Neobanks – also known as “challenger banks” – focus on digital banking. They provide a limited range of financial services that are offered exclusively via digital channels. In addition, they usually focus on a specific customer segment. There are also providers that are not banks themselves but work together with a bank so that they can offer financial services. This is known as “white labelling”.

Neobanks and challenger banks are known as such because they are relatively new companies that enter the market to challenge the established banking world by offering digital services exclusively.

However, it should be noted that some established institutions offer digital banking, too – e.g. by providing specific payment services or establishing a subsidiary with its own market presence or via an investment in a neobank.

There is no clear distinction between those banks and direct banks. Like neobanks and challenger banks, direct banks do not have any branches and offer a number of exclusively digital services. However, direct banks can also be contacted over the phone and offer a greater range of financial services compared to neobanks, for example. Intermediaries can also be used for in-person customer support, e.g. in the area of residential real estate loans. Direct banks can also be subsidiaries of established institutions. Nowadays, direct banks refer to themselves as established banks, as they have been on the market since the 1990s.