Neobank

Aspiration (offers cashback and eco-friendly purchase options), Revolut (offers various currencies for global banking services), Current (helps users build credit through a user-friendly app), and others. 

There are two main pros of using a neobank for customers: lower fees and easy access. Neobanks allow users to access financial services through an app 24/7. Typically, it’s easier to open a bank account there and go through standard security checks, such as ID verification, since everything’s done remotely. Neobanks also have lower fees because they don’t have costly physical branches. However, there are premium services that can have monthly fees. 

Typically, if the user wants to open a bank account on a neobank app, they’ll be asked to provide their personal information (their full name, date of birth, email address), and will be required to go through a Know Your Customer (KYC) check, which is designed to confirm that the user is legitimate and that they’re providing real personal details that aren’t stolen or forged, and that their identity is “valid.” Afterwards, the user has to select their account type and, sometimes, link their existing bank account with the new neobank, ensuring transfers between these accounts. 

The biggest disadvantage that most neobanks share is the fact that they provide limited financial services and might not offer mortgages or more complex financial products. Additionally, they cater to a younger audience that prefers a digital-first approach instead of the traditional channels that require visiting physical locations, which might be the go-to choice for older generations. 

Most online banks don’t have physical branches, allowing them to save costs, similar to neobanks. However, unlike traditional online banks, neobanks aren’t directly FDIC-insured unless they partner with another licensed bank.

So, the biggest difference is that “online bank” refers specifically to an institution that provides financial services exclusively through an app or website. In contrast, various types of institutions (including both online banks and traditional banks) also offer online banking services, allowing customers to manage their accounts digitally.

Neobanks earn revenue through subscription services (premium accounts), interchange fees (where merchants pay for debit and card transactions), lending services, as well as forex fees or referral programs.