Although many neobanks look the same with their flashy marketing and fintech angle on money management, there are crucial differences dependent on their licensing structure. Let us define some popular types with examples of each.
With own bank licence: Many of the popular neobanks have their own bank licence, whether specialised or full-range. With the right licence, they can provide their own current accounts, prepaid, debit or credit cards, currency exchanges, cryptocurrencies, money transfers, peer-to-peer payments, savings accounts and loans.
Without bank licence: Neobanks that offer financial services, but under other banks’ licences. Customers may already have an account at another bank, which is linked to the neobank service providing their own interface and unique tools to your bank account activities. Tools could be transaction analytics, budget management and automated prompts to help you reach financial goals. Other neobanks may also use a partner bank’s (parent company) licence to provide their financial products.
- Examples: Yolt, Simple, Chime Bank
With alternative licences: Companies that meet the criteria of bank-licensed services, but with alternative licensing e.g. for providing e-money services. Such companies may offer accounts that act like bank accounts, but with limitations that set them apart from full-fledged bank accounts.
Beta banks: Subsidiary financial services of a larger, established bank that wants to reach more customers or develop new products under a different brand. Beta banks can provide their offerings under the parent bank’s licence and expand to other countries under licences of partner banks. Services may be limited initially and expand as popularity grows.
- Example: Mettle, Sperbank Direct