Frictionless Finance

No queues or paperwork, just a notification that your money is gone! Welcome to the age of neo-banks. Neo-banks are entirely online banks. Revolut, Monzo, and Starling are all prominent examples of neo-banks. These banks offer a reimagined way for us to conduct our finances. As they provide an option that influences our approach to finance.

Traditional banks are characterised by sprawling networks of brick-and-mortar locations, long queues, and layers of bureaucracy. Whereas, neo-banks live entirely in your pocket. Neo-banks present themselves as the new solution to banking, trading branches for apps, paperwork for notifications, and queues for swift transactions. The appeal of neo-banks lies in their frictionless design; instant transfers, colourful spending insights, and a promise to make banking seamless. Also, many neo-banks offer generous referral programmes; sign-up rewards; influencer marketing and digital marketing to engage clients.

The philosophy of easy, frictionless, banking proves successful. Opening an account takes minutes, usually only requiring a selfie and an ID photo. Moreover, transactions are instant. The share of UK adults with a neo-bank account has risen significantly from 16% in 2018 to 50% in 2024. This is a stark increase. Furthermore, there has been a staggering increase of adults using a neo-bank for their primary debit card. A rise from 1% in 2020 to 9% in 2024.

The uptake in using neo-banks is widespread. Particularly Gen Z are the primary clients of neo-banks; no group embraces the rise of neo-banks more than Gen Z. As 72% of Gen Z now report using a neo-bank, and 99% of Gen Z use an online banking app at least once a month. To our generation, finance no longer requires a traditional legacy bank; now finance can simply be a user-friendly mobile app. Online banking is becoming habitual amongst Gen Z. According to a YouGov poll, over 40% of Gen Z check their mobile banking app daily.

However, convenience has its consequences. Gen Z’s embrace of neo-banks poses challenges. The significant uptake o fneo-banks can influence our way of thinking about money. As spending can happen entirely online, paying is easier. Studies show that people spend more when using cards instead of cash. People spend even more when payments are contactless. This is due to the psychological detachment created by digital payments: when paying feels too easy, consumers act more impulsively.

But, it is worth noting that digital payments are not inherently problematic for everyone. Studies suggest that people with higher financial literacy are both more likely to adopt these technologies and better able to manage them. In countries like Norway, where financial literacy is high, digital payment users were actually found to be less financially vulnerable. This suggests that it is not the technology alone, but how well people understand it, that determines its impact.

Overall, for Gen Z, digital banking feels natural. However, normalised digital banking is quietly changing our relationship with money. Our generation, which grew up tapping before thinking, may be interacting with finance in ways that we could not have imagined.