Interview. Banking Security: "The risks are higher with smaller players."

What is the difference between a traditional bank, an online bank and a neobank?

"A bank, as defined by the 1984 banking law, has three functions: accepting deposits, granting credit, and providing means of payment, including checks and bank cards. Some online banks have a banking license, such as ING, Orange Bank, and Ma French Bank. All forms of digital banks used to be called "neobanks." But two European directives have restricted the scope of application for those that do not have a banking license and that have limited fields of action such as the distribution of means of payment or the issuance of electronic money. In 2023, the ACPR (French Regulatory Authority for the Protection of Financial Markets) indicated that the term "neobank" can no longer be used for fintechs (digital financial technologies, editor's note) that do not have a banking license. Neobank is a name that sounds like a bank, and in order not to mislead users, it can only be used by banks. But some have applied for a banking license. For example, Revolut or N26 have become online banks.

Should customers be afraid for their assets deposited in an online bank?

"I would say yes and no. No, because in an online bank (which has banking approval, Editor's note), customers benefit from a guarantee on deposits of around €100,000 and €70,000 on securities. So, unless they are very wealthy, I would say that 99.99% of customers will get their deposits back. There is no additional risk in being a customer of an online bank or a fintech that has a guarantee account (guaranteed by a bank, Editor's note). On the other hand, and this has happened several times, there can be a freeze on assets, meaning that your money can be blocked for a certain period of time. This can take at least 15 days or possibly several months. If it's your main account, this can be problematic."

Is transaction security ensured in the same way in a traditional bank as in an online bank?

"Unfortunately, I'm going to scare readers a little. Today, there's a shift in risks. In the past, banking risk meant getting robbed. Now it's getting hacked . When it comes to cybersecurity, IT spending to protect customers' money is considerable. There are few banks that can afford to invest that much in cybersecurity. And even if you do that, you're not at zero risk. I think the risks are higher for small players simply because small players have small revenues, so it's complicated (for them) to invest heavily in cybersecurity. In my opinion, deposits are better protected in very large structures than in smaller structures, even if it's not a total guarantee."