Are Neobanks the Future of Personal Finance?

bank office

More neobanks are emerging in recent years. The term “neobank” was first used in 2017. It refers to financial institutions that offer bank services but don’t have physical branches. Neobanks are fully online.

Most people are used to having traditional banks. If a person needs to transact with their bank, they will go to one of its branches. There’s a face-to-face element in traditional banks that give consumers a sense of assurance. So understandably, it’s had for them to trust digital banks.

Neobanks are fairly new, and they do have flaws. And these are reasons why consumers might have trust issues with neobanks. For example, their vulnerability can be questioned since everything happens online. They are also inaccessible in some instances. For example, people who aren’t tech-savvy will have a hard time using and transacting with neobanks.

Still, these new digital challenger banks have merits of their own. They may not be enough to convince people to leave traditional banks. But the advantages of neobanks show that they are worth using.

Low Cost

Neobanks offer fewer products and services than traditional banks. This means the former’s operating costs are much lower than the latter. As a result, neobanks can offer lower costs to their consumers. Neobanks also typically don’t charge monthly fees.

Better Rates

In conjunction with lower costs, digital banks also offer better rates than traditional banks. This is more evident in the younger ones. They often offer promotional rates to get people in. For example, last year, British neobank Revolut offered 4.5 percent to 5 percent annual interest rate to its customers, depending on the type of account they have.


Digital banks are convenient. Since everything’s online, you don’t have to worry about long lines in a bank branch. Signups are done completely online using the digital bank’s app. The process only takes a few minutes. If you need to deposit a check, you can do so through a neobank’s app. You also use it to transfer money. Bank documents can be requested via the app as well.

women using a phone

There’s also a common feature in neobanks called stashes. The concept is similar to a cash organizer used in budgeting. When using a cash organizer, you need to split your on-hand cash and place them in different envelopes with labels. This way, you know which money is for what, and you don’t accidentally spend the money allotted for other expenses, such as utility bills.

This is basically how neobanks stashes work. You no longer have to split your money manually. You also get to easily see how much each stash contains through the app. You don’t have to manually count the bills in each envelope.

Better Customer Service

Digital banks put a lot of effort into their branding to attract consumers. They pay attention to their branding design and identity. They carefully curate their color palette, their logo, and app icons. But the more important area to pay attention to is customer service. It’s something they really invest in because it’s the backbone of neobanks.

There’s no human-to-human contact in neobanks. That’s why they ensure that they have strong customer service. Digital banks offer robust customer service tools. Some examples include a comprehensive FAQ page, a hotline, and a live agent chatting service.

Digital banks also use different platforms so that they can accommodate their clients’ preferences: email, live chat within the app, phone, Facebook, and even a community forum, although rare.


One of the concerns about neobanks is security. But because they operate fully online, they ensure that clients can get the best security features to keep their accounts safe. Mobile apps of neobanks have several security features. They are two-factor authentication, Biometric login and verification, encryption, and many others.


Neobanks are arguably more ready for the future than traditional banks. Neobanks are fully online. So they are more invested in improving the security and user-friendliness of their user interface.

Also, society is slowly becoming cashless. The pandemic put fear on using banknotes because of the belief that the coronavirus can stay on them. Neobanks will be able to adjust to a cashless society more easily since they’re already operating fully online. When you open an account with one, you not only get a savings account or a checking account. You also get access to payment and money transfer services.

It may not be advisable to leave traditional banks yet since neobanks are still young. But with the rapid technological advancements these recent years, these digital banks will definitely take the center stage sometime in the future.

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