Neo Banks Vs Traditional Banking

Neo Banks have changed the way people think about banking? Is this new wave of fintech start-ups the future of banking, or a financial fad? Let’s explore the differences between Neo Banks and traditional banking institutions (Banks and Credit Unions) and weigh their pros and cons. While there is plenty of difference between neo and traditional, there is an even bigger difference between banks and credit unions.

What is a Neo Bank?

The term Neo Bank refers to a financial technology firm that offers apps, services, and software to streamline mobile and digital banking. These Neo Banks by themselves, are not banks. Instead, they are companies that rely on their relationship with a traditional bank to provide banking services to their customers. . Neo Banks are easily recognizable by their naming convention, which is often a single proper noun that sounds high-tech.

Comparing Neo Banks With Traditional Banking

  • Main Banking Features Overview
  • Opening an Account
  • Locations
  • Mobile Application
  • Fees
  • Experience
  • Accounts for low/no credit

Main Banking Features

The following details the average benefits listed by the top 4 Neo Banks in the United States. Not all offers are available at all Neo Banks. Five Factors of their checking accounts serve as the main selling point of Neo Banks:

  • Overdraft Protection
  • No Monthly Fees
  • Early Direct Deposit
  • No Minimum Balance or Transfer Fees
  • Easy Signup

This essentially defines a Neo Bank’s primary product. An easy-to-access, simple spending account that’s lightning-fast to join. Neo Banks are looking for you to do one thing: deposit your money, and spend it, and they do it well. But, besides a debit or credit card with a sprinkle of savings accounts, they offer little in ways to financially plan for the future.

Banks and Credit Unions on the other hand offer multiple products to fit all walks of life, including mortgages, personal loans, vehicle financing, supplemental savings accounts, commercial loans, and more.

Opening an Account 

Neo Banks’ claim to fame is that they are easy to open and feature the banking essentials for all walks of life, regardless of credit. At a local, traditional level, First Commonwealth has brought banking essentials to the community via the Bank On Certified Fresh Start Checking account. Opening an account at both is relatively easy. But what about getting your account closed on you out of the blue?

Issues with Neo Banks

There have been several substantiated reports that Neo Banks can close your account, seemingly out of nowhere.

 Since 2020, a large neo bank with 12 million customers received 920 complaints filed with the Consumer Financial Protection Bureau. In comparison, a major nationwide traditional bank with six times the users generated 317 complaints during the same length of time. When asked about the number of complaints lobbied against the neo bank, Lauren Saunders of the National Consumer Law Center said, “For a company that most people have never heard of, I think that’s a lot of complaints.” (1)

What Happens when you get locked out of your Neo Bank?

  1. Your debit card stops working. Depending on your situation, this could be your only means of payment.
  2. You lose access to the money in your checking account.
  3. You have to deal with customer support to get access to your money.
  4. You will have to work with their customer support to get your money back



Number of Neo Bank Locations: 

Minimal to none - Neo Banks pride themselves on their lack of physical branches.

Number of Traditional Banking Locations

 90,000 + Combined Banks and Credit in the United States ( 2) (3)

Banks and Credit Unions combined operate over 90,000 physical branches in the United States alone. That’s at least 90,000 additional jobs that empower local communities across the country. Physical branches allow rural and low-income families access to banking services without technological disruptions.

Mobile Applications

Neo Banks' main driving factor is their ease of use and their mobile app. By and large, these financial technology companies that are not banks, have the advantage in this aspect compared to traditional banks. However, as the world moves into a more mobile-first future, traditional banking establishments have made great strides in competing with Neo Banks.


Due to the lack of overhead expenses, Neo Banks are known for their lack of fees to open or maintain an account. At banks and credit unions, the operational costs associated with a wider range of products and services result in some accounts potentially incurring an opening fee or monthly charge.


The longest-running bank in the United States was the Bank of New York, now known as BNY Mellon, has been in operation since 1784. The establishment of the first U.S. credit union would come later in 1901. Neo Banks rose in popularity in the mid-2010s.

Accounts for Individuals with Low/No Credit

Neo Banks are appealing to those with zero to low credit, as the leading ones do not require a credit check. Local community-focused banks and credit unions will often offer a checking account designed for the underserved and unbanked in mind. At First Commonwealth, we pride ourselves in our Fresh Start checking account featuring must-have essentials and worry-free banking. Along with membership, comes FCFCUwellness, your all-in-one ad-free financial wellness platform. Join us today, for true banking from your local credit union.

Join Today

A Banking App Has Been Suddenly Closing Accounts, Sometimes Not Returning Customers’ Money — ProPublica

• Number of U.S. FDIC-insured commercial bank branches 2020 | Statista

3. The Future of Branches | Cuna News