Are online banks really suitable for expats?

Online banks and neobanks built for expats?

Online banks and neobanks are attracting a growing number of expatriates. As a quick reminder: online banks are digital offshoots of traditional financial institutions (which still have staff and physical branches), while neobanks are entirely digital operations (N26, Revolut, bunq, and so on).

For expats, both options come with a solid list of advantages. They're easier to manage from abroad and give you access to a wider or narrower range of currencies, depending on where you're living. Each also has its own distinct strengths. Online banks tend to inspire more confidence since they're backed by established traditional banks, making larger financial commitments (such as buying a home) more realistic.

Neobanks, on the other hand, are designed with the expat lifestyle in mind, particularly for those who travel frequently. Their even more flexible structure keeps fees low and makes it easy to manage multi-currency accounts from anywhere in the world, as long as you have a decent internet connection and can actually access your bank.

The drawbacks of online banks and neobanks

Every banking option has its pros and cons, and online banks and neobanks are no exception.

Banking websites blocked by your host country

Most expats have experienced it at some point: being abroad and suddenly unable to access their online bank or neobank. In this case, internet connectivity isn't the issue. The city might have perfectly reliable digital infrastructure, but local legislation may block access to foreign websites for security reasons. Online banks and neobanks are not exempt from these restrictions, leaving expats locked out of their own accounts.

Difficulty receiving your salary

Another common frustration for expats is being unable to receive their salary into a Neo account or an online account. A foreign employer may not recognize an online bank account as valid, or the salary transfer process may simply be more complicated. This can seriously disrupt day-to-day life. Depositing cash and carrying out routine transactions can also prove more difficult with an online-only account.

Limited borrowing options

Buying a home, a car... how do you make a major purchase as an expat? Online banks and neobanks aren't always set up to handle this kind of financial transaction, and when they are, significant limitations apply. Neobank N26, for example, partners with Younited to offer loans of up to €50,000. That's a serious ceiling for expats looking to make a large investment, such as purchasing property.

Investment products

Life insurance and real estate are the two most popular investment options among expats. Investment products (life insurance, savings accounts, etc.) are generally available through online banks, since they're backed by traditional banking groups and can offer the same range of products as their parent bank. Some neobanks also offer investment services through partners: bunq, for instance, works with Gimon, a German financial institution.

No personal advisor

When it comes to investing abroad, having a dedicated banking advisor often feels essential. Expats may also need guidance on more everyday matters. Yet online banks, and especially neobanks, operate without personal advisors. When issues arise, expats are largely on their own. Online support is usually available, but it's not always tailored to the specific challenges expats face.

Watch out for scams

The rise of neobanks hasn't gone unnoticed by fraudsters. Some operations market themselves as legitimate banking providers, often with attractive perks and promises of significant returns, but operate without any official authorization. Expats can find themselves trapped, with no way to recover their money.

What to consider before switching

Thinking about going fully digital before or during your move abroad? Before you take the plunge, a few precautions are worth taking:

• Check whether the online bank or neobank holds a full banking license, not just a payment institution license. A fully licensed bank can offer the complete range of products and services you'd find at a traditional bank. A payment institution license, by contrast, doesn't allow overdraft facilities. Be cautious: some unscrupulous companies offer loans and other banking products without proper authorization.
• Confirm that the banking app is genuinely accessible in your destination country without any restrictions. Reach out to expats already living there to find out which online banks and neobanks work without issues from abroad.
• Consider a hybrid approach: there's nothing stopping you from keeping your existing traditional account while opening additional accounts abroad, whether online, in-person, or both. Just make sure your tax authority is aware of all your bank accounts.
• Use a VPN if needed, but proceed carefully. First, make sure it's actually legal in your host country. In Thailand and France, for example, VPN use is permitted as long as it's not used for illegal purposes. In China, however, VPNs are prohibited.
• Take a close look at how you'll actually use the account and what kind of banking customer you are. Will the online or neo-account simply be for receiving money? Will your expat lifestyle involve frequent travel? Defining your profile, needs, and expectations will help you choose the banking solution that's right for you.