Neobanks vs Challenger Banks
Neobank
Neobank is a digital bank operating online, without any physical presence, which provides its customers remote access to its services via a mobile apps.
Their objective is: to make (a bit of) money on (a lot of) customers. Just like a tech company.
Challenger bank
Midsize firms — appeared to compete with larger institutions by specializing in underserved areas. The new branch in banking was created in the way to be technology-driven, offering online-only operations and avoiding complexities specific to the traditional banking.
Their objective is: to grow their balance sheet.
Services Comparison Matrix
| Features | Neobanks | Challenger Banks |
|---|---|---|
| Regulation | Not regulated as a bank | Regulated as a bank |
| Business model | Similar to a tech startup | Similar to a bank |
| Main objectives | Grow its user base | Grow its balance sheet |
| SERVICES | ||
| Payments | ||
| Debit cards | ||
| Mobile interface | ||
| Loans | — | |
| Overdraft | — | |
| Deposit Protection | — | |
Comprehensive Banking Model Matrix
| Banking Model | Definition | Banking License | Channel | Benefits | Pitfalls |
|---|---|---|---|---|---|
| Challenger Banks | Fintech company natively built around retail banking | Yes | Digital |
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| Neobanks | Type of direct bank that is 100% digital | No (operate through licensed partners) | Mobile apps |
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| Traditional Banks | A financial institution licensed to receive deposits and make loans | Yes | Undergoing digital transformation |
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