Neobanking is picking up the pace in the financial industry. In 2024, neobanks processed $4.96 trillion, accounting for 32% of all transactions in FinTech. eMarketer expects the number of digital-only bank users to surpass 350 million in 2026. If you’re considering investments into neobanking, now is a great time.
Chime, the largest neobank in the US, saw the opportunities of the expanding market and took them. The platform now boasts over 22 million active users, with 11 million using Chime as their primary bank. In 2023, Chime made $1.3 billion in revenue, mostly through a process called interchange. Its British counterpart, Revolut, made an even more impressive $2.3 billion in the same year.
The neobanking, though has potential, is not easy to enter. The lack of industry-specific knowledge and complex regulatory requirements are two common barriers that stop businesses in their tracks. You also must navigate challenges in both technical and financial mastery to build a digital-only banking platform from the ground up.
In this article, Synodus will guide you through the steps of developing a neobank. Learn how to start a neobank from scratch and understand the key requirements. By the end of this post, you’ll be fully equipped with the knowledge to mitigate risks and build a successful digital banking platform.
If you identify a unique solution or niche within the digital banking landscape, don’t hesitate to start a neobank. As long as your idea can address specific customer pain points or unmet needs, you have feasible grounds for entering the market. Challenges in regulatory compliance, customer acquisition, and cybersecurity can be solved with the right strategy.
Found your niche? Great! Let’s explore how you can start a neobank in 2025.
6 steps to build a neobank in 2025
It takes about 6 to 12 months to build a neobank from scratch, or rather its MVP version. The application development alone already accounts for 1600 hours, not to mention the time you need to acquire banking licenses and perform other activities. With that said, let’s go over the 6 steps you need to follow to build a neobank from start to finish.
Step 1: Understand the neobanking landscape and find your niche
Time frame: 1 month
Rushing neobank development without a strong foundation could lead to costly mistakes or missed opportunities to truly meet customers where they are. Take your time to thoroughly understand your market’s needs and the challenges of the digital banking landscape.
The goal of this initial analysis is to find your niche. It’s all about identifying the unique value you can offer that resonates with specific customer profiles. Here’s how to find areas where your neobank will have the most impact:
- Break the market down into smaller, more manageable groups. Pinpoint specific needs and preferences within each segment. For example, low-income communities may want accessible services that are easy to set up. Meanwhile, SMEs and startups love business banking features that support expense tracking and invoicing.
- Next, identify if competitors have addressed the needs you’ve discovered in your market segment study. If they have, evaluate how effectively they are meeting those needs. Are customers satisfied? Or is there room for improvement? This uncovers underserved demographics and opportunities for you to fill those gaps.
- You want to offer what no one else can do or do better. It can be an advanced technology solution, a focus on ethical banking, or an excellent customer experience. However, make sure the USP aligns with what the demographic needs.
- After you’ve come up with a unique solution, make sure you have the technology to effectively implement your idea. Check the regulatory requirements to find potential legal constraints. Failing to meet regulations such as the General Data Protection Regulation (GDPR), the Bank Secrecy Act (BSA), or the Anti Money Laundering (AML) act will lead to severe repercussions, including fines and reputational damage.
The world’s most successful neobanks follow the exact 4-step analysis. Let’s take a look at Chime. They identify their primary customers are Gen Z and millennials who were dissatisfied with traditional banking. Chime stepped in to provide no-fee banking services and a seamless mobile-first experience that catapults them into now the largest neobank in the US.
Pro tip: Leverage tools to make market research easier. Use Google Trends and Statista to gain insights into neobanking demand, trending financial topics, and growth projections. For competitor analysis, go with CB Insights. Direct customer research through surveys and focus groups, alongside social media listening tools like Brand Watch or Hootsuite, can reveal underserved pain points of existing neobanks.
Step 2: Develop a business plan
Time frame: 2 – 3 months
Do you know that only 5% of neobanks manage to reach breakeven, not to mention turning a profit? That’s because your idea is only as good as how you build a business around it. Without a strategic way to monetize, most neobanks will go under in a few years.
There are two key outcomes in this phase: a business model and a fund-raising plan. The first decides how your neobank will generate income, while the latter ensures you receive sufficient funding to back the development and sustain growth.
Here are the 3 most popular business models adopted by global neobanks:
- Freemium Model: This model offers basic banking services for free to attract users, then monetize through paid premium features. Choose this model if your neobank targets younger demographics or customer bases who prefer free features. Revolut follows this strategy and only charges for novelty features such as travel insurance, higher foreign exchange limits, and exclusive cards.
- Subscription Model: Neobanks can charge monthly or yearly fees for their services. Choose the subscription model if your neobank offers a suite of services, or targets users who prefer predictable costs. N26 offers tiered subscription plans. Users can pay more to upgrade their tiers, unlocking additional benefits, such as insurance packages and priority support.
- Interchange Fees: You can charge users a fee for transactions made with their debit or credit cards. The merchant’s bank pays this fee to your neobank for processing the transaction. However, for this model to work, you’ll need to have a strong connection with card networks and payment processors like Chime. They charge $2.5 for each out-of-network ATM withdrawal.
Unfortunately, having a sound business model won’t automatically launch your neobank. You’ll need a substantial upfront investment or capital to ignite it. For example, the UK requires at least $6.4 million in capital to kick-start a bank.
Raising that amount of capital can be really tough if you don’t know how to pitch to investors.
Prepare a compelling pitch grounded in solid market research. Highlight your competitive advantages, potential market size, and growth projections to excite investors. Also, look beyond traditional venture capital and angel investors. Crowdfunding platforms are great alternatives, especially since we’re talking about digital-savvy investors.
Pro tip: You can run multiple monetization strategies simultaneously. For instance, combine a freemium approach with lending services if your user base spans both value-driven younger demographics and SMEs needing financial products. The key is to always provide what your users need.
Step 3: Obtaining a banking license
Time frame: 3 – 18 months
Financial services are regulated in various ways across different jurisdictions by different bodies. For example, to provide financial services in the UK, you must acquire licenses from the Financial Conduct Authority (FCA). In France, it’s the ACPR or the BaFin in Germany.
Knowing where to apply to is one thing, understanding which license to file for is another. Each financial body has its own specific set of requirements for licensing. Below you will find the 4 most common types of licenses for neobanks. We also include a compliance guide to help you avoid prolonged applications or even outright denials.
Full banking license or credit
This is the most comprehensive license. It allows a financial institution to carry all the services of a “traditional bank”, such as accepting deposits and issuing credit cards. If you plan to build an independent neobank, you must have a full bank license to operate legally.
Applying for a full banking license can take up to 18 months and cost up to $300,000. Typically, to be recognized as a functional bank, you must possess a minimum of $10 million to $20 million, to ensure financial stability and absorb potential losses. You must also promise to uphold regulations about anti-money laundering (AML), customer due diligence procedures, and data protection.
Electronic money institution license (EMI)
For neobanks with less robust suites of services, an Electronic Money Institution License is a better fit. It allows digital payment services and the issuance of electronic money. However, an EMI cannot issue credit and must use a partner bank to handle customers’ funds.
The application process for EMI licenses is also shorter (6 – 12 months) and less expensive. To be eligible as an EMI, your neobank needs at least $3 million in capital.
Payment institution license (PI)
This is the “lite” version of the EMI license. It allows financial institutions to carry a variety of payment services by card, mobile app, transfer, or direct debit. The PI can also support cash withdrawals, account deposits, and foreign exchange transactions. As a PI, you cannot issue long-term credit or accept customers’ deposit checks.
Applying for a PI license only takes around 3 – 12 months and $450,000 in minimum capital.
Licensed financial services
A way to bypass the license application process is through Banking-as-a-Service (BaaS) providers. They provide startups and businesses with white-label solutions that come with integrated regulatory compliance. In this model, a neobank will operate under a third-party, offering their licensed financial services.
Pro tip: Apply for licenses that align with your business goals. To quickly launch a neobank, consider licensed services or an EMI license. These options allow for faster market entry with less regulatory burden. A full banking license fits if you have substantial capital and a long-term vision.
Step 4: Build your neobank platform
Time frame: 4 – 8 months
Here’s where you develop the backbone of your operations. A robust and scalable neobanking platform will ensure your systems can securely process user demands. The key components to pay attention to are:
- The core banking system: The platform should run basic banking features seamlessly. Make sure it can perform essential functions like managing accounts, processing transactions, and maintaining customer records without hiccups. Don’t skim on security measures.
- Mobile app: This is the primary touchpoint where customers interact with your services. The app should be seamless and intuitive. Include modern features such as real-time notifications and biometric authentication.
- APIs: If your system integrates with existing infrastructure, also pay attention to APIs. These are crucial for connecting with third-party services and facilitating open banking. Also include support for card processing and back-office tools.
For the development team, you have three options: assemble an in-house team, outsource to a partner, or pick up white-label neobank solutions. In-house development offers complete control over the project but demands significant investments. Outsourcing grants access to a wider talent pool but may pose challenges in communication. Meanwhile, pre-built white-label platforms allow for rapid deployment at the cost of less customizable frameworks.
If you want to launch a Neobank quickly white still keeping it customizable, feel free to talk to us. We use customizable white-label solutions to make it happen and are pretty sure you will have fully functional neobank platform.
Step 5: Acquire a customer base
Time frame: 3 – 6 months
As a digital-only solution, your potential customers will most likely be tech-savvy millennials and Gen Z. In fact, 10.6% of Americans ages 18-24 have an active digital bank account, closely followed by the 25-34 age group at 10.5%. When kick-starting a neobank, focus your marketing efforts on these two mentioned groups. You can always expand your reach once your bank has gathered enough momentum.
Here are 5 proven strategies you can use to attract millennial and Gen Z customers:
- Go digital-first: Millennials prioritize convenience. They prefer digital banking services that are seamless and accessible. Equip your neobank app with features such as intuitive UI, push notifications, budgeting tools, and 24/7 chat support. Pay attention to how your app performs and continue to optimize it. A great product will market itself.
- Embrace personalization: Tailor services and recommendations that resonate with millennials. You can provide offers based on spending habits or leverage data analytics to design hyper-personalized marketing campaigns. An example of this is the European Neobank N26. They send tailored financial advice to customers, showing them monthly subscription costs or which payment should be canceled.
- Leverage social media marketing: Millennials and Gen Z are highly active on social media. Facebook, LinkedIn, and X (Twitter) are three platforms you should target. Produce educational content and interactive posts to boost brand visibility and trust. If you want to use short-form videos, TikTok and YouTube Shorts are the best.
- Be sustainable: The young demographic is more willing to support sustainable products. Build your neobank with corporate social responsibility, green initiatives, and transparent reporting. You can also go ultra-local and create programs to help local SMBs and businesses,
- Incorporate gamification & rewards: Gamified elements appeal to younger audiences. Add challenges and rewards to encourage spending or provide incentives for opening saving accounts. Another popular feature is loyalty programs that reward users for consistent engagement and activity.
Pro tip: Don’t spread your marketing efforts too thin. Draft a cohesive strategy and use it to drive your campaign. You want to meet customers where they are. Focus on channels that have the most potential.
Step 6: Launch and scale your neobank
Time frame: 1 month+
Once your system has ticked all the boxes, it’s time to release it! How successful the launch is will decide how well your neobank is received and set the stage for future growth.
To ensure a smooth deployment, be sure to check the following:
- Pre-launch: Before D-Day, test everything. You don’t want any features failing at launch. Gather as much attention as possible and build anticipation. Run teaser campaigns, countdowns, and targeted advertisements to attract potential audiences.
- Launch Execution: Your launch event should highlight the unique features and benefits of your neobank. Utilize media coverage, social media, and digital marketing to maximize visibility. Offer exclusive benefits for sign-up at launch to attract initial users.
However, launching the neobank is just half of the story. Post release, shift your focus on monitoring the platform’s performance and scale. Your neobank should be able to support increased traffic and requests as it grows. Excellent customer service is also important. It can act as a source of feedback that helps you evaluate and upgrade your offerings.
Another key point is to always look for opportunities for expansion. Globalization greatly increases your potential customer base, but it’s hard to get it right. Entering a new market means re-exploring customer preferences, the legal landscape, and local competitors. Each country/region is different, so you have to do your diligence to find an entry strategy.
Take Revolut for example. Instead of offering banking services themselves in the US, Revolut partners with local banks, operating as a BaaS provider rather than a full-fledged neobank. In Singapore, Revolut tailored its offerings to meet the needs of Southeast Asian users. It opens new multi-currency accounts and SME banking services to enhance liquidity management and cross-border transactions.
Pro tip: Numbers don’t lie. As a neobank, you will collect a lot of data as your operations expand. Leverage it to find insights into your customers’ preferences and their needs. These can power the growth of your business.
How much does it cost to start a neobank?
There’s no fixed budget to build and launch a neobank from scratch. Depending on the scope, complexity, and regulatory requirements, the costs of your digital banking platform will vary. Below is an overview of the factors that impact how much you have to invest in your neobank:
| Cost component | Description | Estimated cost (USD) |
|---|---|---|
| Minimum capital requirements | The minimum amount of capital you must possess to start a digital banking business. | $450,000 – $20,000,000+ depending on the type of banking license |
| Development costs | All expenses related to mobile/web app development. It includes all stages from project analysis to development and testing. We also factor in costs for tech stacks, cybersecurity tools and compliance software. | $100,000 – $500,000+ |
| Licensing costs | Costs for acquiring a banking license or partnering with existing banks to provide BaaS products. Ensuring compliance with AML, KYC, and other financial regulations will add additional costs annually. | $150,000 – $500,000+ |
| Operational costs | Hiring professionals to operate the neobank, mostly for maintaining IT infrastructure, marketing, and performing customer services. | $100,000 – $300,000+ per annum |
| Marketing and customer acquisition | Budget for digital marketing campaigns, promotions, and partnerships to build a presence for your neobank. | $100,000 – $500,000+ per annum |
| Miscellaneous costs | This is a budget for additional expenses that may not fall under the primary categories, such as renting office space and buying equipment. | $50,000 – $200,000+ per annum |
Overall, if you want to start a neobank from the ground up, you’ll need at least a couple of million dollars. Neobanks that leverage third-party providers or white-label solutions cost $1,000,000 – $2,000,000. Meanwhile, a standalone neobank with proprietary technology and a full banking license requires a $10,000,000 minimum. In most cases, licensing a BaaS neobank or using a white-label solution is clearly the more cost-efficient choice.
It’s time to launch a Neobank
We hope this blog helps you understand what it takes to start a neobank. Chances are, you now have even more questions than when you started reading this blog – and that’s completely normal. This journey requires constant learning, asking the right questions, and finding the best solutions.
Here’s one of our case studies of how we helped our client build a scalable Neobank platform.
If you’re ready to take the next step, you can book a call with us. Our team is here to help you turn your vision into a functional digital bank.
Wrapping up
That concludes our guide on how to start a neobank in 2025. We hope the 6-step instruction above has inspired confidence in navigating this new iteration of digital banking.
All in all, building a neobank now is promising, but not easy. It requires careful planning, a deep understanding of market needs, and a strategic approach to technology and regulatory compliance. However, with the right dedication and a little help, you can transform users’ banking experiences and shape the future of neobanks.
