A neobank is a type of direct bank that operates exclusively using online banking without traditional physical branches. In contrast to direct banks, in many cases, neobanks do not have their own , and instead rely on partner banks.
Europe
The term "neobank" gained popularity in 2019, but term’s origins are older.
The term is used to describe fintech-based financial providers that were challenging traditional
. There were two main types of company that provided services digitally: companies that applied for their own
banking license and companies in a relationship with a traditional bank to provide those financial services. The former were called challenger banks and the latter were called neobanks.
The term "challenger bank" is used in the United Kingdom to refer to fintech banking startups that emerged after the 2008 financial crisis. Their services may be accessed by clients through their respective or .
Oceania
Australia
Neobanks are operational in
Australia and include banks such as Up,
Judo Bank, and
Alex Bank.
Asia
Bangladesh
The concept of neobanks was first noted in
Bangladesh around 2020.
These banks would be digital only with customer accounts not connected to any particular branch.
India
In
India, a neobank is a class of digital-only or online bank that operates without physical branch locations.
Neobanks often partner with well-established, traditional banks to provide services and adhere to regulations.
Neobanks in India typically offer a range of financial services, including , current accounts, Debit card and Credit card, and other banking services. They focus on providing a seamless and user-friendly digital banking experience to a younger audience, with features like instant account setup, easy money transfers, and expense tracking. Some neobanks also target specific customer segments, such as millennials, and offer features like budgeting tools and investment options to that demographic.
Indian neobanks primarily operate in Indian rupees and may have limited cross-border services. International transactions are often handled in partnerships with traditional banks. Federal Bank has partnered with Jupiter and Fi in the neo-banking space.
Iran
Neobanks in
Iran are legally digital branches of banks. Central Bank passed a limiting law in 2022 which bans banks from starting mobile "neo" bank apps that have their own core.
There are a number of active programs such as
Omid Bank,
Tobank,
Wepod and Zpod Kidzy,
Plus.
Iranians need Identity national smart cards and video confirmation to open an account.
Financial crime
Report from Swedish police indicates that neobanks are popular with criminals and are frequently used in criminal transactions.
See also
