underbanked communities, with a focus on closing the racial wealth gap. It provides a bill pay feature that lets customers report rent payments to major credit bureaus to build credit history. As a rare perk, MoCaFi works with its third-party partners to provide free cash deposits at various retailers and free mobile check deposits with fast release of funds. A $5.95 inactivity fee is charged monthly for accounts that are unused for one year.

» More about MoCaFi and similar fintechs: Check out neobanks with a community focus

Dave launched in 2017 as a paycheck advance company and expanded to offer spending accounts that let you round up purchases and pocket the difference as savings. You can also get a small advance on your next paycheck without interest charges or a credit check, and you can build credit history through repayments. In addition to these savings and credit features, Dave provides budgeting that factors in upcoming bills and the ability to search for side jobs in its mobile app. There are no minimum balance requirements and no fees for overdrafts or for using ATMs within the nationwide MoneyPass network. However, there are fees for advances, which are offered as an emergency overdraft service. Dave partners with Evolve Bank & Trust to offer FDIC insurance to deposit customers. (Read our review of Dave’s paycheck advance service.)

Investor-friendly

The tech firm M1, or M1 Finance, launched in 2016 and began as an online investment platform that has since expanded to encompass accounts for saving and borrowing money. M1’s high-yield savings account has a competitive annual percentage yield but only for customers who pay a $10 monthly subscription fee; otherwise, the interest rate is comparatively low. Another downside is that M1 doesn’t support ACH transfer connections with more than a dozen banks, particularly ones with partnerships with other neobanks. To offer FDIC insurance for its savings account, the firm partners with B2 Bank, which M1’s CEO bought in 2021. M1 has a checking account that launched in mid-2020, but the firm plans to close all existing checking accounts on Oct. 31, 2023.

Founded in 2015, Stash offers an online account for customers who want to shop with a debit card and also transfer funds into investments. Premium subscribers who shop at certain brands receive an additional perk: fractional shares of matching stock. The fintech charges subscription fees of either $3 or $9 a month, based on subscription level (though the first month is free). Stash partners with Stride Bank N.A. to offer FDIC insurance for customer deposits. Note that investment balances aren't FDIC insured. (Read the full review .)

The microinvesting firm Acorns, founded in 2012, expanded beyond its automated investing for hands-off investors into banking in 2018 with Acorns Checking. The main selling point is having one app for spending money and investing portions of each paycheck or debit card purchase. There’s a limited rewards program where certain purchases earn money that goes to your investment account. Acorns has three account packages with monthly fees ranging from $3 to $9, and Acorns Checking is available for all tiers. Acorns partners with Lincoln Savings Bank or NBKC Bank to offer its FDIC-insured banking account. (Read Acorns investing review.)

Albert started in 2016 as a money management app, and it launched a personalized banking service called Albert Cash in August 2021. Albert Cash is a banking account that earns cash back and includes the following benefits: no-interest cash advances of up to $250; integrated budgeting and savings tools; and a personalized customer support service, called Genius, that helps customers invest and automate their savings. Albert partners with Sutton Bank to provide banking services, and it partners with Axos Bank, Coastal Community Bank and Wells Fargo to provide FDIC insurance on savings accounts.

Traveler-friendly

Founded in 2015, the United Kingdom-based company Monzo launched its digital banking platform in the U.S. in 2022. Its spending account’s most notable perk is no foreign transaction fees, including no foreign ATM fees (other than those charged by the ATM owner). Other features that can help during traveling include real-time transaction alerts and the ability to freeze a card if it’s missing, and there are no monthly fees or overdraft fees. One drawback is that customer support by phone isn't always available and it may need to call you back, though chat support is available all hours during weekdays and limited hours on weekends. Monzo’s accounts are offered through its partnership with Sutton Bank.

Teen-friendly

Greenlight Financial Technology Inc. was founded in 2014 and the Greenlight card and app for kids launched in 2017. Greenlight offers family-friendly features, including options to create spending controls and notifications, connect chores to allowance and invest together. Cash back earned from spending goes to savings, which can earn a high rate depending on your subscription plan. The Greenlight app’s banking services are offered through its partnership with Community Federal Savings Bank. Greenlight doesn’t charge overdraft fees or ATM fees, but there is a monthly fee; the amount depends on the plan you choose. Greenlight also partners with some banks and credit unions to offer its products for free through those financial institutions.

» COMPARE: Check out more banking apps for kids and teens

Step was founded in 2018 and offers a variety of products and services that can help teens with their finances. It provides FDIC insurance on its deposits through its partner bank, Evolve Bank & Trust. Step’s savings account has a high interest rate if customers set up direct deposit and they deposit $500 or more per month. The app allows customers to round up their purchases to the nearest dollar to contribute to their savings account as well as set savings goals. Other features include the ability to get paid two days early and to earn rewards by spending. Step also helps teens build their credit and invest before they turn 18.

Migrant-friendly

Founded in 2019, Majority provides banking services through its app and in partnership with Axiom Bank N.A. and Sutton Bank. Majority doesn’t require a Social Security number for its checking account and debit card, and it offers features that are especially migrant-friendly: customer support in different languages, fee-free money transfers, unlimited free calls to about two dozen countries and low rates for calls to other countries through the Majority app. Direct deposits are federally insured and can be available up to two days early. Majority doesn’t charge overdraft fees or foreign transaction fees when using the debit card, but there is a $5.99 monthly fee.

The Latino-founded neobank Comun, which started in 2021, focuses its offering for the Latino community, including helping migrants better access financial services. Applicants can use a Social Security number, taxpayer identification number, foreign passport or other form of ID during sign-up. The spending account has no monthly fees or minimum balance requirements, and it works with several domestic and international money transfer apps such as Remitly and Xoom, which can help when sending money to family and friends in different countries. Depositing cash is available at 1,500 ATMs at Walgreens and CVS, which is far fewer than what some other neobanks provide. Comun partners with Piermont Bank to offer its banking services.

Founded in 2012, the Dutch digital banking firm Bunq plans to enter the U.S. after becoming one of the biggest neobanks in Europe — with the rare combination of having a European bank charter and being profitable. The U.S. account details haven’t been released on its website, but looking at Bunq’s European accounts, there are more than 50 mobile banking features, including the ability to budget and create subaccounts, a Mastercard with the user's chosen name, joint savings accounts, and the ability to have multiple currencies in one place (the core feature of what’s known as a multicurrency account ). However, Bunq charges monthly fees on all of its spending accounts, and not all features are available for all accounts. In April 2023, the neobank announced that it has applied for a U.S. bank charter.

Considered the first and only Native-owned neobank, Totem founded its platform in 2022 to help Native Americans better access the mainstream financial system. Applicants sign up with their tribal affiliation, and Totem partners with tribes. The neobank has no monthly fees or minimum balance requirements, plus it has some typical neobank features such as two-day early direct deposit and free ATM access nationwide. Totem offers its FDIC-insured banking services through its partnership with First Pryority Bank.

Methodology

We mostly considered neobanks (or fintech banking firms) that have the following: consumer spending and/or savings accounts with no or low monthly fees; clear and useful features that traditional banks don’t often provide; venture funding as a metric for industry interest; and search volume as a metric to gauge consumer interest. Our list focuses on neobanks that we don’t already review for their consumer deposit accounts on our website, followed by a list of neobanks we’ve covered with links to our reviews. In cases where we've reviewed a neobank for different financial offerings, we've typically included the review that focuses on consumer deposit accounts.

Neobanks we’ve reviewed

Standard (nonbank) neobanks.

These are fintech firms that follow the trend of partnering with banks to offer FDIC-insured deposit accounts.

Neobanks that are online banks

Although not typical for neobanks, some end up getting bank charters to operate as banks themselves. So why still call them neobanks? They often have features more like nonbank neobanks than online banks, many of which don’t offer checking accounts.

Digital wallets with banking services

These digital wallets, also known as peer-to-peer transfer apps, expanded into banking with debit cards and early direct deposit services. One note of caution: Not all types of balances at these digital wallets have FDIC insurance, such as in-app balances from sending money. Accounts associated with banking services such as debit cards or direct deposit or check deposit are FDIC insured at partner banks.

Fintech firms with cash management accounts

Some nonbank fintech firms focus on brokerage or investment accounts while also offering a type of banking account called a cash management account . This account often combines features from checking, savings and/or investment accounts.

From credit tracking tools to travel perks, modern checking accounts offer more than their predecessors did. But before getting one, check whether the fintech company is a bank or partners with a bank, and see which features would best serve your financial life.

On a similar note...

Find a better savings account

See NerdWallet's picks for the best high-yield online savings accounts.

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Frequently asked questions, 1. what is neo for business.

neo for business is an all-in-one platform for banking & beyond banking business needs of MSME customers. It aims to offer a truly seamless business banking experience by combining everything from banking to invoicing, bulk payments, payment gateway, expenses & automated bookkeeping

2. Who can use neo for business?

An individual or sole proprietor, holding a Current Account with Axis Bank can register on the platform. A user who does not have a Current Account with Axis Bank can sign up as a guest user to explore and view the features available on the platform. However, to enjoy the full benefits of the platform, you need to open a Current Account with Axis Bank

3. Is there a fee for using neo for business?

No. Axis Bank does not charge a fee for using neo for business. Your telecom operator may charge for the use of data (internet browsing) or for SMS service on your mobile device.

4. Which services are available to the ‘Guest Users’?

As a ‘Guest User’, you can open a Current Account instantly with video KYC

5. Is the neo for business secure for transactions?

Yes, neo for business is completely secure, with end-to-end encryption and 2 factor authorisation using OTP on your registered mobile number, to ensure all your transactions are protected.

6. How do I update my address, apply for a cheque book and manage debit card limits through neo for business?

The below services will be available on neo for business very soon. In the meanwhile, please use Retail Internet Banking/Retail Mobile Banking to access the same. 1. Current Account servicing such as address update, cheque book servicing, debit card servicing etc. 2. Bharat Bill Payment Services 3. Book and Liquidate FD

7. What are the restrictions when a beneficiary is added?

The added beneficiary should have completed the cooling period timeline of 30 mins. Post that there is a transaction value limit of INR 50,000 for first 24 hours. You can use the payout link to make payouts up to INR 50,000 and avoid the cooling period restrictions.

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Startup neobank Mercury is taking on Brex and Ramp with new bill pay, spend management software

Digital banking startup Mercury is layering software onto its bank accounts, giving its business customers the ability to pay bills, invoice customers and reimburse employees, the company has told TechCrunch exclusively. The additional features puts the company in even more direct competition with the likes of Brex and Ramp, two rival fintechs that have for years been fighting for market share in an increasingly crowded space .

The fintech, which has been offering banking services to startups and other businesses since 2019, is first expanding by offering accounting automation and more sophisticated bill pay features with new software that will be integrated with its bank accounts, executives have told TechCrunch exclusively. This summer, it will also begin offering invoicing and employee reimbursement.

Mercury says that it has over 200,000 customers sending $4 billion in outgoing payments every month via its platform. 

“As companies get a little more sophisticated, they want to have more controls around those payments in terms of approvals and they want those payments to integrate better with their accounting system,” CEO and co-founder Immad Akhund told TechCrunch in an interview. “Our plan is to continue to add more of these kinds of building blocks to the bank and to [customers’] financial stack.”

Competitively speaking, the moves pit Mercury up against fintech companies beyond just Brex and Ramp such as Navan, Airbase and Mesh Payments, as well as incumbents such as Bill.com, which also offers an invoicing solution.

In particular, it positions Mercury in even more direct competition with Brex, which also offers bank accounts, corporate cards, bill pay and expense reimbursement. The two companies were among the fintechs that benefited the most when Silicon Valley Bank imploded in 2023 — although Brex’s growth surge was reported to have stalled some last year.

Although Mercury is well-known in the startup world and that’s the group it started out serving, Akhund says that startups today make up less than 40% of its customer base as the company has diversified over the years. E-commerce companies are its second largest customer base. Ramp CEO and co-founder Eric Glyman recently told TechCrunch that venture-backed startups represent a “minority” of its customer base . Brex initially focused more on startups before announcing a push into the enterprise and its own foray into software, then a de-emphasis on smaller businesses , and then later a renewed commitment to startups .

New workflows

With the advanced bill pay software, customers will be able to pay bills directly from their bank accounts with features such as AI populating bill details, duplicate bill detection and the ability to approve payments on mobile and via Slack.

Previously, Mercury business customers could make payments to vendors and it’s had pieces of the bill pay feature for a while, including optical character recognition (OCR) of invoices, “but it didn’t address the fuller workflow of bill pay in a way that would completely replace third-party bill pay tools for larger customers,” the company said.

On top of that, the company is also now providing accounting automations, including a new NetSuite integration, that will allow for things like categorizing and syncing bills and expenses when they are initiated. 

This summer, Mercury will also offer businesses the ability to build professional invoices, allow customers to pay with credit cards or directly from their bank (via ACH) and the ability to send automated invoice reminders. They also will be able to set up reimbursement policies and monitor spend.

The new software “includes the ability to establish finer approval controls and accounting integrations so all invoice activity is automatically recorded properly,” the company told TechCrunch. “So we’re launching with more of the business enterprise resource planning (ERP)-type features built on top of the money movement aspects of bill pay that we already had.”

Access to the new workflows is free until August 1. After that, the company will offer a variety of paid plans depending on the size of a company and its needs — ranging from $35 to $350 a month.

Like other digital banks, Mercury is not itself a bank. It provides banking services through partners Choice Financial Group and Evolve Bank & Trust. It began offering a corporate credit card about 18 months ago.

Square alum Dan Kang, who serves as Mercury’s VP of finance, said that the types of customers that Mercury has makes the company ripe for offering additional products.

“It’s not just that people are parking money in Mercury post-SVB,” he told TechCrunch, noting that the finance team at Mercury itself has been beta testing all the new products. “They’re actually really using this to operate their business.”

The expansion into software is not the only branching out that Mercury has done as of late. The startup also recently expanded into personal banking. Besides earning revenue off of interchange fees and the interest rate spread, Mercury will make money through that new offering by charging users an annual subscription fee of $240 upon the first deposit.

The moves all come at an interesting time for Mercury, which made headlines earlier this year for being the target of federal scrutiny around its practice of allowing foreign companies to open accounts through one of its partners, Choice Bank, according to a report by The Information .

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• Best Neobanks

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Neobanks are steadily growing in popularity among tech-savvy consumers as a banking option. Also known as challenger banks, neobanks are tech firms that offer online-only financial services and transactions through online and mobile banking.

Those who choose to bank with a neobank will receive many of the same financial products and services as traditional banking institutions and the added benefit of lower fees and higher interest rates due to the lower overhead costs of online banks.

To determine the Best Neobanks of 2024, GOBankingRates ranked leaders in the category based on many factors, including:

• Monthly fees
• Minimum balance needed in account to earn APY

Savings APY

• Products and services offered
• Mobile app ratings
• Extra benefits and perks

Here are GOBankingRates’ Best Neobanks of 2024.

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology .

20 Years Helping You Live Richer

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Compare the Best Neobanks

Best for Savings Tools

Invest spare change on every purchase

Read Full Review

Best for Investing

Automated Investing

Best for Mobile App

Fee-free overdraft up to $200 1

Best for Cash-Back Rewards

Crypto trading

Best for Cash Bonuses

Earn money with surveys

Best for Competitive Rates

Refer-a-friend bonus

One Finance

Best for High APY

Earn cash back on favorite brands

Best for Foreign Transactions

Commission-free stock trading

Best for Interest Rate

Cash advances

Wealthfront

Best for Investing and Savings Mix

Automated investing

GOBankingRates Best Neobanks

Best for SAVINGS TOOLS

Products Offered

Checking, savings, investing

Monthly Fee

WHY WE LIKE ACORNS

Acorns covers many of your financial needs and makes the nickel-and-dime tasks seem more approachable. This neobank has a variety of savings products and tools all of which are designed to not only help you store your spare change but also invest it. You can even get cash-back rewards at select retailers. 

The management fees for small accounts can be on the expensive side, however, the automatic round-ups of Acorns makes saving and investing so easy it can be worth it. In today’s economy, where and how you save is important, and with Acorns you can really make every penny count. 

PROS & CONS

• Automated saving and investing
• No required opening deposit or minimum balance
• Competitive interest earned on your funds
• Must subscribe to a paid plan that costs $3-$9 per month
• No physical checks

WHO IT’S BEST FOR

Acorns is best for individuals who want to save and invest without thinking too hard about it. Depending on the subscription plan you select, Acorns’ automatic saving and investing tools will help you build a portfolio that works for you — all you have to do is use your Mighty Oak debit card.

READ FULL REVIEW

Best for INVESTING

WHY WE LIKE BETTERMENT

Betterment provides all the tools you need to start your investing journey, especially if you are starting to make big investments. Betterment’s robo-advisor guides you through picking an investment portfolio for each of your goals. If you don’t know exactly what to invest in, its algorithms can help match you to a diversified portfolio based on your goals and risk tolerance.

It also helps that Betterment’s Cash Reserve Account ranked as one of GOBankingRates’ Best High-Yield Savings Accounts of 2024 with a competitive APY and no fees or minimums.

• High savings APY
• Access to investing products and services
• Limited banking products (one checking and one savings account)

Those who want to be able to save their money – and earn a high interest rate – while investing through the same platform may find the perfect solution in Betterment.

Best for MOBILE APP

Checking, savings, secured credit card 3

Savings APY 2

WHY WE LIKE CHIME

Holding the twofold distinction of being ranked as one of GOBankingRates’ Best Neobanks in 2024 and the No. 1 most-loved banking app, Chime is all about delivering a smarter way to bank.

Some of the benefits of banking with Chime include no monthly fees, strong Annual Percentage Yields (APYs) to grow your money fast and secure and interest-free credit cards to help you build credit. This neobank also takes the security of your money seriously and is FDIC-insured to protect your funds so you can focus on building your wealth.

• No monthly or overdraft fees
• 24/7 customer service
• Large network of fee-free ATMs 4
• Low savings rate compared to most online banks/neobanks

Chime works best for customers comfortable with a mobile-only banking experience. Its lack of fees, customer service and fee-free credit card (that’s easy to qualify for) are what make Chime shine.

Best for CASH-BACK REWARDS

Savings, crypto trading

WHY WE LIKE CURRENT

There’s now a seemingly endless crop of neobanks popping up, but Current distinguishes itself with its unique product offerings. For starters, it offers a crypto trading platform, which many other neobanks do not. Its checking product also stands out. Perks include no overdraft fees and accessing your paycheck up to two days early when you sign up for direct deposit. Current also makes it easy to earn cash back — you can earn up to 7x the points on purchases at thousands of participating merchants, which can be redeemed for cash back.

While Current is designed for those looking to build credit — and it’s a great option for that — you don’t need to be in credit-building mode to make use of the various offerings provided by this mobile-only bank option.

• No balance minimums
• Can get points redeemable for cash back by using debit card at select merchants
• Solid APY on Savings Pod balances
• Low spending limit on debit card
• Limited product lineup

Current is best for customers who want a mobile-only banking solution with special perks like crypto trading and earning cash back on qualifying purchases.

Best for CASH BONUSES

Checking, savings

WHY WE LIKE DAVE

Yes, Dave offers your typical checking and savings accounts, but this neobank also helps you get money to put in these accounts and keep whatever money you do have safe. As soon as you open a Dave Spending account (their version of a checking account), you’ll get an ExtraCash advance bonus. You can also earn money by answering questions through Dave’s Surveys feature. Plus, you can get paid up to two days early, which can help you avoid overdraft fees. And, when you make purchases with the Dave Debit Mastercard, you’ll earn up to 15% cash back.

Meanwhile, Dave’s Goals account offers a pretty high APY. Although not the highest in the neobanks category, it’s still much higher than you would get at a traditional bank. Overall, Dave is a great option if you want access to an appealing sign-up bonus and built-in ways to earn money.

• Opportunities to earn cash
• Option for paycheck advances of $500
• Savings account has a solid APY
• Cash advances and some deposits incur fees, plus you’ll pay a membership to use most app benefits
• You need to receive direct deposits in your Dave account or link a bank account to get approved for an advance, and you’ll pay a fee unless you can wait 3 days to receive it via a linked external account

Dave is best for people who would make use of its most unique features, such as its paycheck advances or opportunity to earn cash by taking surveys.

Best for COMPETITIVE RATES

Savings, secured credit card

WHY WE LIKE GO2BANK

There are many reasons why GO2bank receives top honors as one of GOBankingRates’ Best Neobanks of 2024. Described as the ultimate mobile bank, GO2bank is the simple and smart way to bank. 

Those who bank with GO2bank enjoy the benefit of earning significantly more than the national savings rate average when they open a high-yield savings account and up to $200 in overdraft protection to back up your balance. Your money, and account information, is also always kept safe as GO2bank is Member FDIC, provides fraud alerts via text message and includes an easy card lock/unlock feature on every chip-enabled card.

• High APY on savings
• Overdraft protection
• Easy-to-waive monthly fee
• Very limited product lineup
• Fees for cash deposits, teller cash withdrawals and transfers from a linked debit card

GO2bank is best for customers who want to easily bank on their phones and receive a very competitive APY on their savings.

Best for HIGH APY

WHY WE LIKE ONE FINANCE

One Finance almost acts like a credit card rewards program, with cash back earned on purchases of certain brands, round-ups where you save change on your purchases and the ability to get your paycheck two days early.

Consumers will approve of the high APY for eligible deposits, the lack of fees and minimum daily account balances and access to more than 55,000 ATMs. And, a special feature called ‘Pockets’ that lets you create a checking and savings account in one.

• Very high savings APY on eligible deposits
• No monthly fees or minimum account balances
• Cash deposits are only available at Walmart

One Finance is an easy-to-use banking platform with a high savings APY. It’s particularly useful for customers who shop at Walmart, as it gives cash-back rewards on Walmart purchases and cash deposits can be made for free at the store.

Best for FOREIGN TRANSACTIONS

Savings, investing, foreign exchange, money transfers

WHY WE LIKE REVOLUT

Revolut is an excellent choice for people who want the ability to bank, crypto and stock trade on the same platform. With three checking and savings account plans plus free crypto trading and the ability to buy and trade stocks through the app, it’s quite versatile. It also offers low-cost foreign exchange that works with 28 different currencies.

Revolut does things a little different than traditional checking and savings accounts, offering plans that include savings accounts but allow you to transfer funds like you would with a checking account. Plan holders can earn a decent APY on their savings funds.

• Foreign currency exchange
• Worldwide money transfer services
• No-commission stock trades
• Fee-free crypto trades
• Savings APY is low for an online-only bank
• More focused on investing and foreign exchange than traditional banking products

Revolut is best for international travelers who will utilize its foreign currency exchange, or avid investors who will appreciate its fee-free stock and crypto trading. While it can perform normal checking and savings functions, customers can find higher APYs elsewhere.

Best for INTEREST RATE

Checking, savings, secured credit card

WHY WE LIKE VARO

As neobanks gain popularity, the competition heats up. Varo won in this category in part because of its no fees and competitive interest rates. 

The bank impressed us with its measures to serve the unbanked and underbanked populations. It may be the best online solution for those who can’t open a traditional checking account. The secured credit card, Varo Believe, is backed by your Varo Bank Account balance. The card has no fees, no interest charges and no hard credit check required to open an account. 

Varo also offers a cash advance of up to $500 for Varo Bank Account holders. Overall, the high interest rates combined with the convenience and a broad-based network of 55,000 fee-free ATMs makes Varo a top pick. 

• No monthly fees or minimum balance requirements
• Competitive savings rate
• Perks like credit building and cash advances
• Limits on cash deposits and external transfers

Varo is best for those who can benefit from its easy credit card approval and cash advance option. But it also has a stellar savings APY that beats traditional banks by far and even beats out most online-only banks.

Best for INVESTING AND SAVINGS MIX

Checking, savings, investing, retirement, loans

WHY WE LIKE WEALTHFRONT

With no monthly fees and no minimum deposit, Wealthfront earns the title as one of GOBankingRates’ Best Neobanks of 2024. The straightforward Cash Account delivers an extremely high APY with no limit to the withdrawals you can make monthly. 

But Wealthfront really stands out as an investment solution for those who want simplified savings plus hands-free investing all on one platform. Wealthfront offers individual stock accounts, bonds and automated investing, which you won’t find with many other neobanks. 

We love Wealthfront for its unique robo-advisors, which help you choose the best stocks, index funds and bonds to meet your financial goals. Funds are also FDIC-insured up to $8 million, which is well above the $250,000 most banks guarantee.

• Offers high savings APY
• Up to $8 million in FDIC insurance
• Access to unique investing features such as automated tax-loss harvesting, dividend reinvesting and bond portfolio rebalancing
• No checking account
• Customer service is not great (no live chat feature or phone number on the website)
• No human financial advisors, so you have to be comfortable with robo-advisors

Wealthfront is an easy option for investors interested in getting the most out of the automated investing features that come with a robo-advisor. It also gives peace of mind to high-net-worth individuals who hold large balances, and pays a very competitive APY on savings.

Research Methodology

Neobanks are fintech firms that offer apps, software and other technologies to streamline mobile and online banking. These fintechs generally specialize in a particular financial product(s), like checking and savings accounts. To determine rankings GOBankingRates looked at the following factors: (1) monthly checking fee ratio (percent the minimum to avoid fee compared to the monthly fee itself); (2) minimum needed to earn APY; (3) savings APY; (4) products/services offered (credit cards and investment services); (5) the average mobile app rating between the android and apple stores; and (6) number of extra benefits and perks unique to neobanks. All factors were then scored and combined, with the lowest score being the best. Factors (1) and (2) weighed 0.5 times, factors (3) and (6) weighed 2 times. All data is up to date as of Nov. 8, 2023; rates and fees are subject to change.

What To Know About Neobanks

A neobank is a tech firm that offers online-only financial services through mobile and online banking. Nearly all financial transactions can be performed online with a neobank, including transferring money, paying bills and depositing mobile checks. A neobank does not have a brick-and-mortar presence or physical branches.

What Are Neobanks?

The difference between a traditional bank and a neobank is a neobank does not have a brick-and-mortar presence or any physical branches. Essentially, it is a tech company or fintech firm that provides banking services via a website or mobile app. Neobanks are often also referred to as challenger banks.

Who Is a Neobank Best For?

A neobank account is best for those who are tech-savvy and comfortable in an online banking environment. If you have many complex banking needs or an influx of cash, neobanks may not be the best fit for you.

Neobanks vs. Traditional Banks

Neobanks, unlike traditional banks, have no physical branches . However, this can limit the services neobanks can offer, because they save on so much overhead and operational costs, allowing them to offer more affordable options and fees for their customer base. Neobanks are online only which gives them a flexible virtual presence and an instant account confirmation process.

Neobanks vs. Online Banks

While neobanks do offer online banking services, this does not qualify them to be online banks . Online banks have FDIC insurance. Neobanks do not. If you wish to bank with a neobank, it is recommended you make sure the neobank is recognized by the FDIC or is partnered with an FDIC-insured bank.

Pros and Cons of Neobanks

While neobanks are a bit limited in their services, some pros and cons come with using this form of banking.

There are several advantages of neobanks to be considered, such as the following:

• Ease of access: You can access your funds easily through a neobank’s mobile app or website.
• Ease to set up: Setting up an account with a neobank is much less time-consuming than it is with a traditional bank. Some neobanks, depending on the financial institution, do not conduct credit checks. This gives your account a higher chance of approval and may make it easier to set up your account.
• Competitive rates: Unlike traditional banks, neobanks do not have branch locations. Due to not having to pay for physical premises, their cost of operations is low. This gives neobanks the chance to offer competitive rates and better interest rates to banking customers.

There are many disadvantages of neobanks to be considered, such as the following:

• No physical branches: Not having a branch or in-person banking option can limit some service options.
• Less regulated: Neobanks may not be chartered or licensed, which could cause issues if the fintech goes bankrupt.
• Complex transactions: As there is no in-person support, complex banking transactions can be problematic with neobanks.

How To Choose a Neobank

Neobanks are online replicas of traditional banks and credit unions. Convenience is one of the greatest benefits of a neobank, as customers may set up their accounts within minutes and begin financial transactions. 

Some of the most popular services available from neobanks include mobile money transfers , online check deposit and checking and savings account services. Once you know what features are most important to your finances, you can choose the best neobank account for you. 

Caitlyn Moorhead contributed to the reporting for this article.

Recap of Winners

• Acorns – Best for Savings Tools
• Betterment – Best for Investing
• Chime – Best for Mobile App
• Current – Best for Cash-Back Rewards
• Dave – Best for Cash Bonuses
• GO2bank – Best for Competitive Rates
• One Finance – Best for High APY
• Revolut – Best for Foreign Transactions
• Varo – Best for Interest Rate
• Wealthfront – Best for Investing and Savings Mix
• Best described as a niche fintech, a neobank helps bridge the gap between traditional banks and customers by offering digital banking alternatives. A neobank may operate solely through digital means, but it can accomplish most financial transactions like that of a physical bank branch. 
• As most neobanks are FDIC-insured, they are considered to be as safe as traditional banks . This means that all accounts are covered and protected typically up to $250,000. If they are not insured through their own charter, they will generally do so by working through a larger bank.
• No, PayPal is not considered a bank or neobank, as it does not offer traditional banking account needs, nor is it FDIC-insured. It is considered a payment platform.
• No, Venmo is not FDIC-insured and is not considered a bank or neobank, as it does not offer traditional banking customer services, such as high-yield savings accounts or ATM withdrawals. It is considered to be a payment platform.
• While neobanks operate solely online, digital banks are essentially just an online alternative to traditional banking.

See Best Banks Winners From All Categories

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*Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC

1 Chime SpotMe is an optional service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.

2 The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of September 20, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.

3 Out-of-network ATM withdrawal and over the counter advance fees may apply. See here for details.

4 Out-of-network ATM withdrawal and over the counter advance fees may apply. See here for details.

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Dutch neobank Bunq launches travel insurance offering in Ireland

Rolled out in partnership with Qover, the Belgium-based global insurance provider, Bunq’s expanded product range is available in Ireland and worldwide

• Eoin O'Hare
• May 15, 2024

Bunq, the Dutch neobank , has expanded its services in Ireland with the roll-out of a travel insurance offering.

The fintech, whose customer base grew 90 per cent to 12.5 million users in the last year, said that the roll-out represented the next step in its mission to build a full-service neobank for digital nomads worldwide.

Announcing a €53.1 million annual profit at the beginning of this year, Bunq, which owns Irish specialist lender Capitalflow, said ...

• Travel insurance
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Wefox warns shareholders of insolvency

Insurance unicorn Wefox has warned investors that it may soon face insolvency due to financial losses and regulatory charges.

CEO Mark Hartigan sent a memo to shareholders in early May, stating that the business could become insolvent in August this year or earlier, according to Sky News .

Hartigan wrote in the memo: "The opportunity to rebuild through restructuring and any optionality for the future remains dependent upon reaching [a] sustainable position by balancing cashflows with the timing of our planned disposals.

"The increasing demands on Group cash from country demands to stay solvent, from the Regulatory requirements for upfront carrier capital, from business disruption from increased media leading to partner uncertainty, from the control of cash and increased costs related to the [Revolving Credit Facility], leads me to remain very concerned that this balance will be disrupted."

This news comes amongst job cuts amongst the Wefox ranks and shutdowns of their offices in Italy, Germany, Poland, and Switzerland.

The company was valued at £3.6 billion less than two year ago, with lenders including Barclays and JP Morgan , but has since been descending into crisis. Wefox was founded in 2015 and has since amassed 3 million customers globally. 

In 2023, Wefox secured £55 million in funding. 

Wefox maintains that they are closing international offices to save costs and continue with their business model.

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