What Is a Neobank?

Despite the name, neobanks have nothing to do with the Matrix, and Keanu Reeves won’t be showing up the next time you want to make a deposit. Rather, neobanks are technology companies that provide online banking services that you can access from your digital devices.

Neobanks, commonly referred to as “challenger banks,” aim at providing essential financial services, such as savings and checking accountswith an end goal of making personal finance a bit less intimidating and a whole lot more transparent than traditional banks.

These new fintech (financial technology) services are attempting to disrupt the banking industry by providing easier access to your financials via digital services, while also typically offering attractive features, including lower (or non-existent) banking fees and more competitive banking rates.

Keep on reading to learn more about how neobanks are re-shaping the banking landscape, and if they might be the right fit for your financial needs. But first, let’s answer the most basic question: What is a neobank?

What Are Neobanks?

Neobanks are typically not banks, which is a shocking idea since the word ‘bank’ is right in the name. To be a true bank, an institution must be properly chartered, answering to federal and state regulators, while offering FDIC insurance to protect customer assets.

Rather, neobanks are technology companies that provide apps and software to make the entire banking process a bit easier. They are a new breed of financial institutions.

Neobanks, such as Chime, offer mobile apps and websites that allow you to easily manage your money. However, on the back-end, your money is being managed by a traditional bank. In the instance of Chimeyour money is managed by a partner bank, either The Bancorp Bank or Stride Bank.

Some neobanks are taking a similar approach as credit unions, attempting to forge close relationships with their customers and provide an overall better experience, such as higher…