While neobanks have been a welcome addition to the payments space, they’re also emerging as hubs for payment risk.
Challenger banks have experienced significant growth in recent years. Revolut, for example, totalled over 52.5 million customers by the end of 2024, an increase from 38 million the year prior.
In addition to customers attracted to payment products not available from traditional institutions, a big reason for this growth is how easy it is to open an account. While this “seamlessness” helps towards neobanks’ common goal of increasing financial access, it also creates a high-risk environment for payment professionals.
According to the Bank Account and Payment Intelligence 2025 Q1 Report by ValidiFI, neobank account holders typically have an average of 4.1 bank accounts, 3 emails and 3.6 phone numbers linked to their profile.
This contrasts with customers at top US banks, who average 3.5 accounts, 3 emails and 3 phone numbers, and credit union customers, who average 3.3 accounts, 2.6 emails and 2.8 phone numbers.
The more complex profiles of neobank customers show up in their payment results, with challenger banks recording 20% more failed ACH payments and 2.5 times more Non-Sufficient Funds (NSFs) than top US banks.
Operational hurdles
Higher rates of NSF transactions and failed ACH payments create operational challenges for neobanks, increasing their overall costs. Each failed transaction requires exception handling, meaning banks must allocate resources to review and process returned payments.
Neobanks also experience higher fraud review queues due to the complexity of customer profiles. With multiple linked bank accounts, emails and phone numbers, it is more difficult to identify legitimate transactions from fraudulent activity.
As a result, neobanks should consider investing in advanced fraud detection systems and manual review processes, which can slow transaction approvals and negatively impact the customer experience.
Rising risks of fraud
Fraud is also becoming increasingly sophisticated through the use of AI, allowing bad actors to create complex synthetic identities. Due to neobanks’ rapid onboarding processes, these accounts are more likely to go unnoticed.
Risk indicators highlighted in the report include accounts which have faced 12 inquiries within 30 days, accounts with four emails, five unique SSNs or six phone numbers associated.
Additionally, neobank accounts tend to have shorter lifespans, averaging 340 days compared to 500+ days for traditional banks, reflecting higher account turnover rates often linked to fraud.
Neobanks have faced criticism from stakeholders over rising fraud levels. However, they have been vocal against social media platforms to do more.
