indó logo
All postsA photograph of a phone with a bank icon

May 18, 2022Einar Björgvin Eiðsson

What is a neobank?

Neobank. When most people hear this word, they think “new bank” which is a decent understanding of what a neobank is. Nonetheless, this word hasn’t been used much in Iceland, maybe because no new bank has been started in Iceland the last 50 years or so.

Even if the word neobank is easy to understand, we can be a little more specific about what this means than just saying it’s a new bank. At indó, we feel that the word neobank is a company that:

provides the banking services people expect but dares to be different the big old banks in ways that matter to customers has a strong focus on customer needs and makes products and services that solve real problems is fully transparent on fee’s customers pay and why they pay them. A neobank isn’t part of the old pricing club where most banking products just cost pretty much the same, irrespective of which bank you go to

We could carry on, but these three aspects cover pretty well what we feel matters. Neobanks are different than old banks in good ways, they really focus on their customers and they’re not part an existing banking legacy.

If we look abroad, a number of neobanks have been created in Europe and elsewhere. Another term often used for a neobank is “challenger bank”. We almost think this is a better word than neobank. The founders of these banks decided to challenge the old banks and compete for their customers. In most cases this is a battle of David and Goliath, where the old banks are large, rich and deeply ingrained into the inner workings of national societies. At the same time challenger banks are small, quick and full of people that strongly believe in what they are doing and want to be part of changing the system to benefit customers.

In the Nordics, a number of challenger banks have already been founded. In Sweden you have Klarna that transformed into a challenger bank through a banking licence in 2018, in Denmark you have Lunar that has grown and gone international during the last few years and besides those you have a number of smaller challenger banks like Rocker, PFC and Instabank.

Sometimes these challenger banks started offering financial products that weren’t regulated but then decided to challenge the old banks through getting a banking licence and starting to take deposits. These Nordic neobanks combined have millions of happy customers and are part of changing the Nordic banking environment for the better.

During 2014-16 there was a lot of innovation in the United Kingdom’s financial system and the challenger banks Monzo, Starling and Revolut came into existence. They have grown massively since they were founded and are strong alternatives to the old UK banks. Combined they internationally have about 25 million customers which is pretty impresssive. They’ve made people in the UK more aware of the fee’s they’ve been paying banks, for example when using their cards abroad. We’ll do the same but in our own indó way.

To sum up, neobanks are here to stay and this year Iceland will get its first neobank in the shape of indó. We intend to be different then the old banks, have strong focus on solving our customers problems and be as transparent as we possibly can. We intend to challenge the old banks and create a company that people will be happy to move their banking business to.

We want to listen to our customers, and if you have ideas, thoughts or maybe just words of encouragement send us some good ideas through our ideas page.