Breaking Banks

Chapter 9Here Come the Neo-Banks!

Prepaid debit cards are the fastest-growing deposit product in countries like the United States and China today. In the United States, healthy 25 percent year-on-year growth over the last four years now amounts to a $300 billion deposit business. In contrast, checking accounts in the United States have shrunk by close to 4 percent in recent years. The vanguards of the new bank account today, however, are not necessarily the giants of the financial industry.

The new bank account is being defined by a different set of rules. Low friction, engaged customer base, differentiated distribution (no branches), and strong digital (mobile and web) support are all the rage, but at the core is a new approach to the basic day-to-day bank account.¹

Neo-banks is the term given to innovative new approaches to day-to-day banking, specifically pure-play Internet-only banks with a focus on either digital or social approaches. These neo-banks generally aren’t chartered banks; in fact, of the four U.S. based neo-banks (Moven, Simple, GoBank, and Bluebird) only one of these has a charter—GoBank (a brand of Green Dot). The others are backed either by wholesale banking partners in the case of Moven and Simple, or by American Express in the case of Bluebird. From Europe there are also the likes of Knab, Fidor, mBank, and Hello. Like traditional retail banks, the neo-banks offer a debit card, some basic savings capability, and so on. but their core differential is they ...