5 Questions To Ask Before Trying A Neobank

By RobertBarba
Bankrate.com

WWR Article Summary (tl;dr) The most common definition of a neobank is an institution that provides some combination of checking accounts, savings accounts and debit cards via digital channels, primarily mobile, without any physical bank branches.

Bankrate.com

The explosion of mobile technology and people’s distrust for traditional banks following the economic crisis make this a fertile time for new financial firms.

Enter the neobanks, a collection of startups that make it easier for you to manage your money in this highly mobile age.

“Everything from the account-opening process to the customer service experience is unlike traditional banking, or at least not like the banking experience that has turned so many people off,” says JP Nicols, managing director of Fintech Forge, a banking innovation consultancy.

The first wave of neobanks came on the scene in the early 2010s, and they have seen varying degrees of success.

Today the landscape is shifting, with some neobanks acting more and more like traditional banks, even as traditional banks try to compete with the neobanks by launching stand-alone brands. In addition, fintech firms that operate in other sectors, primarily lending, are getting to the deposits business.

Below you’ll find answers to the five most frequently asked questions about neobanks.

What is a neobank? Is my money safe with one?
The most common definition of a neobank is an institution that provides some combination of checking accounts, savings accounts and debit cards via digital channels, primarily mobile, without any physical bank branches.

Neobank apps tend to be slick and simple, designed to help you better understand, and hopefully improve, your saving and spending habits.

It is important to know that neobanks are usually not banks: They do not have charters from the Office of the Comptroller of the Currency or state regulators, and they do not have coverage from Federal Deposit Insurance Corp. (FDIC).

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