While the fine amounts may seem relatively minor compared to the financial resources these banks command, trust remains one of the biggest barriers to broader neobank adoption. Regulatory actions like these can therefore inflict outsized damage to user trust and hinder customer acquisition.

User trust

Safety and security are top concerns for users when it comes to storing and managing their money. Perceived weaknesses in anti-money laundering (AML) or know-your-customer (KYC) systems can erode confidence – especially when they result in wrongful account closures or allow fraudulent activity to go unchecked.

Regulatory actions serve as public warnings about the risks associated with a given service. They reinforce the perception that some digital banks may prioritize rapid growth over essential safeguards, branding them as riskier choices and limiting their appeal to a more cautious user base. As a result, trust is poised to become the central battleground for neobanks looking to win over customers from traditional institutions.

A change in AML strategy across the sector is likely. While short-term growth may take a hit, a stronger compliance foundation could lead to improved long-term user acquisition by steadily building consumer trust.

What can be done?

Neobanks must begin treating AML systems as core infrastructure rather than secondary considerations or afterthoughts. Robust digital identity verification – especially when integrated with trusted third-party data sources - can play a key role in preventing the types of compliance failures that have attracted regulatory scrutiny. These measures can be reinforced by transparent KPIs (such as fraud incident rates) to align incentives with long-term accountability.

AI, as ever, will play an essential role. Intelligent automation allows AML teams to scale more effectively and intervene earlier. Starling’s customer-facing fraud alerts and Revolut’s scam detection features, for example, provide visible reassurance that user safety is a priority. Transparency around these efforts - such as publishing annual AML summaries – can help restore confidence by showing users that their security is taken seriously.

Much of the original appeal of neobanks stemmed from their intuitive, modern mobile apps – a welcome departure from the clunky platforms offered by legacy institutions. Going forward, neobank UX will need to incorporate robust security alongside ease of use. Features like facial or voice verification and cross-border identity checks can still deliver a seamless experience if they’re well-designed and clearly explained. Increasingly, users are willing to accept minor onboarding friction in exchange for greater peace of mind.

Lastly, neobanks are expanding their service offerings to increase user stickiness. Products such as Monzo Pensions or digital contents insurance provide meaningful value beyond basic banking, helping to embed the platform more firmly in users’ financial lives. When these services are underpinned by strong security and compliance frameworks, they not only reduce churn but also serve as trust signals – demonstrating that the bank is both capable and committed to supporting users over the long term.

In it for the long term

In the short term, implementing these measures may dampen growth expectations, especially as regulatory scrutiny intensifies and compliance costs rise.

But over the long haul, a proactive and transparent approach to compliance – paired with user-facing trust signals – will help neobanks distinguish themselves from both legacy institutions and other challengers. Those that rise to the occasion can build deeper, more loyal user bases that drive sustainable growth.

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