Digital financial institutions and the use of the term “neobank”
24/10/2023
In recent years, new financial companies have emerged that are characterised by their intensive use of technologyAbre en ventana nueva (fintech). Like traditional banks, these institutions usually offer services such as payment accounts or cards, but they do so exclusively through digital channels, mainly a mobile app. This allows them to offer lower costs to their customers, which may be advantageous for many users. However, the absence of physical branches may be a drawback for those who prefer to carry out transactions in person.
The term “neobank” has sometimes been used, especially in the media, to refer to some of these new financial companies. However, this use is not always correct, as only banks authorised as credit institutions may use the term “bank” or similar terms (such as “neobank”, “banking”, “banker”, etc.) in their corporate name or other distinctive signs, as this designation is legally reserved exclusively for them.
Banks
Banks are authorised as credit institutions, which means they are subject to regulation and that the money deposited with them is covered by a deposit guarantee schemeAbre en ventana nueva (Spanish or from another EU country).
In addition, banks and other credit institutions are the only entities allowed to take repayable funds from the publicAbre en ventana nueva (deposits), as this activity is reserved exclusively for credit institutions.
Fintech financial institutions offering payment services
Some fintech financial institutions may offer payment services through an association with a duly authorised electronic money institutionAbre en ventana nueva (EMI) or payment institutionAbre en ventana nueva. Other entities provide these services directly after obtaining their own licence as an EMI or as a payment institution.
Both Spanish EMIs and payment institutions are supervised by the Banco de España. However, unlike credit institutions, they may not take repayable funds from the public and therefore are not covered by a deposit guarantee scheme. To protect their customers’ funds, they must apply one of the safeguarding procedures established by law (such as depositing the funds in segregated accounts at banks or investing them in assets considered safer, such as fixed-income securities).
Before contracting financial services, it is important to check whether the institution is authorised by the Banco de España, how it operates and which services it may provide.
How can I check whether an institution is authorised?
Consult the official register of institutions of the Banco de EspañaAbre en ventana nueva. If the institution is authorised in another EU country, you can consult the national registers of other Member StatesAbre en ventana nueva or the European Banking Authority’s single electronic register.Abre en ventana nueva
If you suspect that an institution is using the term “neobank” improperly or is not authorised to provide the services it offers, you may notify us through our External Whistleblowing Channel.Abre en ventana nueva
