Are neobanks safe to use?
Neobanks might be new but they're still highly regulated and must comply with many security and quality standards before they can even start offering their products and services in the UK or Europe.
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Although neobanks are relatively new, they are still heavily regulated and must meet a number of security and quality standards before they can begin delivering their products and services in the United Kingdom or Europe. They also use a variety of security methods to ensure that your money is safe and secure, as well as your personal information.
However, many people are concerned about the Neobank's youth. First, are deposits safe if the bank only exists in digital form? Second, if I join a Neobank startup that fails, will my money still be available?
And, as with any internet endeavour, data security is an issue. Neobanks are vulnerable to the same pressures that affect other banks and companies that store data online.
Because their survival depends on their security procedures, digital-only banks may be even more secure. Neobanks spend more time and resources securing your money and personal information because they don't have the support of traditional financial institutions. And digital security is one area where being young might help—traditional banks' security mechanisms may be outdated.
The "new players," on the other hand, must enter the market with up-to-date and inventive security measures.
However, there are two crucial questions to ask about Neobanking's security before you choose it.
How to Pick a Safe Neobank. You should always ask your potential Neobank these two research questions:
Is there a banking or e-money licence on their books?
Is there a security profile or reviews that aren't favourable?
Even if your bank goes out of business, the Financial Services Compensation Scheme (FSCS) insurance protects your money. These are known as Deposit Guarantee Schemes in Europe (DGS).
For the most part, this implies that your deposits are protected up to £75000 or €100000 with most banks.
Go to the FSCS or DGS to see if any bank, neo- or otherwise, is insured.
By just completing an online search on the Neobank you're contemplating, you can uncover unfavourable security circumstances or evaluations.
Most Neobanks are safe; nonetheless, don't let the convenience of signing up fool you into skipping your due diligence.
Disclaimer
Please note that the content provided in our blog articles is for informational and educational purposes only and is not intended as financial, legal, or professional advice. The opinions expressed within the articles are the personal views of the author and should not be taken as a recommendation or endorsement of any products or services discussed. We strive to present accurate and up-to-date information; however, we make no representations or warranties, express or implied, about the completeness, accuracy, reliability, suitability, or availability concerning the blog content. Any reliance you place on such information is strictly at your own risk. We urge our readers to perform their own research and due diligence and where necessary, consult with a professional advisor before making any financial decisions. This blog may contain references or links to products and services from our partners, affiliates, and advertisers. We may receive compensation when you click on links to those products or services.
Not all providers are actual banks
Please note that the terms 'app-based bank,' 'neobank,' 'challenger bank,' and 'mobile bank' are sometimes used interchangeably. It's important to note that not all providers offering these services may be licensed banks. Before opening an account, be sure to research the provider's regulatory status to ensure it offers the protections and features you expect from a traditional bank.