What is a neobank?
A neobank is a financial institution that operates entirely through digital channels, with no physical branches. All services, including account opening, payments, and customer support, occur via mobile app or web interface.
Two models exist:
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Full-stack neobanks hold their own banking licenses and operate independently. Varo became the first US consumer fintech to receive a national bank charter in 2020.
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Front-end neobanks partner with licensed banks to offer services. Chime, for example, partners with The Bancorp Bank and Stride Bank to provide FDIC-insured deposits.
The distinction matters for consumers and regulators: Front-end neobanks depend on partner banks for deposit insurance and regulatory compliance, while full-stack neobanks bear those responsibilities directly.
How do neobanks differ from traditional banks and challenger banks?
Neobanks, challenger banks, and traditional banks occupy different positions in the financial services landscape:
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Traditional banks operate physical branches alongside digital channels, hold full banking licenses, and offer comprehensive services including mortgages, business lending, and wealth management.
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Challenger banks hold banking licenses and compete directly with traditional banks but emphasize digital-first experiences. UK-based Starling Bank and Monzo fall into this category.
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Neobanks typically lack their own banking licenses and partner with licensed institutions. They focus on specific consumer segments or use cases rather than full-service banking.
The lines are blurring. Fintechs that once looked like banks are actually becoming banks, per EMARKETER. Mercury filed for a national bank charter in December 2025 after managing $20 billion in customer deposits. Nubank applied for an OCC charter in October 2025, and Revolut has pursued a US banking license.
What features do neobanks offer that traditional banks don't?
Neobanks differentiate through technology-enabled features and pricing:
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Early direct deposit. Access paychecks up to two days early.
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No minimum balances or monthly fees. Lower operating costs enable fee-free accounts.
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Real-time spending notifications. Instant alerts for transactions.
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Built-in budgeting. Automatic categorization and spending insights.
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Savings automation. Round-up features and scheduled transfers.
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Integrated investing. Cash App, SoFi, and Robinhood offer trading within banking apps.
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Crypto access. Several neobanks include cryptocurrency trading and storage.
UK neobanks have expanded into super-app territory. Monzo offers savings accounts, investments, pensions, credit cards, consumer loans, and home insurance through a single app. This bundled approach creates engagement through financial journeys rather than isolated products.
Why are Gen Z and millennials adopting neobanks?
Younger consumers drive neobank growth because these platforms match their digital expectations and financial constraints. Millennials and Gen Z comprise 78% of neobank customers globally, per industry data.
Several factors explain adoption:
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Mobile-first design. Nearly 99% of Gen Z used a mobile banking app in the past month, with almost 50% preferring to manage finances exclusively through phones.
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Lower fees. Neobanks eliminate costs associated with branch networks, passing savings to customers through reduced or zero fees.
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Early paycheck access. Features like early direct deposit appeal to consumers living paycheck to paycheck.
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Budgeting tools. Built-in spending insights and savings automation address financial management pain points.
US neobanks primarily target younger, low- or middle-income consumers seeking products, fee structures, and digital experiences that traditional institutions don't offer, according to EMARKETER.
What are the largest neobanks in the US and UK?
The US and UK markets feature different dominant players reflecting each region's regulatory environment:
United States:
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Chime leads with approximately 8.7 million active users as of the beginning of 2026, which valued the company at $11.6 billion.
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Cash App (Block) has evolved from peer-to-peer payments into a digital bank for households earning up to $150,000 annually, with nearly $9 billion in loan originations through Cash App Borrow in 2024.
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SoFi transformed from a student lender into a digital retail bank offering checking, savings, brokerage, and consumer loans.
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Robinhood expanded from commission-free trading to include banking, credit cards, and crypto.
United Kingdom:
Revolut competes globally and has pursued a US banking license.
What challenges do neobanks face in 2026?
Despite growth, neobanks confront structural obstacles:
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Profitability pressure. Many neobanks prioritized user growth over sustainable unit economics. Investors now demand paths to profitability, forcing difficult decisions about fees, lending, and customer acquisition costs.
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Partner bank risk. The 2024 collapse of Synapse, a banking-as-a-service platform, disrupted fintechs relying on partner banks like Evolve Bank & Trust. Mercury terminated its Evolve relationship and diversified partners after regulatory issues emerged.
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Consumer trust gaps. 32% of UK Gen Zers plan to use in-branch banking in 2025, the highest of any generation, per Dentsu. Gen Z values human interaction for financial decisions, creating challenges for branchless models.
Competitive convergence.Major neobanks are getting more alike as they expand product sets and target the same consumers, intensifying competition.
How are neobanks regulated compared to traditional banks?
Neobanks face different regulatory frameworks depending on their structure:
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Partner bank model. Most neobanks partner with FDIC-insured banks that hold customer deposits. The partner bank bears regulatory oversight from the FDIC, Federal Reserve, or OCC. Neobanks must clearly communicate that FDIC coverage applies through partner institutions, not the neobank itself.
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Licensed neobanks. Full-stack neobanks like Varo hold their own charters and face direct regulatory supervision comparable to traditional banks.
Regulation is tightening. The FDIC proposed rules in June 2024, partly responding to the Synapse collapse, to ensure deposits placed through fintechs receive the same scrutiny as traditional bank deposits. Multiple neobanks have applied for bank charters: PayPal applied for an industrial loan company charter, Nubank and Mercury filed for OCC charters, and Revolut has pursued licensing to reduce partner bank dependency.
How should marketers reach neobank customers in 2026?
Neobank customers share characteristics that inform marketing strategy:
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Mobile-first engagement. Neobank users manage finances through apps. Marketing touchpoints should prioritize mobile formats, in-app messaging, and mobile-optimized content.
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Fee sensitivity. These consumers chose neobanks partly to avoid fees. Value propositions emphasizing cost savings resonate more than premium positioning.
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Financial wellness focus. Budgeting tools and savings features attract users seeking financial improvement. Content addressing money management aligns with their goals.
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Social proof reliance. Younger consumers research financial products through social channels and peer recommendations rather than traditional advertising.
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Omnichannel expectations. Despite digital preferences, UK Gen Zers still value branch access for major financial decisions. Hybrid approaches may outperform purely digital strategies.
For financial services marketers, neobank adoption signals broader shifts in how younger consumers evaluate and select financial products. Understanding these preferences informs positioning even for traditional institutions competing for the same customers.
We prepared this article with the assistance of generative AI tools and stand behind its accuracy, quality, and originality.
EMARKETER forecast data was current at publication and may have changed. EMARKETER clients have access to up-to-date forecast data. To explore EMARKETER solutions, click here.