What Is Neobank?
A digital-only financial company that offers banking services through a mobile app, typically without its own bank charter or FDIC insurance.
Neobank is a term from U.S. bank regulation and FDIC Call Report accounting — typically a line item, ratio, or supervisory classification used in federal banking oversight. The definition here is the practical depositor-facing meaning. Understanding Neobank is part of reading bank-financial data defensibly. Bank-supervisory frameworks (Basel III, CAMELS, prompt-corrective-action) use specific technical definitions that often differ from how the same terms appear in general financial reporting or popular press.
Each bank page on BankHealth surfaces the Neobank-relevant values for that specific institution, so the general definition here translates into concrete data on the per-bank pages.
How It Works
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.
Related Terms
FDIC Insurance
Federal guarantee that protects bank deposits up to $250,000 per depositor, per bank, per ownership category if a bank fails.
Community Bank
A locally focused bank, typically with under $10 billion in assets, that emphasizes relationship-based lending and community service.
Uninsured Deposits
Bank deposits that exceed the $250,000 FDIC insurance limit and are not guaranteed if the bank fails.