Will Neo Banks Accelerate the next Banking Revolution?
By ClearCycle Team

With the cloud, individuals and small businesses can snap their fingers and instantly set up enterprise-class services.” ~ Roy Stephan, Founder, and CEO of PierceMatrix

This era is an era of cloud computing. Everything is going on the cloud these days. And so there is a massive boom in concepts like SaaS (Software As A Service). Remote Accessibility and No Data loss make cloud computing a growth factor for a business.

So, why financial institutions like banks won’t get digitized? Here comes an innovative concept of Neo Banks. Neo banks or Challenger banks are digital banks with no physical branch. They provide each and every service of a traditional bank like current accounts, mobile apps, payment cards, money transfers, loans, savings accounts through web and mobile apps.

Origin of Neo Bank

The first wave of Neo banks hit the finance industry in early 2010 with the opening of banks like Monzo and Atom Bank. Other leading neo banks that hit the market later include Chime, Simple, Starling, N26, Moven, and Volt.

Developing a Neo bank

In spite of having open banking policies by governments across the globe, and the mobile banking revolution – neo banks face two significant challenges: Infrastructure and Technology.

And both of these problems can be solved by two types of solutions or by a blend of both the solutions, BaaS (Banking As A Service) partnerships, and Direct integration with any bank.

BaaS (Banking As A Service) is becoming a dynamic solution in the Fintech industry so that a customer-centric bank could be quickly delivered into the market. BaaS providers build a banking infrastructure through API (Application Programming Interface). The merit of this practice is API can be created and launched in months without monetary licenses (for most use cases) or extensive rounds of capital. Further customization is then layered on top to set up direct deposit, issue debit cards or credit cards, and process loan applications. Banks like  Synapse, Cambr, Bankable, and Treezor run on the BaaS platform.

Another option of Direct Integration with a bank partner involves a tie-up of a bank with a fintech company. Similarly, APIs are used to serve basic banking facilities like customer-initiated onboarding, account funding, etc. The timeline for approval, integration, and launch tends to be longer as well.  Some examples of top banks in this area are BBVA, Fidor Bank, and GreenDot.

Revenue Generation for Neo Bank

Conventionally, every finance institute has three ways to generate revenue. And these are, bank fees, deposit interest margin (i.e. paying deposit holders a smaller share of interest than what they earn as an institution), and loan interest income (from issuing and servicing personal, auto, residential, and commercial loans).

Fortunately, NeoBanks has opened the fourth way of generating revenue, using card interchange. Neo bank issues a debit card for their customers. The customer makes a purchase online using that debit card and there is a merchant processing transaction fees that deduct from the total of the final authorized purchase. So, in this way, a percentage of the online sales is being given to the parties involved – specifically the card network (e.g. Visa, MasterCard, American Express, Discover) and neobank (as the issuing bank of the card used in the transaction).

Neo Banks Across the World

Neo banks are spreading across the entire world very rapidly. Here is a list of top neo banks:


Top Neo Banks


 n26, Atom Bank, Monzo, Revolut, Starling Bank, Tide Bank, Bnext


Bank Zero, Barko Financial Services, Bettr Finance, Discovery Bank, PostBank, TymeBank


 Neat, MYBANK, Kakao Bank (Korea), Jibun Bank (Japan)

Mexico and Latin America

Albo (in Mexico), Banco Original (Brazil), NuBank (Brazil)

United States

Chime, Simple, NOVO, AXOS, Aspiration, VARO


 Koho, ATB Brightside, EQ Bank, Impak Finance, Mogo, Motusbank, NorthOne Business Banking, QuestBank, Stack, Tangerine


 Tyro Payments, Xinja, UP, 86400, Volt Bank, Judo Bank, Douugh

Future of Neo Banks

Besides basic banking facilities, the sector will start to focus on customized features by specific target groups in the upcoming years: 

  • Freelancers
  • Small Businesses
  • Startups
  • Minors/Kids
  • Travelers
  • Immigrants

The outlook is bright and expansive for established neo banks and new arrivals, offering a personalized experience for niche user segments.


As everything is getting digitized, so the banking system is as it makes the user to use the banking facility anywhere anytime. Despite so many digital services provided by neo banks, there are obstacles too faced by them, infrastructure and technology are the major ones. Neo banks have opened the fourth way and most modern way of generating revenue, cards interchange. But, in the upcoming years, neo banks have to target some specific sector of society for consistent growth.


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