A neobank (also called a digital bank or challenger bank) is a financial institution that operates entirely online without traditional physical branches. You manage your account through a mobile app, and all services from opening an account to customer support happen digitally.

There is an important regulatory distinction between neobanks. Some hold a full banking license (like N26, which holds a German banking license, or Bunq, which holds a Dutch banking license). Others operate under an e-money license (like Revolut's original UK license, though it has since obtained banking licenses in several EU countries). The difference matters: a banking license means your deposits are protected by the national deposit guarantee scheme (up to 100,000 EUR in the EU). An e-money license provides different protections, typically safeguarding your funds but without the same deposit guarantee.

Popular European neobanks include Revolut (UK-founded, 40+ million users, now with banking licenses in multiple EU countries), N26 (Germany-founded, full German banking license, available in 24 EU markets), Bunq (Netherlands-founded, Dutch banking license, strong on sustainability and multi-currency), and Wise (originally TransferWise, technically a multi-currency account rather than a bank, holding e-money licenses).

Neobanks typically offer features like instant spending notifications, free or low-cost international transfers, built-in budgeting tools, virtual cards, and real-time currency exchange. Many provide free accounts with optional premium tiers that include travel insurance, higher ATM withdrawal limits, and additional features.

The European neobank market has grown rapidly, with over 100 million accounts across the continent. However, profitability remains a challenge for many neobanks, and some have restricted their services or exited certain markets (N26 left the UK in 2022, for example).