Neobanks are a new way businesses and people are approaching their finances. Legacy banks are still the leading banking method, however, neobanks are steadily catching up as time goes.
Right now, neobanks make up to about 20% of the UK’s banking market share, a pretty big number for the newcomers. And investments are no different- neobanks are securing hundreds of millions in funding, as more startups are coming in and more confidence in neobanks grows.
This is not to be confused with online banking, though. Neolista explains the difference between online banking and neobanks perfectly, saying, “The main difference between a neobank and an online bank is that neobanks are typically technology-driven startups that do not have their own banking licenses but rely on partnerships with traditional banks to offer banking services, whereas online banks are usually the digital arms of established banks, possessing full banking licenses and offering a broader range of financial services.”
To sum it up, these are the 5 main differentiators with neobanks:
1. Neobanks don’t have physical branches
2. Neobanks are fully digital and exist to ‘replace’ traditional banks, whereas online banks are ‘hybrid’ in that, they use tech simultaneously with their analogue infrastructure
3. Neobanks generally hold younger generations as they are more tech driven
4. Neobanks usually rely on fees from card transactions (interchange fees) and may have lower overhead due to the absence of physical branches for lower or no fees compared to traditional banks.
5. Not all neobanks have banking licenses, so there could be some limitations to their services.
Neobanks like Revolut, Monzo and Starling are becoming popular in the UK. Starling Bank leads with £188 million in revenue, while Monzo follows with £154 million. In terms of customer numbers, Monzo is ahead with 6 million users compared to Starling’s 3 million.
5 Neobank Startups For Convenience
These neobank startups stood out, and bring low-cost, convenient and central platforms for those who are interested in looking into the new world of banking, and leaving behind (or using simultaneously with) the legacy banks:
1. myTU
Neobank myTU is pioneering the use of cloud-only infrastructure and AI to make essential financial services easier to access, more secure and more cost-effective. It’s an approach that precisely matches the needs of underserved markets and clients, including freelancers, digital nomads, and businesses often overlooked by larger banks. myTU is growing rapidly and currently counts with more than 50,000 customers representing over 100 nationalities.
Headquartered in Vilnius, Lithuania, myTU was founded in 2019 by banking veteran Raman Korneu and technology expert Tomas Navickas. The startup has raised €7 million to date. On the product side, myTU has recently launched business accounts to complement its consumer offering. It plans to add lending soon, starting with travel loans as a differentiator. Multi-currency support is on the roadmap as well, to facilitate international transactions.
Technologically, myTU prides itself on efficiency. Founders made the forward-thinking decision to build entirely on Google Cloud, making it one of the first digital banks to run fully on the public cloud. This allowed it to scale efficiently and innovate rapidly, while keeping IT costs extremely low.
2. Bunq
Bunq’s eco-conscious and inclusive strategy gives you control over how money is used. Bunq is unique in letting you decide the investments made with your deposits. They have both business and personal account options, with a quick account registration process.
With different languages supported, and help available 24/7, this is perfect for those who need a modern banking solution that is convenient to use and manage from a smartphone.
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3. Allica Bank
This bank caters to established SMEs with a business banking experience that leads among main competitors. With a dedicated relationship manager for every account, you can expect personalised service without monthly fees or frustrating wait times.
They have some of the best business savings rates in the industry, so funds are growing while you focus on growing your business. You’ll enjoy the convenience of applying for financial products online, and your deposits are safe, insured up to £85,000 by the FSCS.
4. Okoora
Okoora, a groundbreaking Swiss B2B fintech innovator founded in 2021, are the creators of a financial control infrastructure for cross-border businesses. Okoora’s cloud-based, AI-powered platform, Automatic Business Currency Management (ABCM™), aims to simplify currency operations and combines operational tools, currency risk management modules, and access to a vast network of banks and trading rooms.
Okoora’s proprietary technology enables small, medium and large organizations to streamline their currency-related processes, manage growth with greater predictability, and eliminate wasted financial costs. From sending and receiving local and global payments in 100+ currencies, through opening fee-less accounts virtually anywhere, to managing currency risks and cashflows, and enabling transparent collaboration among teams and partners – okoora delivers on its promise of Currency Simplified.
In the past year, the company has expanded into Cyprus and Poland. The Cyprus branch is expected to employ up to approximately 30 professionals with specific skills in European regulatory compliance, licensing, technological advancements, and marketing and sales. The company has a team of 100 professionals based across Switzerland, Germany, Cyprus, Israel and India.
5. Nerve
Nerve is a neobank created for artists and freelancers. This 2022 founded startup helps artists with a platform to manage finances with low costs. They have free business debit cards and savings accounts, with most of their transactions also being low cost to free. They also have an invoicing feature, where artists can involve clients directly via the app for convenience.
Nerve’s app also has this auto-save function that rounds up transactions to save spare ‘change’, or setting aside funds for tax purposes, for better financial management. Strong security measures, including two-factor authentication and biometric locks, secure your financial data and transactions for safety and privacy.