Is a neobank a bank? Charters, partner banks and e-money explained

"Neobank" describes an app-first way of banking, not a legal status. Behind each app is one of three arrangements, and which one applies decides who holds the money and what protection it has. This guide explains the three models in the US and UK, how limits are counted when apps share a bank, and how to check any app.

Three models

United States: when the app is a bank

Some well-known app-first accounts are run by banks. Ally Bank and Capital One, N.A. are both FDIC members, and their apps are a way into an account at the bank itself. If the bank failed, FDIC insurance would apply directly.

United States: fintechs and partner banks

Many US banking apps are technology companies that are not banks. Current's page says Current "is a financial technology company, not an FDIC-insured bank", and that banking services are provided by Choice Financial Group and/or Cross River Bank. The deposits sit at those banks.

The FDIC says its insurance covers "$250,000 per depositor, per FDIC-insured bank, for each account ownership category", and that it "doesn't cover default or bankruptcy of any non-FDIC-insured institution." The insurance protects customers if the partner bank fails, not if the app company does. It also "does not protect against losses due to theft or fraud" (FDIC).

If the app fails. The money is owed by the partner bank, so it has not disappeared, but getting it back depends on the bank and the app's records agreeing on who owns what. When those records are incomplete, access can be delayed even though the bank itself is sound.

Shared partner banks and the $250,000 limit

The FDIC adds together accounts in the same ownership category at the same bank: "All single accounts owned by the same person at the same bank are added together and insured up to $250,000" (FDIC). The brand on the app does not change that.

Example. A person holds $200,000 through one app and $100,000 through another, and both apps use the same partner bank. The two balances count as $300,000 at one bank in the single-account category, so $50,000 is above the limit.

United Kingdom: app banks

Several UK apps hold full banking licences. Their eligible deposits are protected by the FSCS up to £120,000 per person, per bank, for failures after 30 November 2025, and the FSCS says it will pay within seven working days of a failure.

The limit is per authorised firm, so two brands that share one banking licence share one £120,000.

United Kingdom: e-money institutions

Other apps operate as electronic money institutions. They do not take deposits. Instead, the Electronic Money Regulations 2011 require them to safeguard customer funds, either by keeping them in a separate account at an authorised bank or the Bank of England, or by covering them with insurance or a comparable guarantee (regulation 20).

Safeguarding is meant to keep customer money apart from the firm's own if it fails, but it is not deposit insurance. As Mettle's fee document states, "FSCS protection does not apply to electronic money institutions."

Some providers offer both

The same brand can offer both models. Mettle's bank account is provided by NatWest and is FSCS-protected, while its e-money account is provided by PrePay Technologies and is not. Tide offers an account provided by ClearBank with FSCS protection, while older Tide accounts are e-money. The label on the specific account, not the brand, decides the protection.

What else differs day to day

The legal model decides protection; the fees decide what an account costs to use. A sample from our comparisons, read 29 October 2026:

What to look for

1. The legal name. Find it in the footer or the terms, not the brand.
2. The register. In the US, the FDIC's BankFind Suite lists insured banks. In the UK, the FCA Register shows whether a firm is a bank or an e-money institution.
3. The wording. "Member FDIC" or "FSCS-protected" signals a bank deposit. "Safeguarded" or "e-money" signals the e-money model. On a fintech, "Member FDIC" usually refers to the partner bank.
4. Shared banks. If two apps use one partner bank, or two brands share one licence, the limit may apply once across both.
5. Investment and savings add-ons. Treasury, money market and investment products inside an app are not deposits, and deposit protection does not cover them.

Comparing apps

Our US mobile banking comparison and UK comparison name the bank behind every account, and the everyday account fee calculator compares everyday costs.