# Neobank

> A neobank is a type of direct bank that operates exclusively online without traditional physical branch networks.

Source: https://www.neobank.wiki/wiki/neobank
Last updated: 2026-08-11
Categories: Financial technology, Banking, Digital banking

A **neobank** (also known as an *online-only bank*, *internet-only bank*, or *digital bank*) is a type of [direct bank](/wiki/challenger-bank) that operates exclusively online, without traditional physical branch networks. Neobanks deliver banking services through mobile apps and web platforms, typically partnering with licensed institutions or holding their own banking licences.[^origin] The term gained prominence in the mid-2010s as smartphone-first startups such as [Monzo](/wiki/monzo), [Revolut](/wiki/revolut) and [Nubank](/wiki/nubank) began attracting millions of customers. By user count, the largest digital banks and finance apps are often Asian platforms such as [WeBank](/wiki/webank), [PhonePe](/wiki/phonepe) and [GCash](/wiki/gcash). For a country-by-country catalogue, see [List of neobanks](/wiki/list-of-neobanks).

## History

The concept of branchless banking predates smartphones, but the modern neobank emerged after the [2008 financial crisis](/wiki/banking-as-a-service) eroded trust in incumbent banks and mobile connectivity became ubiquitous. Early movers launched between 2013 and 2015, using slick app design and transparent fees to differentiate themselves.[^history]

Regulatory changes accelerated the trend. In Europe, the revised Payment Services Directive (PSD2) mandated open banking, letting startups build on top of existing bank rails. In China, licensed internet banks such as [WeBank](/wiki/webank) scaled through super-app distribution. In Brazil, [Nubank](/wiki/nubank) and [Mercado Pago](/wiki/mercado-pago) helped redefine digital finance for Latin America. Parallel waves followed in India ([PhonePe](/wiki/phonepe), [Paytm](/wiki/paytm), [Jupiter](/wiki/jupiter)), Southeast Asia ([GCash](/wiki/gcash)), South Korea, Australia and Mexico.

## Business model

Neobanks generally fall into two categories:

- **Licensed neobanks** hold their own banking licence and can take deposits directly (e.g. [Monzo](/wiki/monzo), [N26](/wiki/n26), [Starling Bank](/wiki/starling-bank), [Varo](/wiki/varo), [KakaoBank](/wiki/kakaobank)).
- **Front-end / partner-bank neobanks** partner with a chartered bank that holds deposits while the neobank owns the customer relationship (e.g. [Chime](/wiki/chime), [Current](/wiki/current), [Mercury](/wiki/mercury), [Up](/wiki/up)).

Revenue typically comes from interchange fees on card transactions, subscription tiers, lending, interest margin, and foreign-exchange spreads. Some firms, notably [Revolut](/wiki/revolut) and [Nubank](/wiki/nubank), package banking into a broader [super-app](/wiki/list-of-neobanks) spanning investing, insurance and commerce.

## By country

Neobank markets developed unevenly. The United Kingdom produced early licensed [challengers](/wiki/challenger-bank) ([Monzo](/wiki/monzo), [Starling Bank](/wiki/starling-bank), [Revolut](/wiki/revolut), [Atom Bank](/wiki/atom-bank)). The United States favoured partner-bank models ([Chime](/wiki/chime), [Cash App](/wiki/cash-app), [Current](/wiki/current), [Mercury](/wiki/mercury), [Brex](/wiki/brex)) alongside charter holders ([SoFi](/wiki/sofi), [Varo](/wiki/varo), [Ally Bank](/wiki/ally-bank)). Germany and the Netherlands scaled pan-European apps ([N26](/wiki/n26), [Bunq](/wiki/bunq), [Trade Republic](/wiki/trade-republic)). Brazil and Mexico saw rapid adoption of [Nubank](/wiki/nubank), [Inter](/wiki/inter), [Neon](/wiki/neon), [C6 Bank](/wiki/c6-bank), [Klar](/wiki/klar), [Ualá](/wiki/uala) and [Mercado Pago](/wiki/mercado-pago). China and broader Asia hold much of global user scale via [WeBank](/wiki/webank), Indian payments giants ([PhonePe](/wiki/phonepe), [Paytm](/wiki/paytm)), [GCash](/wiki/gcash) and [Maya](/wiki/maya) in the Philippines, [Bank Jago](/wiki/bank-jago), [Trust Bank](/wiki/trust-bank), [Toss](/wiki/toss), [Rakuten Bank](/wiki/rakuten-bank), [Jupiter](/wiki/jupiter), [KakaoBank](/wiki/kakaobank), [Up](/wiki/up) and [Airwallex](/wiki/airwallex). Africa is represented by [TymeBank](/wiki/tymebank), [OPay](/wiki/opay) and [M-Pesa](/wiki/m-pesa); Canada by [EQ Bank](/wiki/eq-bank) and [Wealthsimple](/wiki/wealthsimple).

The wiki also covers adjacent platforms—payments ([Stripe](/wiki/stripe), [Wise](/wiki/wise), [Klarna](/wiki/klarna)), brokerages ([Robinhood](/wiki/robinhood)), and self-custody finance ([Torque](/wiki/torque), [Avici](/wiki/avici))—listed on [List of neobanks](/wiki/list-of-neobanks).

## Common features

Neobanks are known for a set of consumer-friendly features that pressured incumbents to modernise:

- Instant push notifications on every transaction
- Fee-free or low-cost foreign spending
- Automated budgeting and spending analytics
- Early access to wages ("get paid early")
- Sub-accounts, pots, spaces and shared accounts

Business-focused neobanks such as [Mercury](/wiki/mercury), [Tide](/wiki/tide) and [Qonto](/wiki/qonto) emphasise multi-user access, accounting integrations and expense cards.

## Criticism and challenges

Critics note that many neobanks struggled to reach profitability, relying on venture funding and interchange revenue.[^profit] Concerns have also been raised about customer-service accessibility, account freezes tied to automated fraud checks, and the durability of deposits held via partner banks rather than direct licences.

## Infobox

- **Industry**: Financial technology
- **Also known as**: Digital bank, challenger bank
- **Distribution**: Mobile app, web
- **Emerged**: c. 2013
- **Key markets**: China, India, LatAm, SEA, UK, EU, US

## Frequently asked questions

### What is a neobank?

A neobank is a direct bank that operates exclusively online without traditional branch networks, delivering accounts, cards, and payments through mobile apps and web platforms. Many hold their own banking licence; others partner with a chartered bank that holds deposits.

### How is a neobank different from a traditional bank?

Traditional banks combine branches, legacy core systems, and full licences. Neobanks are mobile-first, usually fee-transparent, and either licensed themselves or front a partner bank via banking-as-a-service. They typically launch with a narrower product set and expand over time.

### Are neobank deposits insured?

Deposit insurance depends on the legal structure. Licensed neobanks that take deposits directly are covered under their jurisdiction’s scheme (for example FSCS in the UK or FDIC in the US). Front-end neobanks usually rely on partner banks that provide insurance on held deposits.

### What are examples of major neobanks?

Widely cited examples include WeBank in China; PhonePe, Paytm, and Jupiter in India; GCash in the Philippines; Nubank, C6 Bank, and Mercado Pago in Latin America; Revolut, Monzo, and Starling Bank in the UK; N26 in Europe; and Chime, Cash App, SoFi, Current, and Varo in the United States. Coverage varies by licence and product set.


## References

[^origin]: Definitions of neobanks vary across regulators; most emphasise branchless, mobile-first delivery. — https://www.bis.org/fsi/publ/insights28.pdf
[^history]: Skinner, C. "Digital Bank" (2014), on the post-crisis rise of branchless banking. — https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015L2366
[^profit]: Analysts have repeatedly flagged the challenge of reaching profitability on interchange revenue alone. — https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-banks-a-20-trillion-dollar-growth-opportunity