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Neo-Banks: tomorrow’s banking has arrived

The retail banking world has faced a lot of challenges over the past few years. Recently, a new challenge emerged under the form of new entrants from the FinTechs world. Neo-Banks are attracting more and more consumers by presenting new innovative features, well-designed interfaces and unrivaled customer experience. Today, they are showing themselves as true competitors to the more “traditional” banks.


For the last few decades, retail banking hasn’t changed much for consumers. With profitability being the main objective, investment in customer experience has not always been a top-priority. We have been ‘consuming’ banking the same way for decades, whereas many other industries have seen radical new usages appear.

Transportation is one of the best examples to illustrate how new technologies have enabled real evolutions for a whole sector. The sector has seen some big changes thanks to companies like Uber and Blablacar. Another example is tourism with the rise of companies like Airbnb. Neo-Banks are bringing these same transformations to the banking world, “uberizing” banking in a way.

A Neo-Bank is a digital bank (often working solely through a mobile app) which offers a different and, most of the time, broader user experience than traditional banks. Although the financial product offered is often similar, the interaction with it is totally different. This is the main value proposition for the client.

New services and groundbreaking features

Neo-Banks are real competitors to the “traditional” banks on the market due to their reduced costs, advanced features, very user-friendly interfaces, user customization and new technologies. Below is a list of some of the innovative and interesting components of Neo-Banks.

Challenges and opportunities


Costumer Acquisition

The customers acquisition is quite a challenge because it can be difficult to convince someone to change from a regular bank to a new kind of bank. The marketing to overcome is extremely expensive. A lot of customers are not interested in a mobile solution and would rather have face to face interaction or a telephone call.


The major challenge for the Neo-Banks is revenue. Most if not all of the services provided by a Neo-Bank are free. Consequently, they have to find their revenue elsewhere. A few examples of services they can benefit from: currency exchange (with a margin), international money transfers, credits or taxes on cash withdrawals. Some Neo-Banks work with a freemium mode where the premium account comes with even more services but at a monthly fee.

The one and only Neo-Bank which has achieved profitability, as of now, is Revolut. They closed 2017 with 1.5 million accounts and 800 000 actives users per month. Worth noticing, Revolut does not invest in costly marketing campaigns to get new clients. They solely work with word of mouth advertisement.


New technologies

As new technological advancements emerge, some become opportunities. Since Neo-Banks are growing on fresh roots, they have the possibility to integrate new technologies fast and easily. For instance, Blockchain technology could play its part in increasing safety and reliability.

The European Regulation - PSD2

The PSD2[1] regulation, which entered into force at the beginning of the year, already gave birth today to numerous third-party applications which compete with “traditional” banks. In this new playground, Neo-Banks will also be able to attract new clients by providing their services through third-party applications (as a back-end provider), or by offering other banks’ services by using their APIs (as a Third-Party Payment Services Provider).

Existing players

We listed below a few of the major Neo-Banks to date.

Revolut: Created in July 2015 in the United Kingdom, Revolut is the first Neo-Bank ever to have made profit in 2017, profit which they decided to reinvest in the development of new features. They estimated the savings in currency changing fees for their 2 million clients to £150 million. The bank is only accessible via their mobile application.

N26: Launched in 2015 in Germany, N26 is a key actor on the market and one of the few to have a real Banking license. With more than 850.000 users, they are mainly based in Europe for now but they are expected to launch soon in the UK and the USA. The bank is accessible on both internet browser and their application.

Monzo: With more than 600.000 users today, Monzo was launched in 2015 in the United Kingdom. They recently launched an innovation lab to work and build their application along with their clients. Users can only access their accounts via the Monzo mobile application.

Starling Bank: Launched in 2014 in the United Kingdom, Starling bank has a banking license like N26 does, protecting your money up to £85.000. It is also the first Neo-Bank to propose fully digital Business Accounts. The bank is accessible on both the mobile application and through a web browser.

Face off


A Neo-Bank offers everything a traditional retail bank has to offer, but with the major advantage of speed and instantaneity. E.g.: while adding a new bank beneficiary at a traditional bank takes up to three days due to multiple verifications, doing the same via the neo bank mobile application only takes three clicks. Another example is that payments can take up to 24 hours to show up on a traditional bank account but with Neo-Banks you get an instant notification confirming the transaction right after you have pressed OK on the payment terminal and your balance is updated instantly as well.


Neo-Banks have put a lot of effort in designing their applications to make them as simple as possible since this will be the base of their interaction with their end customers. On the other hand, it is counterproductive for traditional banks to create such applications, as they expect most clients to call or to visit one of their agencies for any advanced service. When accessing a Neo-Bank application for the first time, you don’t need to find you way around, everything is self-explanatory and easy to reach (only a few touches/clicks away).


With Neo-Banks, opening a bank account has never been easier, it takes only ten minutes on average. As they all have a mobile application, and because it contains all the features the bank has to offer, you don’t need an access to a computer, just a mobile phone, which is a huge advantage. Most of the Neo-Banks offer a very efficient 24/7 support, where any issue is solved in a matter of minutes.

On the other hand, traditional banks have agencies, which can be considered as more accessible for certain people. Also, there is no hotline you can call for Neo-Banks, some people prefer to call instead of typing their issues.


The range of products and services offered by a Neo-Bank are almost limitless. A few key functions are: access to Crypto currencies, saving vaults, multiple currency account opening and expense analytics. They are really focus on the innovation and improvement of traditional features. A comparison with traditional banks cannot be made here as most of the services provided by Neo-Banks are not even accessible or offered by traditional players.


One would think that the services provided by a Neo-Bank come at a high price, but this is incorrect as most of these services come for free. Moreover, by going on holiday or paying in another currency, one would even save money as the rate used for conversion is live and there is no transaction fee. Most of traditional banks accounts come at a monthly rate which gets more expensive for each service you decide to subscribe to, plus all the fees which would occur for transactions in foreign currency.


Even though Neo-Banks face many challenges, by being 100% user-oriented and offering a new type of retail banking they have a huge attraction factor, especially to the younger generation. With their ‘guerilla tactics’ towards traditional players and in combination with the open banking landscape facilitated by PSD2, Neo-banks greatly contribute to an evolution of the retail banking sector which is faster than ever. By offering business accounts, credits and insurances at a fraction of the usual costs, the stakes for traditional banks are high as Neo-Banks services are expanding every day and giving their clients access to products and services at the tip of their fingers, hence forcing incumbents to catch up.

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