Swiping right on the perfect match: why Gen Z chooses neobanks

Found my partner online. Ordered my dinner online. So why not my bank too? With neobanks, it is now possible. In less than a decade, neobanks have shaken up the world of finance, pushing traditional players out of their comfort zone.

Neobanks have become the newest trend in banking; every student seems to be using one. A generation known for doing everything online explains what makes neobanks so appealing and why managing money online feels natural.

Before jumping into the topic, let's define neobanks. Neobanks are a specific type of fintech; companies leverage technology to offer financial services ranging from mobile payment platforms to peer-to-peer lending. Unlike conventional banks, neobanks operate entirely online, often focusing on a specific set of services. They offer the usual features, such as checking and savings accounts and money transfers, winning over customers with lightning-fast transactions, sleek user interfaces and fees that won’t break the bank.

“As somebody who studies in Switzerland, the currency fees are very convenient for me,” states Yann, a Luxembourgish student. But it’s not just about saving money. Neobank apps are designed with the digital generation in mind. They’re modern, intuitive and refreshingly easy to use. Opening an account takes just minutes, all from the comfort of your home, thanks to automated processes and AI. There’s no paperwork, no queues and no need for face-to-face interactions. This feels familiar and convenient for a generation that grew up doing everything online. Since neobanks focus on a narrower set of services, their interfaces are clean and minimalistic, giving users a clear, uncluttered view of their finances. In contrast, traditional bank apps often feel crowded and overwhelming, packed with features that cater to everyone but rarely appear personalised, making them less appealing to younger users.

The rise of neobanks stems from their innovative approach to tap into younger generations’ passion for travel. “As someone who travels a lot, low currency exchange fees and international withdrawals are important to me. They help me save money during trips," says Kevin Freitas, a student from Luxembourg. A leading example is the British neobank Revolut, which allows users to purchase and activate mobile data directly within its app, reshaping what banks can provide. Most digital banks have different subscription tiers, attracting customers with free Netflix, Spotify or even Tinder subscriptions. Choosing the right bank can help you find the right partner. 

Strong expansion in Luxembourg

“Luxembourg feels like it's built on traditional banks,” notes Eva Zastawnik, an undergraduate. The finance sector is used to being a monopolistic industry, with only knowing intra-industry competition, a battle between traditional banks. Student loans, such as Aidefi, are only paid out on accounts from Luxembourgish banks, which is one of the reasons why students still hold on to those accounts. In addition, Luxembourg banks offer Payconiq, enabling quick and direct money transfers, which makes eating out with friends easier.

But this does not mean that Luxembourg is sleeping on neobanks. It’s completely the opposite, as Revolut’s numbers show. Their growth in Luxembourg has been nothing short of impressive. The number of active users has increased yearly, reaching 75,000 at the end of 2024. It seems they are not slowing down; they aim to hit 100,000 customers by the end of 2025. This showcases how fast digital banks are gaining traction and earning trust in the industry.

After in 2024, many customers probably migrated their accounts to neobanks like Revolut or N26, leading Revolut to report a sharp 30% growth in sign-ups during this period. Faced with this digital wave, innovation has become a matter of survival for traditional banks, especially in Luxembourg.

A recent , there is a significant gap between digital expectations and the availability of resources. A majority (52%) of the surveyed banks admit they lack the needed in-house skills to support their projects, thus slowing down their ability to adapt and compete in this fast-changing landscape. A trend that needs to change as students get increasingly comfortable with neobanks, which continue to adapt to their needs and lifestyle.

Ongoing challenges

Neobanks may seem ideal on the surface, but they face their own challenges, such as attaining profitability due to hefty upfront costs of tech infrastructure and security to ensure operations run smoothly. Their limited revenue streams, mainly from fees and subscriptions, make it challenging to ensure long-term survival. Whilst they showcase high customer growth, their acquisition strategies are costly, frequently consisting of sign-up bonuses and referral incentives to reel in new users.

Beyond those problems, neobanks are also challenged by the trust gap, mainly due to their lack of physical presence. Whilst traditional banks allow customers to solve their problems in a physical branch, neobanks require consumers to solve their issues online, which can be tricky, especially when dealing with fraud or account disputes. Even with younger people increasingly trusting them and doing everything online, some trust concerns are still there. Many adolescents choose their digital bank based on recommendations from friends or only use the most well-known, showing that there is still an uncertainty factor among everybody.

Neobanks will continue challenging the banking sector with innovation, speed and low fees as they undeniably change how we do banking. Yet they still face hurdles that cannot be overcome solely by technology, like trust and regulations. Meanwhile, traditional banks are not standing still; they are developing strategies to compete with neobanks while trying to retain their existing customer base by changing their operations and adding features like Payconiq. Still, the future of banking may not focus on replacing one model, but rather on creating a landscape in which both models coexist, compete and even collaborate to meet tomorrow’s customers’ rising expectations.

*Yann Grutzmacher, Hugo Pinart, Kevin Freitas and Eva Zastawnik are members of the Anesec Investment Club.