Neobanks are booming and more people are now starting to use their services. These banks are entities that work exclusively online and offer a wide range of new advantages; free credit cards, zero commission, or multi-currency accounts just to name a few. What exactly are these services and how can you benefit from them? If you want to know how neobanks work and which are our top choices, then keep on reading.
What are neobanks?
Neobanks or digital banks are financial entities that operate 100% online and mainly appeal to younger clients (digital natives), people who no longer trust traditional banks, or those who can't open a bank account for any particular reason.
They first appeared on the online market approximately 5 years ago, making their debut in Germany & the UK, and have slowly expanded throughout Europe, America, Canada, and Australia. More recently, you can find some Neobanks growing in Latin America.
Neobanks operate solely online, giving them low building and staffing expenses, and allowing them to offer more advantageous services to their clients. With this system, you can forget the stress and make all your bank transfers and movements in real-time. You can avoid the long queues and endless paperwork for your banking operations. On top of that, they offer free services that traditional banks usually charge for, like debit cards or maintenance costs.
There are two types of neobanks: challenger banks, which hold a similar banking license as a traditional one, and neobanks, which do not have this license and work through entities that do have them. Even so, as a client, you won't notice the difference, and just to clarify, we can refer to both as neobanks.
What are the characteristics of a neobank?
To distinguish a neobank (or challenger bank) from traditional banks in their digital version, we will explain to you their main characteristics:
- They allow you to make simple, transparent banking operations, opening accounts, credit and debit cards, international transfers, currency exchanges, etc.
- They offer real-time financial information about your banking movements; this comes with simple financial tools that can be of great help, for example, management of income and expenses through notifications and alters, saving plans, etc.
- They have low or zero commission in maintenance expenses, credit and debit cards, and cash withdrawals in national and international ATMs.
- Everything works through an app that allows you to make transactions "online" within minutes, including opening the closing the account.
- They do not have physical subsidiaries, and their online customer service tends to be fast and effective.
Are you interested in opening a neobank account?
If you are comfortable with technology, these entities are made for you since they will allow you to do all of the operations you need straight from your mobile and with zero or zero cost.
Another significant advantage is that they allow you to open a bank account in a foreign country. This may interest you if you're a traveler or working in another country. One important thing to remember is that most neobanks are European, meaning that conditions are different for Latin America or the United States. However, you'll be able to find some Neobanks growing rapidly in the USA and Latin America due to their practicality (more info below)
Last but not least, you must know that some of these neobanks have created strategic partnerships with other tech companies such as Netflix, Spotify, Glovo, or Lime, offering discounts and subscriptions, meaning if you're a regular in these services, you could also find attractive advantages.
Chime is one of the top neobanks in the US. It allows its customers to make quick money transfers, set money aside with a 2.00% Annual Percentage Yield (APY), get transaction and balance alerts, and so much more. Your funds in Chime are FDIC insured up to $250,000. You can sign up and get your plastic card within several days and use the handy banking app right away.
Revolut may be the most recognized entity and the veteran of the neobanks. Launched in 2015 in the United Kingdom, it holds its own banking license, meaning it works as a challenger bank. Today, it has over 10 million clients in the European Union, Canada, Australia, and more...
It offers you a free account opening with an IBAN number, debit, and/or credit Mastercard for only 6€ a month. It allows you to make free international transactions in over 25 currencies and offers services for mortgage loans, cryptocurrency operations, and stock exchange investment, among others. You can withdraw up to 200€ monthly from any ATM without paying commissions at home and abroad.
Based in the United Kingdom, Monese offers private and business accounts. You can open an account with an IBAN number, multi-currency, transfers between Monese accounts, and SEPA payments all free of charge. With their account, you'll receive a free credit or debit Mastercard that will allow you to withdraw 200€ a month or up to 6 times, and with zero commission, both home and abroad.
Their customer service team and the app are available in 14 languages: Spanish, English, French, German, Brazilian, Portuguese, Bulgarian, Italian, Rumanian, Polish, Czech, Turkish, Estonian, and Lithuanian. The app is available on IOS and Android.
N26 was founded in Germany in 2013 and has steadily grown to become one of the top Neobanks in the market. It has a license to operate as a regular bank in the Eurozone and has over 5 million customers worldwide. The neobank giant is planning to continue expanding further from Europe and is now fully available in the USA. The German giant has different perks, just like its competitors, you can take advantage of the easy transfer to more than 16 international currencies handled by their partner Transferwise, and you can forget about paying extra fees. They have a secure login that you can be adapted to use with digital touch print or facial recognition.
The basic account provides you with a free MasterCard card and account that holds no fees and allows you to do real-time transactions and baking check-ups at no extra cost. The app allows you to set up your monthly bills to have them paid automatically, you can create saving accounts and set up personal goals. For those seeking a more specialized service, they offer the Metal card, where a monthly fee can offer travel insurance supported by Allianz and multiple discounts in business worldwide. You can take a look here.
Another Neobank launched in the United Kingdom in 2015, Monzo has over 4 million users worldwide and received its banking license in 2015. This allowed its customers to create regular deposits and banking features. The neobank is working in the Eurozone and has created a waiting list for its final debut in the USA. Even with the waiting list, Monzo has already managed to secure thousands of customers waiting impartially for its arrival in the USA.
This Neobank has often been referred to as one of the most user-friendly applications and the owner of remarkable customer service. Setting up the account is easy, and the bank will provide a free MasterCard that can be used to withdraw money with no extra fees in the United Kingdom and to withdraw up to 200€ abroad for no extra fees. You can take a look here.
The original online payment service was owned by PayPal. Working actively in the USA. Venmo is a wire transfer platform that allows you to create a free and fast account to make transactions worldwide using their online service.
This application turns out fast and useful when making one-time payments or split transfers in real-time without paying extra commissions, and it’s safe to say that you can still use this service while holding a standard bank account. As of 2018, the application introduced a debit MasterCard that can be acquired free of charge and can be used as a standard bank account linked to the services of Venmo, ideal for those who need to make fast payments or transfers, bills, and you’ll find discounts in some of its affiliated businesses. Learn more about Venmo here and download the app here.