What is a neobank, and how does it differ from a traditional bank?
Neobanks are digital-first banks built around an app instead of branches. Here's how they work, who regulates them, and where they fit if you already have a high-street bank.
The word neobank gets used loosely. In finance media it sometimes means any fintech with a debit card; on the street it usually means "the app my friend pays me back from." Both are close enough, but the term has a more specific shape if you want to compare them honestly.
The working definition
A neobank is a financial-services company that:
- Has no physical branches — you open the account in the app.
- Builds its product around a mobile-first experience, not a retrofitted web banking portal.
- Either holds a banking licence itself or partners with a licensed bank to hold customer deposits.
That third point is where most of the confusion sits. Some neobanks — like bunq in the EU — hold a full banking licence, so they custody deposits directly and offer deposit insurance up to the local cap (€100k in the EU). Others operate as an e-money institution and partner with a third-party bank for the deposit layer. The user experience looks identical, but the regulatory protection differs in edge cases.
What neobanks tend to do well
- Onboarding. Most accounts open in under 10 minutes from a phone, with photo ID + a selfie.
- Multi-currency. Holding balances in 20+ currencies is the default, not a paid add-on. The exchange rates are typically mid-market or close to it on weekdays.
- Spending visibility. Real-time push notifications, automatic categorization, and shared sub-accounts ("Spaces" / "Pots" / "Vaults") are table stakes.
- Fees. Free tier exists for everyone; paid tiers start at £3–£10/month and add travel insurance, cashback, or higher fee-free ATM limits.
What traditional banks still do better
- Mortgages, in-branch advice, complex business products. Most neobanks don't offer these at all, or offer a basic version through a partner.
- Cash deposits. If you regularly handle cash, a high-street account remains easier — neobanks route cash deposits through partner networks at a fee.
- Long credit history weighting. Lenders and landlords often still weight a 10-year high-street account more heavily than a newer neobank one.
Revolut
One app for all things money
How to decide
The pragmatic answer is "use both." A high-street current account for direct debits, salary, and mortgage history; a neobank for spending, FX, and travel. The neobank fee tier you pick should match how often you use the extras — if you don't travel monthly, the free tier covers most of the value.
If you're comparing specific options, our neobanks listing ranks the providers we cover by fee structure, country availability, and account types.