Neo banks are now in the market and have launched competitive products. They offer low rates and fees on their banking products and provide easy to use budgeting tools in their apps. These products can be great for consumers, but not every banking product is available at a neo bank.
What is a neo bank?
Neo banks are fully licensed banks that operate entirely online and through apps, and sometimes also known as smart banks.
They don’t have the physical branches that traditional banks have. Starting from application point to customer support is all done online via chat or over the phone. Customers who are approved online can immediately start using the virtual card provided via the app, rather than waiting for the card to arrive by mail.
In countries like the US, UK, and Australia the neo banks are fully licensed and regulated banks. In the United States, some of the popular neo banks are Moven bank, Simple bank, and Gobank. While in Canada, one of the more popular banks is Stack.
What products do neo banks offer?
Generally, neo banks mostly offer debit cards that include perks usually found on credit cards. For example, you might find a neo bank offering debit cards that can also make payments online, have no ATM fees, no annual fee, no foreign transaction fees, and sometimes even earn reward points.
These new banks sometimes offer other banking products, such as deposit accounts (for earning interest), personal loans, and in some cases home loans. But one product they don’t provide is credit cards. Using a credit card for making purchases now and then repaying it later is not a service that neo banks usually have. Instead, they’ve just taken the perks usually found in rewards credit cards and loaded them into the debit cards they provide.
Being solely online provides this new type of bank one advantage over the more traditional banks. By saving on the cost of having physical branches. These savings can then be onto the customer through lower interest rates and fees.
What are the pros and cons of a neo bank?
Pros
– Competitive interest rates.
– Low or no-fee products.
– App features that help with budgeting money
– Virtual cards that customers can receive instantly
Cons
– Limited product offerings compared to traditional banks, such as credit cards and home loans.
– No physical branches if you prefer or need to do banking in person.
– Service limitations can exist. Hours of operation can sometimes be only Monday to Friday.
– Being a new bank, it can have teething issues, which could impact customer experience.
