Neo banks and Their Global Impact in Banking

What are Neobanks

What are Neo banks?
Neo banks mobile-first digital-only e-banking companies whose value proposition to the consumer is always on mobile. They don’t have services of a traditional banking channel or a physical Bank branch that you can visit and get your work done. For everything, they have a mobile app to work on.

Why Neo banks?

Ok, so imagine how do you commute these days from Point-A to Point-B when you don’t have your transport, you either opt for a mode of public transport or take an ola or uber. You can get a cab within minutes of calling it. This digital transformation in the transportation sector has changed the entire outlook of the transportation sector. Taking these learnings to another level, this digital transformation is happening in every other sector as well which is at the end of the day benefiting the consumer only. Banking was one of the only sectors where this digital transformation was lacking due to regulatory hurdles and stringent compliances in place. But around 5 years ago when the fintech industry started to grow by leaps and bounds small startups emerged as digital-only banks which are now known as Neo banks.

These banks provide the comfort of doing all the banking related work from home on the touch of a button without any hassle of going to a physical branch.

How do they work?

Neo Banks usually have a front end mobile application at work which provides all the functionality that you need or which are provided by the competing traditional bank branch. You don’t need access to a computer, just your mobile phone which gives it a huge advantage. Want to open a bank account? Just click a picture of your ID card as a proof of identity, punch in the relevant details, choose your account, click a selfie and Voila! You’ve opened an account within minutes without any support. Also, unlike traditional banking systems around the world, Neo banks provide a 24/7 support with a resolution to your issue within minutes.

Through their front end mobile application you can open an account, get a vault/locker, order cheque books, do money transfers, get a fixed deposit done, request for loan, get a debit card issued on your account, apply for a credit card basically pretty much everything that can be done by a physical bank branch with an added advantage of applications such as the convenience of doing it anytime of the day, plus additional services provided by the app such as expense analytics – giving you a detailed breakdown of your expenses, remembering your favourites , so the next time you log in it keeps your favourite actions at the top for faster work.

How do these Banks earn?

All this seems pretty amazing, but how do these Neo Banks earn? You would be surprised to know that Neo banks have much stronger revenues and growth perspectives than traditional banks. First off, Neo Banks have huge savings in cost as they have to do reduced maintenance, they do not need to maintain physical branches, moreover no need to have human resources for those branches, this results in huge savings in costs hence they can work on the core areas like app development and providing better services and customer support even with fewer workforce. Since everything is done online, which means no paperwork at all, and no maintenance of these papers, everything is digitally tagged and saved in secured databases available at the touch of a button! One major revenue source for these banks is the name of “Convenience fee” since thee banks promote anytime 24/7 banking this gives them the leverage to charge Convenience fee from the end consumer. Additionally, these banks track and save your data which is the new gold in the 21st century where they can make a customised profile of yours as per your transactions and services and tailor-made new services and advertise you just that. Also, since through analytics they have a fair idea about the banking products that a specific consumer shall use, it tends to sell that product at a higher rate. This way, each consumer gets a ‘customised price’.

Neo Banks around the world


One of the most renowned Neo banks, it started its operations in 2015 and has more than 600,000 users today. It was started by Tom Blomfield when he exited from Starling (another neo bank).

It came in the limelight when it set the world for the quickest crowdfunding campaign in history when it raised 1 million pounds in 96 seconds via the Crowdcube crowdfunding investment platform.

Atom Bank

Another one of the UK startups, it was started by Metro Bank co-founder Anthony Thompson in 2014. It received a full banking license in 2015 from UK authorities following which it has raised more than 100 million pounds from angel investors. It provides a full range of banking services from loans to deposits to savings accounts.


Moven is a neo bank founded in 2011 by Brett King which has partnered with CBW bank to provide all the services. Moven’s mobile app comes with a debit card to do contactless payments, it provides spending analytics as well to encourage its users to make smarter financial decisions in their life.


WeBank is the online banking app of the Chinese internet giant Tencent Holdings Ltd. Launched in 2015, where it branched out from its bigger brother WeChat app. WeBank is extensively used in China as their population is the digital-first on everything, this has valued WeBank of over $5 Billion!


If Tencent is there, then why will Alibaba be left behind, MyBank is Alibaba’s answer to Tencent’s WeBank. Although 2 years late into the market, but it is as famous as was only the second company in the country to receive a banking licence from the government.


Formerly known as BankSimple, it is an American neo Bank launched in 2009, it has partnered with Compass Bank and The Bancorp Bank for providing the financial products. Simple has partnered with STAR network to give its users surcharge-free access to 55,000 ATMs across the US.

It was acquired in 2014 by BBVA as an extension of their digital financial services.

Neo Banking Scenario in India

Due to the complex legal system and regulations in the Banking sector, our country does not yet have any “pure” Neo Banks. But Paytm qualifies to be one of the first digital-only banks in the country which provides not full but a huge roster of financial services like Deposit, Lending, Savings account, debit card and investments in mutual funds.

SBI Digital Lobby and Intouch banking services also deserve a special mention. SBI has created a network of InTouch Bank branches throughout the country where there is no personnel, just computers to interact with and get your work done. Though baby steps but these things are a sure step towards neo banking in the country.

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