How to Build a Digital Bank?

Wondering how to build a digital bank but feeling stressed about funding shortages and unsure where to start? Don’t worry! 

We live in the 21st century, where new solutions for your challenges always pop up, especially in fintech. You can choose custom development or build bank with a white label financial services. There is no need to fret about the approach — I’ll put all the details on the shelf. Your main priorities should be getting the necessary licenses and planning your bank’s creation strategy to ensure it’s a hit with customers.

Here’s a key rule to remember: even if you have a perfect product, it won’t succeed if there’s no demand for it in the market. 

In this article, I’ll walk you through the process of how to start a digital bank in the USA, UK, or any other region quickly and effectively. Let’s dive into understanding what a digital bank is, who can benefit from it, and how to decide between custom development services and white label fintech solutions, even if you’re working with limited funds and time constraints.

What Is a Digital Bank?

Digital bank is a fintech company that offers traditional commercial banking services online.  

While it offers the same core banking services found at physical branches — such as savings accounts, loans, and credit cards — it primarily operates through online platforms like websites and mobile apps. Thus, it mainly provides seamless and opportunely digital access to banking services.

Think of it as having all the capabilities of a traditional bank but with the added convenience of managing your finances from anywhere. You can use it in the comfort of your home or while on the go, using just your smartphone or laptop. This change towards digital banking mirrors the needs and preferences of consumers in the 21st century, where convenience and accessibility are top priorities.

ONE of the main differences:

• One of the main differences between digital banks and traditional banks lies in the certification requirements. Traditional banks typically require full bank certification to operate. On the other hand, digital banks may only need specific accreditations, such as Payment Institution (PI) or Electronic Money Institution (EMI) licenses, depending on the services they offer and their jurisdiction. The simplified regulatory process allows digital banks to focus on specific financial services, such as payments or lending, without the extensive regulatory burden faced by traditional banks.

What Do You Need to Know Before Building a Digital Bank?

If you are interested in building a digital bank, here are some key points to consider.

Building a Digital Bank with Custom Development Services

Custom development services are designed to create products that align perfectly with your individual requirements and objectives. This means that the digital bank you build will have unique features that fully satisfy clients’ needs.

But how do you know if you need custom development, or if any other development approach would be more suitable? Let’s explore this through a simple example with two options.

Option 1: Normal Digital Bank

You want to start a digital bank with lots of features, making it easy to use for everyone. Even if you don’t have all the ideas figured out yet, you can look at what other banks are doing for inspiration. Getting your bank out there quickly is important, but you also want to save some money for future improvements.

Here, you have two options: custom development or a white-label solution. Custom development lets you control everything, but it takes more time and money. On the other hand, a fintech white label solution gives you a ready-made start, so you can get into the market faster and cheaper.

Option 2: Space Digital Bank

You have a big idea: a bank that works even in space, so people can manage money on Mars. This idea is new and exciting but will take a lot of work to figure out. Since there’s no other bank like this yet, custom development is the only way to go.

For a project like this, custom development is a must. It means putting in a lot of time and money to create all the new technology and systems needed for “space digital banks.”

With this approach you will definitely have a chance to be different on the market and sell unique opportunities for users. But before starting such a project, ask yourself if the market truly needs such solutions for now.

Advantages of Custom Development

Custom development is a powerful way to build special digital banks. Let’s explore its main benefits.

#1. Unique proposition

Custom-built products let you stand out in a crowded market and attract and retain customers.

#2. Complete customization options

With custom development for digital banks, you have complete control over every aspect of the platform, from design and functionality to security measures. This means you can tailor the user experience, features, and branding to align perfectly with your business goals and customer preferences..

#3. Scalability

With custom development, you have the freedom to design your digital bank’s infrastructure for future growth, including scalable solutions like cloud computing. While this approach requires time and resources, it ensures that your bank can expand smoothly as more users join, providing a seamless experience without technical issues.

Disadvantages of Custom Development

#1. Higher upfront costs

Custom development often requires a significant initial investment in resources, including skilled developers, project management, and infrastructure setup.

#2. Longer development time

Building a digital bank from scratch takes time, typically ranging from 11 months to 2 years, as every aspect needs to be designed, developed, and tested thoroughly. This can delay the launch of the product to market.

#3. Increased complexity

When creating a completely new solution with specific requirements, you can face complexity into the development process. Managing this complexity requires careful planning and execution.

#4. Greater risk of project setbacks

Due to the nature of custom development projects, there is a higher risk of encountering unexpected challenges or setbacks along the way. This could include technical issues, changes in requirements, or delays in delivery.

#5. Dependency on skilled development resources and their expertise

Custom development relies on skilled developers and technical experts to bring the project to fruition. If these resources are not readily available or if there are disruptions in the team, it can impact the progress and success of the project.

As you can see, custom development services offer many advantages in terms of customization, scalability, and control. But this approach also means higher upfront costs, longer development times, and greater complexity and risks compared to off-the-shelf solutions. 

You must carefully weigh these factors against your business-specific requirements, resources, and strategic objectives to choose the most fitting approach for creating a digital bank company.

Building a Digital Bank with White-Label Solution

White label solutions make it possible to create a digital bank in just a few months. These platforms serve as ready-made foundations for financial products.

With this technology, your business can create banking solutions without requiring an extensive product development stage. It’s a great option for startups looking to create a profitable digital bank and large businesses looking to expand their current product offerings.

The popularity of white label banks is expected to grow, with Grand View Research projecting the global market to reach $5.1 billion by 2028. So the best time to start building your digital bank is NOW.

What is the Process of Building a Digital Bank with White Label Solution?

Creating a digital bank with the off-the-shelf infrastructure is easy for anyone, whether you’re a new newcomer or an established fintech company.

For instance, DashDevs offers Fintech Core, a solution that comes pre-configured with all the necessary service providers and integrations. This means you’re not starting from ground zero; instead, you’re building on a solid foundation, significantly reducing time and cost.

In this section, I’ll explore the steps you need to establish a digital bank using Fintech Core, a dependable white label banking solution designed explicitly for fintech businesses.

Stage 1: Choosing a White-Label Provider

Finding the ideal “partner in crime” is the initial step. Select a provider like DeshDevs, offering Fintech Core, a modular white label banking platform for quick digital banking and payment product launches. You’ll get access to all necessary documentation to ensure regulatory compliance and security.

Stage 2: Working on Your Bank with the White-Label Solution

Use the provided features like onboarding, banking accounts, transactions, and payment orchestration to customize your digital bank according to your business identity and needs. Then, improve your product with unique offerings not available in competitor solutions. Such an approach enables you to enter the market swiftly with a distinctive proposition for users.

Stage 3: Integration with Third-Party Vendors and Regulatory Compliance

As DashDevs collaborating with more than 70 fintech vendors, we’re well-equipped to assist you in this stage. Your bank must offer seamless payment methods and robust security measures like KYC and AML solutions to provide safety and convenience for you and your customers.

Our team of experts can guide you through obtaining all the licenses and permits necessary for your business to operate officially. For further information on this aspect, you can explore relevant articles on our website.

Stage 4: Testing Your Product

Thoroughly test your product to identify and rectify any bugs or issues early on. Addressing these problems before the go-to-market phase prevents user dissatisfaction later on.

Stage 5: Launching the Digital Bank and Market Entry

Now is the time to deeply understand your potential users and target audience. Explore practical strategies to promote your digital bank and craft a compelling offer that sets you apart. Today, thorough marketing is essential for survival. Make sure your bank has a unique selling proposition that resonates with customers and captures their interest.

Stage 6: Support after Launch and Scaling

At this stage, your product has already hit the market and is poised to make its mark in the financial industry. With Fintech Core by your side, you can strategize the further expansion of your digital bank, tapping into new markets and regions. With our white-label solution, you have a solid foundation and a product ripe for development with innovative features that rival or surpass competitors.

The DashDevs team stays committed to supporting you throughout the journey, from inception to post-launch. Our team will work tirelessly to help you find effective solutions if you face any challenges after the launch.

Advantages of Fintech Core White Label Solution

#1. Rapid product launch

With Fintech Core, your product can go live in months rather than years. This swift launch allows you to capture a niche market and facilitates testing your theories and strategies, providing valuable insights for further refinement and growth. Additionally, its adaptability in any region and language enhances accessibility and market reach.

#2. Full control off source code

With Fintech Core, you own the source code, allowing you to refine the product yourself. This independence means you’re not reliant on others for changes, offering greater control over your digital banking solution.

#3. Cost-effective development

You can save time and resources by avoiding the need to develop core banking and standard fintech modules from scratch.

#5. Leading technologies

Fintech Core is constructed with innovative technology. This ensures your platform can evolve and expand seamlessly.

How Do Digital Banks Make Money?

When you create your own digital bank, consider different ways of making money and mix them with smart business models. This helps keep the bank financially stable while offering customers modern and easy banking services.

Below you will find the exact ways on how to do it:

Interchange Fees

When customers use their debit cards for purchases, merchants pay interchange fees to the bank. These fees are typically a percentage of the transaction total, and digital banks receive a portion of these fees from card networks like Visa or Mastercard.

Loans and Overdrafts

By offering credit cards and overdraft facilities to clients, digital banks charge fees and interest on transactions and balances that exceed predefined limits. This generates additional income for the bank.

Interest on Deposits

Digital banks earn money through interest on deposits. When customers deposit funds into their accounts, the bank invests these funds in interest-bearing assets such as loans or securities. The interest earned on these investments contributes to the bank’s revenue.

Withdrawal Fees

Customers may incur fees when using ATMs outside of the bank’s network, providing additional revenue for the bank.

Value-Added Services

Digital banks may offer value-added services such as premium account features or financial advisory services for an additional fee. These services contribute to the bank’s overall revenue stream.

In our blog you can also see more information on different types of business models in fintech. Specifically, we discuss the ones that digital banks commonly use to generate revenue.

How Much Does Digital Bank Development Cost?

You can get a good idea of how much it will cost to make a digital bank by thinking about the size and scope of the work, the chosen method, the technologies that will be needed, and the size of the team.

The location of the company or individual developers also has a big effect on how much a fintech development project will cost in the end. The price tag is based on the typical size and complexity of the product, the hourly rate of a team of 7–10 professionals (business analysts, project managers, developers, QA, and designers), and the 9–12 month time frame for making the app. So, the total cost is found by multiplying the weight of each part by itself.

When considering timelines and expenses, custom development projects typically span 9 months to 2 years before full deployment. In contrast, choosing a white label fintech platform significantly reduces this timeframe. With this approach, you could potentially unveil your digital bank in just 3 months, starting with an investment of approximately $300,000, but the actual price depends on the specific modules you require.

Wrapping Up

Beginning the journey of building a digital bank may seem daunting, but it becomes achievable with the proper guidance and resources.

Whether you opt for custom development or leverage a white-label solution like Fintech Core by DashDevs, understanding your objectives, market demands, and available resources is the main thing in this whole process.

Even though I recommend to open digital bank with a white-label solution to save on costs and time to market, each approach has its own pros and cons. Finally, the decision on which strategy to follow rests with you and your unique objectives.

Every step requires careful planning, from defining business requirements to navigating regulatory compliance. By following the outlined steps and working with professionals, you can accelerate your digital bank’s development and position yourself for success in fintech.

Remember, launching digital bank is about delivering value to customers, driving industry innovation, and shaping the future of banking. With determination and strategic execution, your digital bank can become a trusted partner worldwide.

At DashDevs, we’re committed to supporting you every step of the way. Our team stands ready to provide guidance, technical expertise, and ongoing support to help you realize your vision. For detailed consultation on costs and development, contact us today.