What are neobanks? A guide to digital-only banking
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Key takeaways
- Neobanks are digital-only financial institutions that operate without physical branches.
- They offer services such as checking and savings accounts, debit cards, and budgeting tools through their mobile apps and websites.
- Gain more control over your money by understanding how neobanks work and how they compare to traditional banks.
If you're looking for a new bank to manage your finances, you have many more options than even just a few years ago. Besides your typical brick-and-mortar big banks and regional banks and credit unions, a new class of banking has emerged: neobanks. But what are they and how do they work? Here, we break down what neobanks are and how they're similar—and different—from traditional banks.
What is a neobank?
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Neobanks are financial technology companies that operate exclusively online without maintaining any physical branches. By forgoing physical locations, they can invest more in innovative technologies to disrupt the traditional banking industry, while also reducing fees and offering higher interest rates. They often appeal to demographics such as millennials, Gen Z, digital nomads, or people underserved by traditional banks. According to a YouGov survey, about 30% of Americans use a digital-only bank.
Neobanks typically offer core banking services like checking and savings accounts as well as budgeting tools within their apps.
How neobanks work
With an emphasis on technology and service, neobanks often partner with chartered banks to offer FDIC-insured accounts. Since they don’t have the overhead of physical branches or the complexity of running as full-service banks, neobanks can often move faster and focus on developing innovative features with lower fees.
Neobanks vs. traditional banks
While every bank may operate slightly differently, here is a general overview of how neobanks compare to traditional banks:
Feature | Neobanks | Traditional Banks |
Access | Online-only via mobile apps and websites | Physical branches plus online and mobile banking |
Fees | Generally lower fees, often no monthly or overdraft fees | Higher fees (e.g., maintenance, overdraft, ATM) |
Account Setup | Fast, fully digital | May require in-person visits or documentation |
Services Offered | Core services like checking, savings, and budgeting tools | Broader range: loans, mortgages, safe deposit boxes, investment advice |
Customer Support | Typically digital (chat, email); some offer phone support | In-person, phone, and online support |
Cash Handling | Limited or no cash deposit options | Full cash services, including deposits and withdrawals |
FDIC Insurance | Provided through partner banks | Provided directly by the bank |
Technology | Cutting-edge apps with real-time insights, instant notifications, and automation | Often slower to adopt new tech, but improving digital tools |
Whether you prefer to use a neobank, a traditional bank, or a combination of both will depend on your personal needs and goals. Some examples of neobanks include Sesame Cash, Dave, and Varo.
💸 Money tools for families. Like the convenience of digital banking? Greenlight* offers families a debit card and app for kids and teens, paired with parental controls and educational tools that help teach real-world money skills.
A modern approach to banking
Neobanks offer a modern, digital alternative to traditional banks, popular for their convenience, technology, and lower fees. They can be a helpful part of a family’s overall money management strategy, depending on your needs and preferences.
Make smart money moves. Say 👋 to Greenlight, the family money and safety app that makes financial education part of everyday life. Try Greenlight, one month, risk-free.†
*Greenlight is a financial technology company, not a bank. The Greenlight app facilitates banking services through Community Federal Savings Bank (CFSB), Member FDIC.
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