How to Build a Neobank and Which Licence You Will Need

The financial landscape has changed dramatically in recent years, and the rise of neobanks is at the centre of this transformation. A neobank is a fully digital financial institution that offers many of the same services as a traditional bank—current accounts, savings products, debit or credit cards, loans, and payment facilities—but operates entirely online. There are no physical branches, and all customer interactions occur through digital platforms such as mobile apps and web portals.

The appeal of neobanks lies in their ability to simplify banking. They provide a seamless, mobile-first experience that reflects how people want to manage their finances today. However, building a neobank involves more than designing an attractive app or offering innovative features. It requires a clear understanding of regulatory requirements, particularly the type of licence necessary to operate legally in your target market. This is where the process can become complex, and where InvestGlass can provide significant value as the digital infrastructure for new financial institutions.

Understanding What a Neobank Is

While traditional banks rely on legacy systems and physical networks, neobanks are built on modern technology stacks that integrate client relationship management, compliance, payment systems, and investment tools in one cohesive digital ecosystem. InvestGlass provides such an environment, offering a complete set of tools for financial institutions. This includes client onboarding, know-your-customer (KYC) and anti-money laundering (AML) compliance, portfolio and investment management, customer relationship management, and reporting features—all designed to meet strict regulatory standards while maintaining an excellent user experience.

Neobanks often begin as niche operators focusing on a particular market segment, such as freelancers, small and medium enterprises, or environmentally conscious consumers. Over time, they may expand into broader banking functions once they have the appropriate licence and infrastructure.

Choosing the Right Licence for Your Neobank

The licence you will need depends on the services you intend to offer and the jurisdictions in which you plan to operate. In Europe, for example, financial institutions are governed by directives such as the Payment Services Directive (PSD2), which allows new entrants to the market through a variety of licence types. Each option carries different regulatory obligations, costs, and timelines.

Credit Institution Licence or Full Banking Licence

Obtaining a credit institution licence—sometimes referred to as a full banking licence—is the most comprehensive but also the most demanding route. It allows a company to take deposits from the public, issue loans, manage savings accounts, and perform most of the activities of a traditional bank. This licence is heavily regulated and subject to capital adequacy requirements, fit and proper assessments for management, and detailed compliance reviews by the national competent authority, such as the Financial Conduct Authority (FCA) in the United Kingdom, BaFin in Germany, or FINMA in Switzerland.

The application process for a full banking licence typically takes between twelve and twenty-four months and involves extensive documentation. Applicants must demonstrate a robust governance framework, secure technological infrastructure, and sufficient financial resources. InvestGlass supports this process by providing digital tools that streamline compliance, risk monitoring, and client communication, all aligned with regulatory expectations. By using InvestGlass to automate reporting and centralise client data, institutions can present a more transparent operational model to regulators.

In Switzerland, for example, the process of building a new digital bank is particularly challenging due to the high standards set by FINMA. Applicants must show not only financial stability but also experienced leadership and a sound operational structure. InvestGlass, being headquartered in Switzerland, is well positioned to assist with this, offering locally compliant tools that meet FINMA’s data protection and audit requirements.

Electronic Money Institution Licence (EMI)

The electronic money institution licence offers a more accessible route to market. It allows companies to issue electronic money, create international bank account numbers (IBANs), and offer payment cards. However, EMIs cannot lend customer funds or provide deposit insurance. The primary function of an EMI is to facilitate everyday transactions such as payments, money transfers, and card issuance, without engaging in traditional credit activities.

The process for obtaining an EMI licence is generally faster than that for a full banking licence, often taking less than a year. Legal and consulting fees vary but are usually in the range of one hundred thousand to one hundred and fifty thousand euros. An EMI is ideal for start-ups and fintech companies that wish to provide digital wallet services or payment solutions without entering the full banking space.

InvestGlass technology complements this model perfectly. Its platform provides client onboarding, transaction monitoring, and compliance management modules that integrate seamlessly with existing payment infrastructures. This enables EMI-licensed institutions to focus on customer acquisition and service innovation, while maintaining full control over regulatory obligations.

Payment Institution Licence (PI)

A payment institution licence is another popular option for fintechs seeking to operate within the European Union or the United Kingdom. It authorises the holder to process payments, execute direct debits and card transactions, and facilitate money transfers. However, like the EMI licence, it does not permit institutions to accept deposits or issue credit from customer funds.

The payment institution licence is a practical starting point for those planning to evolve into full banking status in the future. The regulatory process is relatively straightforward, typically lasting between six and twelve months. The initial capital requirements range from approximately four hundred and fifty thousand to one and a half million euros, depending on the scale of the operation.

InvestGlass assists payment institutions in managing all client-related processes through its modular architecture. From onboarding and risk scoring to transaction tracking and client communication, every component can be customised to fit the licensing framework. Moreover, InvestGlass can connect to partner banks that provide custody services and deposit guarantees, allowing PI-licensed companies to offer a more complete financial experience to their clients.

The Agent or Umbrella Model

For new entrants that wish to test their concept before investing heavily in licensing, operating under an umbrella licence is a practical solution. In this arrangement, the start-up acts as an agent of a licensed financial institution, such as an established bank or an electronic money institution. This allows them to launch quickly and offer digital financial services without directly holding a licence.

The advantages of this model are speed and cost-efficiency. The disadvantages include dependency on the umbrella institution’s systems, policies, and compliance procedures. Monthly maintenance fees can also become a consideration as the start-up scales.

InvestGlass is particularly well suited to this approach. Its white-label digital banking tools allow start-ups to operate under an existing partner’s licence while retaining control over their brand and client experience. Once the company is ready to transition to its own licence, the same infrastructure can be expanded without major disruption.

Regulatory Sandboxes and New Payment Licences

In recent years, regulators have introduced more flexible frameworks to encourage financial innovation. Regulatory sandboxes, available in several European and Asian jurisdictions, allow fintech firms to test products and services in a controlled environment before applying for a full licence. These schemes are especially popular among firms exploring areas such as embedded finance, cryptocurrency integration, or micro-lending.

InvestGlass supports institutions working within these frameworks by offering scalable, compliant systems that can be adapted as regulatory requirements evolve. This flexibility allows companies to experiment with new financial models while maintaining transparency and security.

Building a Neobank with InvestGlass

Creating a neobank involves much more than obtaining the right licence. It requires robust digital infrastructure capable of handling customer data, compliance, payments, and investments in an integrated environment. InvestGlass provides exactly that. Its platform is built to support end-to-end operations for digital financial institutions, from client acquisition to regulatory reporting.

By using InvestGlass, a new neobank can dramatically reduce development costs and implementation timelines. The platform’s no-code configuration tools allow for rapid setup of client onboarding, workflow automation, and compliance checks. Furthermore, its multilingual and multi-jurisdiction capabilities make it suitable for institutions aiming to operate across Europe, the Middle East, and Asia.

InvestGlass’s experience with financial institutions of various types—banks, wealth managers, brokers, and fintech firms—ensures that its tools meet the high expectations of both regulators and customers. Whether your goal is to build a niche payment platform or a full-scale digital bank, InvestGlass provides the foundation upon which your institution can grow securely and efficiently.

Conclusion

Selecting the right licence is one of the most critical steps in establishing a neobank. A full banking licence offers the most freedom but requires considerable resources and time. Electronic money and payment institution licences provide faster routes to market, while umbrella models and regulatory sandboxes allow new entrants to test their ideas with minimal risk. Regardless of the approach, success depends on having the right technological and compliance infrastructure.

InvestGlass offers an all-in-one solution for launching, managing, and scaling a neobank. From onboarding and KYC automation to portfolio management and reporting, every part of the process is supported within a single platform. This enables entrepreneurs and financial institutions to focus on building trust with their customers and delivering innovative digital banking experiences.

If you are planning to build your own neobank, contact InvestGlass to discover how our platform can simplify your journey from concept to fully operational digital bank.