A neobank is also classified as a type of direct bank, meaning it is fully digital through the internet (online banking) and/or a mobile app. This is in contrast to the decades-old traditional banks with physical bank branches in the countries they’re based in, although most established banks also have online banking options today.
Customer support is usually more personal with traditional banks, which can mean slower. For instance, a mortgage application may require in-branch meetings in your local bank as well as a lot of paperwork and submissions of proof and documentation, plus thorough checks of your account.
Neobanks bypass laborious applications through quick sign-up forms and automatic checks of credit history, identity and more, not requiring personal contact with anyone to get approval for a loan, overdraft or account creation.
While all traditional banks have full bank licences, licensing is a bit of a mixed bag for neobanks. The type of licence (or lack thereof) determines what services the neobank provides themselves or through other banks, and the level of protection for your savings. Some neobanks may, for example, not have deposit insurance, or provide enough consumer protection if a payment dispute happens.
Neobanks are usually cheaper, with no monthly costs. Pricing is shown and simplified upfront so you don’t have to worry about hidden fees. Traditional banks can charge many different fees that can seem invisible on a bank statement, with monthly fees for certain account types. That said, traditional banks have a wide range of services and account types, personalised for your financial position and needs.