What Is Neobank?

Neobanks are technology companies that offer banking-like services — checking accounts, debit cards, savings, direct deposit — through mobile apps and websites, without traditional physical branches. Prominent examples include Chime, Dave, Current, and Varo (which became one of the few neobanks to obtain its own bank charter). Most neobanks are not banks in a regulatory sense: they partner with chartered, FDIC-insured banks that hold the actual deposits.

This distinction is critical for depositor safety. When you open an account with a neobank like Chime, your deposits are technically held at a partner bank (in Chime's case, Bancorp Bank or Stride Bank). Your FDIC insurance flows through the partner bank, not the neobank brand. If the neobank company goes bankrupt (as happened with Synapse, a fintech middleware company, in 2024), your access to funds can be disrupted even though the underlying deposits remain insured.

The Synapse failure in 2024 illustrated the risks: when the fintech intermediary between neobank apps and their partner banks went bankrupt, thousands of consumers were unable to access their funds for weeks or months. While the insured deposits were ultimately protected, the disruption was severe and highlighted gaps in the regulatory framework for fintech partnerships.

For depositors using neobank services, verify which FDIC-insured bank actually holds your deposits by checking the fine print in the app or on the company's website. Ensure the partner bank is legitimate and check its Health Score on BankHealthData. Consider keeping essential funds (rent, bills, emergency savings) at a traditional FDIC-insured bank where you have a direct relationship, and using neobanks for discretionary spending or specific features like early direct deposit.