6 Best Neobanks of 2021: What do they offer?
Neobanks are comparable to traditional banks in that they are online-only financial entities. Compared to regular banks, neobanks often offer fewer services—usually only a checking and savings account. Customers of neobanks frequently benefit from lower fees and interest rates that are higher than average due to the slimmed-down strategy. Learn more about neobanks, what they have to offer, and if they're suitable for you.
What is a Neobank
Neobanks are one of the fastest rising products that have taken the financial technology industry by storm. Neobanks are often touted as the future of banking as they provide all the necessary financial services that a traditional bank would but with any physical location. These Neobanks have become quite popular amongst tech-savvy customers and are reaching more and more people every day.
Many Neobanks bring financial features that most traditional banking lack, like money management right from the comfort of your home, allowing users to take control of their finances and many more. You might be thinking, what makes neobanks better than traditional banking? Well there are several reasons why one must move from traditional banking to a neobank. Some of those reasons include:
- The fact that neobanks have no physical locations and run all their services online allows users to avoid unnecessary bank queues and wait times.
- Neobanks are financial technology companies offering cutting-edge financial tech that helps users move money faster and cheaper.
- Neobanks also help users cut down on the all so nerve-racking banking fees we've all become accustomed to.
- Neobanks also provides its services to the unbanked and underbanked who have fallen into the crevices of our traditional banking system.
All Neobanks are not created the same; they offer different services and are also structured differently. However, most provide the specific services that a traditional bank or credit union would.
Which Neobanks are the best in 2021
N26 is a German-based neobank that has become a leading force in the financial technology sector. The neobank provides a number of services a traditional bank does and improves on some of the features you would get at conventional banks. With it being a digital-only bank, its mobile app is easy to use and helps consumers take complete control of their finances.
Some of the excellent services that N26 potential consumers can look up to include: ATM withdrawals, international money transfers with low fees, virtual and plastic prepaid debit cards, competitive exchange rates, IBAN accounts and many more. The bank is regulated by the FCA but has no protection by the FSCS (Financial Services Compensation Scheme) because the bank believes it can keep your money safer than any entity can.
Monzo is a UK-based banking app with a customer base of nearly five million users. Most of the service's functions are available to UK clients, while some services, such as the Monzo debit card, are available to users in other countries. With Monzo, you can make payments, register for joint accounts, share expenses, sign up even if you are a teenager, spend funds abroad, etc. Monzo is also available for business users, especially for entrepreneurs who closely want to monitor their budgets. Read our full Monzo review for more details.
Revolut started out as a multi-currency bank account with low bank and transaction fees when it comes to international money transfers. Revolut saw a lot of success with its international money transfer app, especially in the EEA region and raised millions of euros in funding.
The fintech company has shifted its goal to becoming a full-fledged neobanks with all the features traditional banks provide. Today, Revolut has crossed the United Kingdom's borders and offers its services in several European territories, the United States, Canada, Singapore, and many others. Read our full Revolut review for more details.
Wise is the UK's most popular peer-to-peer international money transfer service. The service's website is available in ten different languages. Users can quickly and easily send money to over 59 countries rapidly and efficiently, with the lowest fees compared to a few major banks and PayPal. The exchange rate determines the transfer cost, the amount transferred, and the payment method used. Wise allows you to see what you receive, but other financial institutions would charge for currency exchange. Read our full Wise review and check out our comparison of Wise and Revolut for more details.
Monese offers money transfer, online European and UK checking accounts, and essential individual and business bank accounts in the UK and the EEA region. After identity verification, users can access services such as replenishment, account management, debit card to access their money anywhere, along with the budgeting, payment, and security features.
You should know that Monese is an e-money company and not a bank. Unlike the traditional UK banks, the users' funds are not covered by the FSCS; there is no coverage for deposits up to 85,000 GBP in case the company goes bankrupt. Money is a registered agent PrePay Technologies (an EMI) which the UK's FCA authorizes. Read our full Monese review for more details.
Starling Bank takes a unique approach to traditional banking. The goal is to supply everything you need from a complete UK bank account while excluding anything you don't. With no physical branches, you can still receive money management tools, a MasterCard contactless debit card, and 24/7 customer support, low fee international money transfers and more!
Are Neobanks Safe?
Unlike traditional banks who have had years to prop up their reputations and thousands of account holders to help boost their reputations, neobanks don't have that kind of foundation in the financial market yet.
However, that doesn;t mean the neobanks aren't safe. In fact for this reason the Neobanks have gone through meticulous lengths to make sure that their customers' funds are secure and that their private information is safe as well.
One of the biggest reasons for this is regulations, in the early days of nebanks many people couldn't trust the system as it wasn't regulated by any financial regulators. However, the tide is changing and many nonbanks are getting regulations from the FCS and many more. Even in countries like Australia, the government guarantees bank deposits up to the value of $250,000 for Authorised Deposit-taking Institutions (ADIs). In the United Kingdom, the FCS protects deposits of up to $250,000 in the unusual event that a neobank fails.
Neobanks vs Traditional Banks
The basic difference between neobansk and traditional banks is simply the fact that neobanks have no physical location while traditional banks have several physical locations. All neobanks are accessed using a computer or mobile device. However, there are traditional banks who also provide web versions and mobile apps for their customers. The services they can perform online are still limited but we think that is going to change in the near future. Traditional banks such as Capital One are a good example of traditional banks with a great online presence.
Consumers, especially the younger crowd are growing frustrated with established traditional banks. The frustration stems from their lack of quick adoption of technology and their sometimes ridiculously high fees. The constant innovation in the financial technology space has led to a lot of interest in neobank, and the high costs of traditional banks have been a major driver for the shift to digital-only banking.
Rising consumer enthusiasm in trading in cash and debit cards for mobile banking applications fuels worldwide competition, prompting neobanks to roll out more lavish features like overdraft insurance and welcome bonuses.
Final Thoughts on Neobanks
The rise in popularity of neobanks is largely supported by the growing number of young consumers finally coming of age to get a bank account. Now they have more choices than ever before when it comes to choosing a bank. As regulations continue to roll out, the trust in mobile-only banks will only continue to get stronger and will also rope in consumers of all ages.
Europe has been the unofficial hub where many neobanks are being launched; The Financial technology space just seems to be growing and growing with no end in sight. The future is bright for neobanks and the demand for digital banking is at an all-time high. With that in mind, the neobanks should continue to see success in 2021 and beyond.