GlossaryTerm · Banking

What does neobank mean?

By Tokenova Editorial Desk

An app-first bank, or an app that looks like one.

3 sources ↓
A hand holding a smartphone with app tiles on the screen
Photo: “Smartphone Use” by Océanos y dados, CC0 1.0 (edited: cropped, colour-graded)

Quick answer

A neobank is a company that offers retail banking services mainly through a smartphone app and website instead of branches⁠[1]. It is a marketing term, not a licence: some neobanks are licensed banks, while others are e-money firms or apps built on a partner bank⁠[2].

Key points

  • Neobank describes how banking is delivered (app-first), not what licence the company holds.
  • A licensed neobank's deposits are protected like any other bank's, up to the scheme limit.
  • A non-bank neobank-style app relies on safeguarding or a partner bank instead of its own deposit insurance.
On this page
  1. Where does the term neobank come from?
  2. Is a neobank always a real bank?
  3. How do you check what a neobank really is?
  4. FAQ
  5. Sources

#Where does the term neobank come from?

"Neo" means new. The word describes newer banking providers built around a phone app rather than a branch network. Bank supervisors use similar language: the Basel Committee describes neo-banks as firms that make extensive use of technology to offer retail banking services predominantly through a smartphone app and internet-based platform⁠[1]. You will also hear "challenger bank" or "digital bank" for the same idea. For the full explainer, read what is a neobank.

#Is a neobank always a real bank?

No. Because neobank is not a legal category, the same word covers very different set-ups. Some neobanks hold a full banking licence. Others are e-money or payment institutions, and in the UK the FCA warns that money held with a non-bank provider is not protected by the Financial Services Compensation Scheme if that firm goes out of business, although it should be safeguarded⁠[2]. A third group are apps that offer a partner bank's accounts, a model explained in banking as a service.

Worked example

Example: the same £130,000, two set-ups

If a UK neobank is an authorised bank, £120,000 of a £130,000 balance is protected by the FSCS and £10,000 is not⁠[3]. If the app is an e-money firm, none of it is FSCS-protected; it is safeguarded instead. The difference was computed with code.

#How do you check what a neobank really is?

Find the legal entity name in the app's terms, search it on the regulator's register and read which permission it holds. Then compare it with a branch-based bank using neobank vs traditional bank. Related terms: e-money and IBAN.

Frequently asked questions

Is a neobank the same as a challenger bank?

In everyday use, mostly yes. Both describe newer, technology-led providers. Neither phrase tells you the licence.

Is money in a neobank insured?

Only if the neobank, or its partner bank, is a licensed bank covered by deposit insurance, and only up to the limit, such as £120,000 per person per firm in the UK⁠[3].

Sources

  1. Sound Practices: Implications of fintech developments for banks and bank supervisors — Basel Committee on Banking Supervision (BIS), 2018 Primary
  2. Using payment service providers — Financial Conduct Authority, 2026 Primary
  3. FSCS welcomes higher deposit protection limit of £120,000 — Financial Services Compensation Scheme, 2025 Primary

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