You’re probably aware of how much technology has advanced in recent years, especially within the financial sector, so it’s no surprise that new innovations are allowing banks and financial services organisations to branch out of in-branch banking.
From the word ‘neo’ we get the common English word ‘new’, which might help explain what a Neo Bank is. A neo bank is a new type of bank which is entirely digital with no physical branches.
From setting up the account to day to day management and even switching banks, neo banks operate entirely online and over the phone – there’s no need to speak to anyone face to face or to physically authorise the account. With clever face and voice recognition software and high-tech fraud prevention measures, banking with a neo bank remains safe and secure, while also offering additional features to typical high-street banks.
How do neo banks work?
Instead of going to a branch to open a new bank account, neo banks are set up entirely online. Typically, you download the mobile banking app, register and then complete various identification and fraud prevention steps before your account is opened. Things like video recordings along with copies of your passport or driving license will be used to verify your identity. Once you’ve passed all the checks, your debit card will be sent to you in the post and the pin sent a few days later – just like any normal bank account payment card.
If you want to discuss any details of your account, such as upgrading a feature, you just need to call or get in touch online. Usually, the response times are quick because they know you can’t visit in-branch and waiting for your call to be answered would be inconvenient, especially when it’s about your banking and finances.
Are neo banks safe?
Neo banks have all the safety and fraud prevention measures in place that normal banks do, and probably a few more given the digital nature of them. Your funds are kept safe under the Financial Services Compensation Scheme (up to £85,000) and other acts like the Direct Debit Guarantee ensure your payments are protected and the risk of monetary loss is minimised. Of course, it remains your responsibility to ensure your banking details are kept safe and secure and this includes not sharing any of your bank login information or debit card information with anyone – including close friends and family.
What are the disadvantages of neo banks?
The main disadvantage to neo banks is that there are no branches so if you have an issue or you need help understanding something, it has to be done over the phone. While this might be beneficial to some people who perhaps don’t like face to face meetings or struggle to visit the bank because of transport or locational issues, for others it can make the whole process feel quite isolated and disconnected.
Additionally, if you deal mostly in cash – if you are paid your wages in cash, for example – and you need to pay it into your bank account on a regular basis, not having a bank branch can make this difficult. You can deposit cash into any bank account at a post office, so it’s not impossible, but there are often queues at post offices due to the range of services they offer. Fortunately, you can withdraw cash at any ATM.
Do neo banks do loans?
Like normal banks, neo banks offer overdraft facilities and some loan products. Your overdraft will be offered and agreed prior to you opening the account, however you can opt out of having an overdraft at any time, and you can usually apply to increase or decrease your overdraft limit as well.
Neo banks consider a lot of different pieces of information when making a lending decision – as do almost all lenders – so although they may offer loans, it doesn’t mean you are guaranteed to get one, even if you have a good credit score.
Whenever it comes to a loan application, make sure you really need the loan before applying. Could you budget a little better and save some cash first? Or maybe switch utilities providers to save on essential bills? There are lots of ways to save a little extra cash even on a budget, so make sure you to try to save some money first before applying to borrow.
