Neobanks continued to gain popularity and expand their customer bases in 2024. Many leading neobanks like Chime, Current, and Varo reported strong growth in customers and deposits.
Competition continued to increase, with tech giants and large banks launching their own digital banking options. Examples include Google Plex, Amazon's partnership with Goldman Sachs on Marcus, and JP Morgan's Finn app.
Neobanks have also grown rapidly in the past decade. As of 2023, there were 300 neobanks globally, a significant change from only 12 in 2015. Their user numbers are also on the rise, with a projected 850 million by 2030, according to Juniper Research.
Profitability continued to be a challenge for many neobanks who prioritized growth. Some, like Varo and MoneyLion, worked towards launching lending products and expanding their monetization models. International expansion continued as neobanks entered new markets across Latin America, Europe, and Asia Pacific. Major players like Revolut and N26 continued growing globally.
The rapid growth of neobanks shows no signs of slowing down. As the likes of Chime, N26, and Revolut continue expanding their customer bases globally, competition is fiercer than ever. Standing out with the hottest digital banking features is key to differentiation and driving further adoption.
Key Features for Neobanks
With no physical branches and innovative digital solutions, neobanks offers a fresh approach to banking services. As neobanks focus so much of their resources on developing a fintech app, getting new features is their key to attracting new users. However, as the market grows, we can see what are the essential.
In this article, we delve into the most essential features of neobanks, exploring how they reshape the financial services landscape and why they're important for users.
Based on current industry trends and developments, here are 5 key neobank capabilities to keep an eye on in 2024:
1. Advanced & User-Friendly Mobile Banking Apps
Mobile apps are the core platform for neobanks, replacing the need for physical bank branches. Customers can conduct all critical banking functions directly through the provider's smartphone app, supported across iOS and Android devices.
Users can complete new account openings entirely digitally through the mobile app flow. Streamlined identity verification, funding, and activation of debit cards/accounts can appear within minutes instead of days. Ongoing account management for deposits, transfers, and payments is also facilitated seamlessly.
Neobanks allow depositing paper checks simply by capturing photos through the smartphone camera within their app. Advanced image processing verifies check details.
Transaction histories and balance details are viewable immediately in real-time through users' mobile apps. Advanced analytics also auto-categorize spending into areas like dining, entertainment, and travel and provide custom insights into cash flow trends users can act on.
Peer-to-peer (P2P) and Acount-to-Account (A2A) transfers to other users are instantly facilitated to account numbers/emails/phone numbers for easy sharing of funds. Remittance payments are also fast and simplified, as most of the world's currencies are available on almost every platform. One-time or recurring bill payments can be scheduled to merchants, and everything stays digital.
By concentrating full financial functionality within intuitive and highly-rated mobile apps, neobanks have appealed strongly to digitally inclined demographics who manage personal finances primarily from their smartphones.
Action step: If your mobile app needs advanced payment processing solutions so your users can easily send and receive payments, our teams have the experience and knowledge to consult and develop cutting-edge payment gateways and custom payment apps or help with PCI DSS compliance.
2. Automated Budgeting Tools
Better in-app and web budget templates, spend tracking, subscription management, and savings goals help customers manage finances.
Neobank apps provide real-time spending tracking in customized categories (dining, travel, bills, etc.) and merchant-level details to identify top expenses. Advanced analytics highlight areas exceeding budget goals and can detect unusual spending patterns early.
Custom Budgeting Template. Users can set up periodic budgets for common categories like food, entertainment, or car expenses based on usual spending. Budget caps trigger alerts once reached, along with advice to reallocate excess funds to savings goals.
Automated Savings Rules. Set predefined rules to automatically transfer set amounts to separate savings accounts or "pockets" after receiving direct deposits or when making certain purchases. Makes building an emergency fund or splitting bills to joint account holders an effortless habit.
Subscription Management: Neobanks lets users track, cancel, or optimize recurring subscriptions and bills from their account dashboard to stop unwanted charges.
Overall, these robust tools integrated with banking make it simpler for consumers to take control of cash flow, save more automatically, gain financial insights, and build sound money management habits. The automation and seamless user experiences allow for consistent money management versus more manual budgeting.
Action step: Using emerging technologies like AI and ML can contribute to better data management by adding rules.
3. FDIC-Insured Accounts & Cards
Neobank checking, savings, cash management, or money market accounts come standard with FDIC insurance protections safeguarding up to $250,000 deposited (for individual accounts). This covers customers in financial insolvency cases- matching traditional brick-and-mortar banks' guarantees.
Neobanks prominently display FDIC signage within their mobile apps to clearly indicate funds are securely insured by the government agency. Some showcase real-time insurance calculation tools highlighting available coverage based on current balances for full transparency.
Neobanks issue both virtual debit cards (for online use) and physical debit cards (for in-store purchases) linked directly to users' checking accounts. This allows for omni-channel spend access from the provided accounts, like classic debit cards.
Visa or Mastercard-branded debit cards support all the latest functionality, like contactless tap payments via digital wallets, simplified security, and real-time purchase notifications. Many neobanks further enrich cards via integrated rewards programs.
Cards get rapidly re-issued through the app if lost/stolen to prevent negative user account impacts. Coupled with instant digital freezing capabilities inside the mobile experience, customers receive robust debit access and security that they are in control of their money at all times.
By blending modern digital banking practices with rich card functionality comparable to top issuers, neobanks furnish reliable payment utilities customers expect alongside account management conveniences.
4. Fraud Prevention Alerts
Monzo, N26, and Revolut offer real-time purchase verification alerts and card freezing to prevent fraudulent transactions.
Purchase Verification and Location Alerts. When an unusual or large purchase is attempted with the debit card, neobanks instantly sends a push alert seeking customer confirmation that it's valid. Customers can simply tap to verify quickly within the app or flag it as fraudulent for additional review. This allows neobanks to catch fraudulent transactions fast in real-time vs waiting for monthly statements.
Alerts may also be triggered through location tracking if a purchase seems unusual relative to the customer's mobile device location history and typical transaction geographies.
Automated Card Locking. After a predefined threshold of declined verification alerts, neobanks can now instantly and temporarily lock debit cards pending fraud investigation. This prevents customers from needing to freeze cards themselves each alert and limits unauthorized use.
By leveraging expansive networks, device-tracking, and AI to spot anomalies immediately, neobanks have greatly advanced fraud protection and risk modeling.
5. Around-the-Clock Assistance
A major advantage neobanks provide versus traditional banks is 24/7 support and assistance for users. This alleviates issues of limited service during branch operating hours. A combination of human agents and AI chatbots underpins the experience.
Many neobanks have adopted AI-powered chatbots to handle basic and repetitive inquiries like checking account balances, transaction status, and modifying personal details/contact info. The bots answer instantly without wait times through on-site messaging and in-app chat windows. For advanced issues that require further troubleshooting or specialized knowledge, the bots' qualification algorithms seamlessly route those cases to live agents.
For more complex questions around account operations, security, available products, etc, users access integrated messaging platforms to engage live support specialists directly through their app dashboard.
In urgent situations like lost card replacement or temporary account freezes while traveling, neobanks furnish 24/7 toll-free contact numbers that allow real-time issue reporting/remediation over phone call conversations. Coupled with digital self-service tools, users feel fully covered at all times.
By merging automated bots and dedicated live bank representatives that are accessible anytime, neobank support models have achieved new standards of responsiveness and problem resolution speed that customers have embraced.
New and Popular Features
1. Direct Deposit Advances Features
This feature is one of the relatively new ones, as some neobanks have started offering it in the past two years.
Direct deposit advances allow customers to access their payroll direct deposits up to 2 days early, compared to waiting for the scheduled deposit date. Many neobanks like Chime, Varo, and Dave now offer this ability with direct deposit funds access for up to 2 days.
This feature works so that the neobank essentially fronts a portion of the expected direct deposit amount before payday based on past direct deposit history. The service is generally fee-free, with the neobank taking on the risk that the scheduled deposit will come through as expected. If not, they may revoke access to advances in the future.
Advances give consumers more real-time access and flexibility with their cashflow around bills and expenses before payday. However, some consumer advocates worry customers could become too reliant on the advances.
The direct deposit advance feature has quickly become very popular with neobank customers, differentiating them from traditional banks, which offer slower deposit availability.
Recent examples of direct deposit advances:
- Chime offers "SpotMe" - up to $200 can be accessed early. If the full direct deposit doesn't cover what was advanced, members have up to 30 days interest-free to repay.
- Varo offers advances on recurring payroll deposits of $100-$1000, depending on customer history.
- Dave offers up to $250 in advance without interest or fees.
2. High Yield Savings Features
Neobanks like HMBradley, Varo, and Chime have launched savings accounts offering 2-4% yields, much higher than traditional FDIC-insured banks. As these rates are over 10 times higher than the average bank savings account, according to Bankrate, the neobanks can offer better savings products than brick-and-mortar banks.
The rates are usually variable and fluctuate based on prevailing interest rates and banking regulations. Some neobanks incentivize savings further via "rewards" programs. By making saving more rewarding, the high-yield accounts help customers build their rainy-day funds faster. The rates may adjust lower in the future depending on market conditions but should provide strong value relative to legacy banks.
Recent examples of high-yield savings features:
- HMBradley offers up to 3% APY based on how much the customer increases their savings every quarter.
- Varo offers up to 2.8% on its "Save Your Pay" automated savings transfers from its checking accounts.
- The accounts typically still have no minimum balance requirements and fees like at traditional banks.
3. Credit Building Products
Chime, Upgrade, and others now provide secured cards, credit builder loans, and automated reporting to credit bureaus to help customers build credit scores. There are three new products that neobanks started offering, and those are: secured credit cards, credit builder loans, and credit reporting features.
Secured Credit Cards. These cards require a refundable security deposit that becomes the credit limit. Responsible card usage is reported to credit bureaus to demonstrate the ability to manage credit. After as little as 6-12 months of on-time payments, customers may qualify to graduate to an unsecured card and get their deposit back.
Credit Builder Loans. Some neobanks provide access to loans whose monthly repayments are reported to credit bureaus to show a positive payment history. For example, Chime offers a Credit Builder program where, for a $200 loan held for 12 months, members make $17 monthly payments. Upon completion, the $200 is released to the member, along with an improved credit profile.
Credit Reporting. Many neobanks now offer free access to tools that let members opt-in to automated monthly reporting of bank account activity (on-time payments, account history, etc.) directly to credit bureaus like Equifax. This can also accelerate building credit scores.
By leveraging technology and non-traditional data, neobanks are bringing credit-building solutions to "credit invisible" groups often denied by mainstream lenders. Their solutions could help millions of users worldwide establish and grow their credit profiles outside brick-and-mortar banks.
4. Couple and Teen Accounts
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Revolut, GoHenry, Greenlight, and others are now offering joint accounts for couples and teen accounts to teach budgeting/finance to minors. Separately, many neobanks now offer specialized accounts for teenagers, often ages 13+. Greenlight, Step, and Revolut Junior allow teens to deposit earned income, manage spending through an app, and learn responsible money management with parental oversight.
Family accounts. Joint account offerings are still expanding but have found strong demand from couples/families seeking shared banking tools. The teen accounts have grown extremely fast already, with millions of parents/teens now using them due to their ease of use and educational value as an alternative to cash for allowances.
Account holders can also set up customizable permissions, like setting spending limits and controlling which users can withdraw/deposit or see shared transaction history. Funds can be transferred instantly between the accounts. Some neobanks offer joint debit cards as well. This makes coordinating finances, saving up for goals, and splitting expenses much easier for couples and families.
By better serving various multi-user financial needs, neobanks are expanding their primary account status beyond just individuals to whole family units. The tailored and modern banking user experiences also resonate strongly with younger demographics as they are more tech-savvy and enjoy having all their bank services available on the phone.
Final Word
Neobanks have seen tremendous growth and innovation over the past few years. They now serve over 264 million customers globally and hold over $721 billion in deposits. Also, neobanks have leveraged technology to create entirely branchless and digitally-native platforms that offer consumers modern features traditional banks lack.
Some of the most popular new features that will be driving adoption in the next year are Direct deposit advances to access paychecks faster, high-yield savings accounts with 2-4% APY, Credit-building tools like secured cards and credit builder loans, Debit card rewards programs enhanced via cashback and brand partnerships and streamlined joint/teen banking accounts for shared family finances.
Additionally, neobanks provide integrated budgeting templates, real-time purchase alerts, card freezing to prevent fraud, and automated subscription management, some of the most sought-after features in digital banking today.
The global neobank market is projected to grow at a 47% CAGR through 2030 - reaching over $1 trillion in valuation. As an ever-wider array of financial services migrate to mobile-first platforms, neobanks are poised for tremendous expansion in users and capabilities going forward. Their innovative models are disrupting banking norms to better align with consumer needs and preferences in the digital era.
If you want to develop a FinTech app or add new features to your financial system, our experts will help you make the right decision. Contact us to find out more.
