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How to Build a Digital Bank or Neobank in 2024: Step-By-Step


17 min read

Brick-and-mortar branches, paperwork, and long queues don’t bind the banking era. Can you imagine this isn’t a vision of the future? Today, traditional banks are no longer the only players in town. In the ever-evolving realm of finance, neobanks and digital banks are shaking things up.

The neobanking sector has witnessed an astonishing wave of change in a world driven by digital innovation. In 2022, the global neobanking market boasted a valuation of $79.1 billion, and within just one year, it soared to a staggering $118.51 billion. But still, the neobanking sensation is showing no signs of slowing down. By 2030, experts predict that the global neobanking market will reach an astonishing $2078.54 billion, maintaining an impressive CAGR of 52.4%.

These digital apps, offered by innovative digital-only banks, have transformed how we handle money. They’re the go-to alternative to traditional banks, and businesses are jumping on board to provide neobank solutions for everyday consumers and companies alike. 

If you want to learn how to build a neobank from scratch, join me in this article. I’ll share a business owner’s perspective, keeping things straightforward and informative every step of the way explaining how to build a neobank in 2023.

global neo banking market

Source: SNS Insider

What is a Neobank and Digital Bank?

Neobank and digital bank are terms frequently used in today’s financial world, but what exactly do they mean? What is digital banking, and how different is it from the neobank definition?


A neobank, often called a digital or challenger bank, is a financial institution that operates exclusively online, without any physical branches. Neobanks offer a wide array of banking services, including savings accounts, checking accounts, payment processing, lending, and other financial products — all accessible ONLY through web and mobile applications.

Digital Bank

A digital bank is essentially a traditional bank that has transitioned its services into digital. It provides the same core banking services as brick-and-mortar institutions but primarily through online channels like websites and mobile apps. Digital banks may still maintain physical branches, but they emphasize offering convenient digital access to banking services.


The distinction between neobanks and digital banks lies in their origin and approach. 

  • Neobanks are born in the digital age without legacy systems or physical branches. 
  • Digital banks are traditional banks that have adapted to the digital landscape.

While both aim to provide online banking services, a neobank takes this concept a step further. It’s not just about transferring traditional banking services to digital channels; it involves the development of something entirely new and advanced in the world of finance. 

Suppose you’re wondering how to create a neobank or looking to start a digital bank. In that case, you should understand that neobanks provide a more innovative approach since they are made from the bottom rather than on the base of traditional banking institutions.

What Are the Key Features of Neobanks?

For a competitive neobank, you should integrate user-friendly features:

  • Onboarding helps your users easily navigate the app, find features, execute transactions, etc.
  • Authorization enables users to access the bank or utilize its services. The time users spend creating an account or logging into your app should be minimal.
  • Know your customer (KYC) system protects clients from scams, corruption, illegal gains, and funding for terrorism.
  • Personal account management lets users access their account management controls, where they can change their profile and settings to fit their needs.
  • Customer support should be reachable whenever users have a query or run across an issue. Messaging is a great solution.
  • Card issuing schemes may vary, such as by printing them off or using virtual debit cards, obtaining a unique BIN, or even sharing one. The provider should suit the region and terms and have suitable price policies.
  • Transaction history helps track customers’ spending and process their payments.
  • Internet limits allow customers to control the maximum amount they may commit to an online purchase and make informed decisions about their budgets.
  • Payment templates are a great way to streamline the user experience of your neobank.
  • Contact database synchronization enables the use of phone numbers instead of card information.
  • A notification and reminder system must inform customers about account activity, payment receipts, and app updates.

You need to add some cutting-edge features to build a neobank that stands out from the rest. Even one or two may put your digital bank on the frontline. We’ve put together the list for your neobank app development:

  • Cashback is a percentage of a customer’s purchases. Typically, cashback percentages vary across product categories.
  • The changeable CVV2 keeps balances safe if a customer loses their phone.
  • Cost tracking can show users where their money goes (e.g., food, home, study, etc.).
  • The referral system allows users to get rewards if they engage their family, friends, coworkers, and other people they know in the bank.
  • The accumulating system helps to collect money for specific goals. An amount of money is automatically taken out of a checking or savings account as a rest.
  • Stocks features allow users to buy and sell stocks.
  • Cryptocurrencies features allow to store, send, and receive digital currencies like Bitcoin and Ethereum directly within the app.
  • Budgeting helps clients get their bills, groceries, and entertainment in line by letting them set a budget for how much they want to spend on each.

Neobanks have gained popularity for their user-friendly interfaces, transparency, and agility in responding to customer needs. They are great alternatives to traditional banks, as they offer lower fees, higher interest rates on savings accounts, and a seamless digital banking experience. Neobank meaning for fintech industry development is difficult to overestimate.

In contrast to traditional banks, neobank app development is not bound by legacy systems and infrastructure, allowing them to innovate rapidly and tailor their services to the evolving demands of clients. If you are one of the individuals searching for the best neobank to build in an increasingly digital world, these fintech disruptors can become a good choice for you.

Building a digital bank or neobanking startup also means being strategically focused on rapid expansion. The main advantage lies in allocating resources towards aggressive marketing campaigns, both online and offline, to attract new users. Additionally, you will have a particular task — always coming up with new ideas, for example, offering attractive pricing packages for new customers, since that can help you be on top of the competition.

Join forces with DashDevs to lead the neobank revolution

How To Build a Digital Bank or Neobank from Scratch? 

As a fintech professional and CEO of a fintech company with over 12 years of experience and real-life knowledge developing a neobank from scratch in 9 months, I’m delighted to share practical insights on creating such a product since I already have the expertise you may need.

If you are wondering how to start a digital bank, this information will be useful for you as well. The next section will delve into the critical steps, complete with practical examples and advice.

Starting neobank app development from scratch is a journey filled with challenges and rewards. Remember to stay true to your vision, prioritize compliance and security, and deliver a seamless user experience. Neo banking is all about adaptability and innovation, and by following these steps, you’re on your way to making a significant impact in the financial industry.

Step 1. Define Your Vision and Mission

Everything begins with a clear vision and mission. Take inspiration from real-life success stories of fintech companies like Monzo, a UK-based neobank that aimed to make banking simple and accessible. Define your unique selling proposition (USP) and identify the problems your neobank will solve for customers. For instance, if you’re targeting millennials, create a bank that prioritizes features that enhance budgeting and offer real-time insights into spending.

To-do list:

  • Take inspiration from real-life success stories.
  • Define a unique selling proposition (USP).
  • Identity problems your product will solve.
  • Prioritize and customize features for user needs.

Step 2. Understand Regulatory Compliance

To launch a digital bank, neobank, or fintech solution, securing the right license is paramount. However, the landscape has shifted. In the past, only a full banking license would suffice. Today, you can operate a bank-like service with an EMI (Electronic Money Institution) or PI (Payment Institution) license.

These licenses allow you to offer many banking services, except granting loans and accepting deposits. Notably, Revolut, a prominent fintech player, hasn’t pursued a banking license in the US — a testament to the evolving norms.

So, what’s the difference between EMI and PI licenses?

An EMI is an institution that’s authorized to issue electronic money. Holding an EMI license allows you to:

  • Issue and distribute electronic currency, enabling customers to store funds in an e-wallet for payments.
  • Execute currency exchanges.
  • Facilitate direct debit or credit transfers.
  • Transfer funds to other customers.
  • Handle withdrawals and deposits.
  • Grant customers access to their account details.

On the other hand, PI stands for “Payment Institution.” A Payment Institution is a type of financial entity that is authorized to provide certain payment services without issuing electronic money.

By obtaining PI license, you:

  • Can’t issue electronic money.
  • Can’t facilitate payment transactions (e.g., transfers).
  • Can’t store money long-term.

In short, EMI = e-money + payments. PI = just payments.

There are distinct things EMI and PI cannot provide:

  • Traditional bank accounts (only e-wallets are permissible).
  • Deposit guarantees.
  • Conduct international transactions.

Such services typically necessitate a banking license, which is more challenging to secure.

In essence, while a full banking license might be the traditional route, the EMI and PI licenses are viable alternatives for those looking to break into the fintech space without diving deep into traditional banking regulations.

To-do list:

  • Start by researching the specific compliance requirements in your region.
  • Seek legal and expert guidance.

Step 3. Assemble Your Dream Team

Neobank app development requires diverse expertise. Look for experts who understand fintech, such as former employees from established fintech firms or banks. Collaboration is key in this process, and an agile mindset is essential to adapt to unforeseen challenges. Consider hiring experienced professionals who have faced and conquered hurdles in fintech.

To-do list:

  • Seek fintech experts with real experience (pay attention to projects they built — was it neobanks mobile app development or web development, which technologies they worked with, which integrations they set up).
  • Prioritize collaboration and agile thinking.
  • Hire professionals with a track record of overcoming fintech challenges.

Step 4. Focus on User Experience and Marketing

User experience (UX) can make or break your neobank. Take inspiration from Chime, a US-based neobank with a user-friendly mobile app. Ensure your digital channels are intuitive, secure, and accessible. Regarding marketing, remember the story of one of our customers — Pi-1, an award-winning BaaS platform from the UK. Their product wasn’t significantly different from others, but their success was driven by effective marketing, a modern-looking app, and excellent features, targeting banks and fintechs.

Establishing your brand’s look can achieve better market results and capture a larger market share. Effective communication of your brand’s unique value proposition can set you apart, even in a competitive landscape.

To-do list:

  • Prioritize intuitive, secure, and accessible digital channels.
  • Invest in user-friendly mobile app design.
  • Emphasize effective communication of your unique value proposition in marketing.

Step 5. Prioritize Compliance and Security

Don’t underestimate the importance of compliance and security for neobank app development. A great example is Monese, a UK neobank, which learned this hard when facing regulatory challenges. The company’s initial difficulties might have arisen from insufficient KYC and AML procedures. 

Compliance involves adhering to various financial regulations and ensuring your neobank operates within legal boundaries. One critical aspect is Know Your Customer (KYC), which consists of verifying your customers’ identities to prevent fraud and financial crimes. Anti-Money Laundering (AML) processes are designed to detect and report suspicious activities that might indicate money laundering or other illicit financial transactions.

It would be best to stay updated on regulations like GDPR (General Data Protection Regulation) in Europe, which also governs the handling of personal data. Security is paramount in protecting customer data from threats, cyberattacks, and breaches. Consider partnering with cybersecurity experts who can help you implement robust security measures, encryption protocols, and monitoring systems to safeguard customer data and maintain compliance with industry standards.


Although numerous security tools and measures are at your disposal, remember that they should be okay with your app users. Ideally, neobank security should work behind the scenes, ensuring a seamless and user-friendly experience, such as using video calls for identity verification or entering the last symbols of phone number calling.

To-do list:

  • Prioritize compliance with financial regulations, including KYC and AML processes.
  • Stay informed about data protection regulations like GDPR.
  • Invest in robust cybersecurity measures to protect customer data from potential threats.

Step 6. Develop Your Business Processes

Start with robust business processes before diving into software development. Document how customers will onboard, how transactions will be processed, and how compliance procedures will be handled. This approach streamlines software development and ensures your operations run smoothly.

To-do list:

  • Craft a seamless onboarding process to ensure customers can easily open accounts and use your services. 
  • Define efficient workflows for processing transactions to guarantee your digital channels are intuitive, secure, and accessible.
  • Prioritize KYC and AML processes to prevent regulatory challenges.
  • Create a secure data management system to handle customer information (use tools like Looker, Tableau, or Power BI). 

Step 7. Choose the Right Software Engineering Approach

Engage engineers with fintech experience as they understand the intricacies. Ensure your engineering team can make informed choices and select technologies tailored to the neobanking environment. Without this expertise, engineers may inadvertently choose data types or technologies that could result in balance inconsistencies.

Choosing the right technologies tailored to the neobanking landscape is a basement for a successful product, the same as a base for the future house. Not all technologies suit fintech solutions; an ill-informed choice can lead to technical challenges. Your engineering team should be well-versed in selecting technologies that ensure scalability, security, and seamless integration.

1. Cloud Computing

  • Examples: Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP).
  • How It Works: Cloud computing enables you to host your neobank’s infrastructure on remote servers, providing scalability, flexibility, and cost-effectiveness.
  • Parameters for Selection: Consider data security, compliance standards, scalability options, and ease of integration when choosing a cloud provider.

2. API Integration

  • Examples: RESTful APIs, GraphQL.
  • How It Works: APIs allow your neobank to connect and exchange data with other financial institutions, payment processors, or third-party services seamlessly.
  • Parameters for Selection: Look for APIs that offer robust security features, developer-friendly documentation, and compatibility with your chosen programming languages.

3. Blockchain and Distributed Ledger Technology (DLT)

  • Examples: Ethereum, Hyperledger Fabric, Ripple.
  • How It Works: Blockchain and DLT can enhance security and transparency in transactions, making them suitable for cross-border payments and asset tokenization.
  • Parameters for Selection: Consider factors like consensus mechanisms, innovative contract capabilities, and regulatory compliance when choosing a blockchain platform.

4. Data Encryption

  • Examples: Advanced Encryption Standard (AES) and Transport Layer Security (TLS).
  • How It Works: Data encryption ensures that sensitive customer information remains confidential during storage and transmission.
  • Parameters for Selection: Look for encryption protocols that are widely recognized, regularly updated, and compliant with industry standards.

5. Artificial Intelligence (AI) and Machine Learning (ML)

  • Examples: TensorFlow, PyTorch, scikit-learn.
  • How It Works: AI and ML can help detect fraud, automate customer support, and provide personalized financial insights.
  • Parameters for Selection: Evaluate the capabilities of AI/ML libraries, the availability of pre-trained models, and their suitability for your specific use cases.

6. DevOps Tools

  • Examples: Jenkins, Docker, Kubernetes.
  • How It Works: DevOps tools facilitate continuous integration and continuous delivery (CI/CD), enabling faster and more reliable software development and deployment.
  • Parameters for Selection: Consider factors like ease of use, scalability, and compatibility with your chosen cloud infrastructure.

7. Biometric Authentication

  • Examples: Facial recognition and fingerprint scanning.
  • How It Works: Biometric authentication enhances security by verifying a user’s identity based on unique physical characteristics.
  • Parameters for Selection: Evaluate the accuracy, speed, and user-friendliness of biometric authentication methods.

When choosing these technologies for neobank app development, align them with your specific business goals, regulatory requirements, and user expectations.

Step 8. Architect Your System for Scalability and Security

Neglecting proper architectural planning can be a costly mistake, especially considering that the neobank app development cost is not known as being the most budget-friendly option. Try to architect your system for scalability, robustness, and security. Consider the example of Monzo, which faced challenges as it scaled. 

Monzo’s scaling challenges:

  1. Performance Bottlenecks: Monzo experienced performance bottlenecks as its customer base multiplied. These bottlenecks could lead to slow transaction processing, delayed account updates, and frustrated users.
  2. Infrastructure Limitations: The initial architecture of Monzo’s systems may not have been designed to handle the scale of users, transactions, and data they eventually encountered. This led to issues with system stability and reliability.
  3. Security Concerns: With more users, enhanced security measures are paramount. Monzo had to continuously bolster its security protocols to protect customer data and transactions from increasing threats.
  4. Integration Challenges: As Monzo expanded its offerings and partnered with various financial service providers, integrating new features seamlessly into its existing system became a complex task. This could result in service disruptions and user dissatisfaction.
  5. Regulatory Compliance: Monzo had to navigate complex regulatory requirements as a financial institution. Ensuring compliance across various jurisdictions while scaling posed a significant challenge.

Step 9. Consider a Banking-as-a-Service Platform

If building from scratch feels overwhelming, explore banking-as-a-service platforms like our FinTech Core. This modular solution offers licensing for its components, allowing custom development while saving time and resources.

Here are the key benefits of FinTech Core which speed up neobank app development:

  • Modular Approach. FinTech Core is designed as a modular solution. It offers a range of components that can be tailored to your specific needs. This is akin to having a toolkit with various specialized tools that you can pick and choose from to build your neobank. You don’t have to reinvent the wheel for every aspect of your banking services.
  • Licensing Flexibility. With FinTech Core, you can license individual components, allowing you to customize your neobank while saving significant time and resources. It’s similar to having access to high-quality building materials and hiring skilled builders to construct your dream home without starting entirely from scratch.
  • Speed to Market. With FinTech Core’s pre-built components, you can significantly reduce your time to market. You will have a trusted partner who knows your destination’s fastest and most efficient routes.
  • Expertise and Guidance. Neobank app development involves complex regulatory, compliance, and security considerations. With FinTech Core, you benefit from the accumulated knowledge and experience of the team behind the platform. We can navigate these challenges before and guide you effectively.
  • Cost-Efficiency. Developing every aspect of a neobank can be costly. By leveraging FinTech Core, you can potentially cut development costs significantly, making it more financially viable to realize your neobank vision.

How Do Neobanks Make Money?

There are many business models in fintech, and we’ve already described some of the most popular nowadays. Among them, there are a few specifically spread from which neobanks make money.

1. Interchange fee. A significant portion of a neobank’s revenue comes from the interchange fees paid by merchants when users use their debit cards to make purchases. Every time a Visa or Mastercard debit card is used to make a purchase, Visa adds a percentage fee to the total. In return, Visa sends a portion of the fees to a neobank.

how neobanks make money

2. Loans and overdrafts. In exchange for a fee on each purchase, they facilitate the use of credit cards. When customers go above their restrictions, they pay interest, which generates revenue for the company.

3. Additional accounts. Digital banking solutions make money from the interest that tacks on to new account balances is another source of revenue.

4. Withdrawal fee. Neobanks usually accrue interest on the ATM fees, which is another source of revenue.

5. VIP Client Services: Offering premium services for a specific fee is common among neobanks, catering to high-value clients.

Leverage DashDevs' expertise to launch a successful digital bank

How much does it cost to build a neobank app?

Building a neobank app is no small feat; it requires careful planning, development, and substantial investment. Here’s a breakdown of the potential costs and considerations involved:

1. Custom Development

Starting a neobank app from scratch can be a pricey venture. To give you a perspective, consider our experience of building Pi-1 BaaS solution, which was developed at an estimated cost of $4 million. 

It’s clear from this figure that you won’t be creating such an app for a mere $100,000. The scope and features you desire play a pivotal role in determining the cost.

It’s also crucial to understand that development costs fluctuate depending on the region. For example, North American developers might charge between $150 - $250 per hour. Contrast this with Ukrainian developers who may charge as low as $60 - $90 per hour. Given that the development phase can span 9 months to 2 years, these regional rate disparities can have a significant impact on the total expenditure.

2. Using White Label Modular Solution

White-label modular fintech solutions are an increasingly popular choice for those wanting to fast-track their entry into the digital banking and payment sector. One of the best choices is Fintech Core, which our clients easily adapt to their needs all around the world. 

With Fintech Core, all the necessary service providers and integrations come pre-configured. This means you’re not starting from ground zero; instead, you’re building on a solid foundation, which significantly reduces time and cost.

Furthermore, the inherent modularity allows for easy customization and scalability. As your neobank grows and the financial landscape evolves, you can add or remove modules as needed, ensuring your platform remains contemporary and competitive.

In terms of timeline and cost, while a custom development might take anywhere from 9 months to 2 years to fully develop and launch, a white-label solution can dramatically cut this down. You could potentially launch your neobank in as little as 3 months, starting from an investment of around $300,000.

It’s crucial to remember that these figures are approximate. Actual costs can diverge based on individual project details, vendor negotiations, and market dynamics. Direct consultation with development professionals is always recommended for precise estimations.


In conclusion, neobank app development is a complex but advantageous endeavor, as I have shared with you in this article. 

The financial industry is growing for innovation and disruption, and neobanks are at the forefront of this transformation. By harnessing technology, data-driven insights, and a customer-centric approach, you can challenge traditional banking norms and create a financial institution that genuinely meets the needs of modern consumers.

At DashDevs, we understand the intricacies of building a neobank from scratch. Our fintech development expertise and our modular solution, FinTech Core, can accelerate your journey to launching a neobank. I encourage you to take action, explore the possibilities, and reach out to us to discover how we can partner with you to bring your neobank vision to life.

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