Neobanks Are Revolutionizing Financial Services

Neobanks are transforming the financial services sector by enhancing access to money management tools and promoting innovation. They started in the United States around 2010 as a new way to do banking. The word “neo” means new. It highlights an innovative approach used by these banks, which offer financial services only through online platforms and mobile apps. These banks aim to make the account experience faster and simpler by taking advantage of the easy access that the internet and smartphones provide.

With neobanking, an online-only money management tool allows clients to view and control their accounts anytime and anywhere using smartphones or laptops. The goal is to provide basic monetary functionalities to a wide range of users, including students, freelancers, and business owners.

While these challenger institutions have some benefits, they also have drawbacks. They usually do not offer provisions like loans, overdraft protection, or investment options. Since they lack physical branches, processes like check deposits can be difficult, especially for professionals. Additionally, customer support is often limited to automated chatbots, emails, or social media.

This article examines how digital-first banks work, how they compare to established providers, the main services they offer, and which ones are best for different users and situations.

Online vs. Traditional Models

Traditional banks have long been the main players in the financial market. However, they are frequently unavailable to people in areas without physical branches, like low-income or rural communities. That is where neobanks, or digital-only banks, come in, operating entirely on the cloud and changing the industry by storm. They offer benefits like lower fees, faster loan approvals, and even early access to paychecks.

These institutions are not just about online services; they are changing the way people think about managing money. In 2021, the virtual banking platform Chime was named one of the top 10 banks in the US, serving over 13 million customers. Now, it has more than 21 million users. As this segment grows, it’s important to understand what they are and how they impact the global monetary arena. 

Take a look at their growth over time:

• In 2021, there were 146.42 million global neobank users

• By 2026, there will be an estimated 350 million new global bank users

Why Digital-Only Banks Are Winning Over the Next Generation

Neobanks are user-friendly, offer lower fees, and assess creditworthiness in new ways. These challenger institutions provide access to credit cards and checking accounts for people who previously lacked financial access. They use technology to create a seamless experience, helping retain customers and removing barriers.

Neobanks offer various benefits, for example, they allow you to:

• Find special features in the mobile app.

• Receive a free bank card and low fees.

• View your account balance in real-time.

• Create a client profile in just a few minutes without proof of income.

• Choose from many services.

More millennials of all ages now pick online banks as their main checking account provider instead of community banks or credit unions. Here is a layout of the percentage of consumers who use a digital bank as their main holdings:

• 22% of Gen Z (21 to 26 years old)

• 21% of millennials (27 to 41 years old)

• 22% of Gen X (42 to 56 years old)

Low-Fee, High-Convenience: The Digital Finance Advantage

Unlike traditional banks, which offer a wide range of functionalities in person and online, virtual systems mainly focus on basic assistance like checking and client profiles. However, this is also changing rapidly. As these solutions continue to grow, they are starting to offer more features.

Traditional banks offer various monetary products, including checking and savings accounts, auto loans, mortgages, credit cards, and investment accounts. Digital-native financial services stand out by providing an offering with low or no fees. They also give users tools to help manage their money better, such as free overdraft protection.

Everything You Need—All in One App

Some neobanks offer virtual cards for safer online transactions and money transfers. While many simply focus on these basic services, a few provide more options, like personal loans or savings accounts. Some even allow customers to invest in cryptocurrency.

In fact, they offer a variety of amenities, including:

• Checking accounts;

• High-yield savings accounts;

• Free peer-to-peer money transfers;

• Early access to paychecks;

• Overdraft protection;

• Alternative ways to build credit;

• Financial education tools.

Choosing the Right Online Bank for Your Business Needs

So, which digital banking provider is right for you? In the table below, you will find a ranking of some of the best in the business, each with a score out of five:

Best Neobanks for Businesses

Best Options for Crypto Investments:

Revolut is a neobank that allows users to buy cryptocurrency. Currently, users can invest in five cryptocurrencies: Bitcoin, Ethereum, Litecoin, Ripple, and Bitcoin Cash. 

Another option is Wirex, which focuses entirely on cryptocurrencies. Here, customers can buy and store various cryptocurrencies, including Bitcoin (BTC) and Stellar Lumens (XLM). 

Lastly, Lydia is a virtual banking app that offers a trading-oriented account, letting users invest in stocks, metals, and cryptocurrencies.

Best Options for Money Transfers:

Money transfers are a key service offered by traditional banks and neobanks, with digital-only options often providing better rates. Companies like Wise, Curve, and Revolut are known for favorable money transfer rates. If your business needs to make several transfers, Qonto and Anytime provide good options.

The Future of Finance Is Digital—and Connected

Neobanks are changing how society thinks about money management today. They don’t have physical branches or ATMs, but they work closely with established institutions to keep customer funds safe and provide important services like cash access. Their online-first approach offers an appealing alternative to traditional banks, with easy-to-use platforms, better rates, and more accessibility for people who often get overlooked by the standard banking system.

These digital providers cater to students, freelancers, small business owners, and global travelers. They provide simple tools that fit the fast-paced, mobile lifestyles of today’s consumers. Their ease of use, cost-effectiveness, and wide reach show that they are not just a temporary trend—they are becoming an essential part of today’s changing world. As more people seek flexible and inclusive financial options, neobanks are set to significantly impact how people and companies manage money.