How to Build a Neobank From Scratch

The pandemic has increased the demand for online services, including banking. Mobile banking apps and websites are now the norm, allowing people to handle almost any banking task without visiting a branch. Following this trend, why not create your neobank?

In this blog post, you'll learn how to build a neobank, what you'll need, and how much it will cost.

What is a neobank?

First, we should outline the neobank definition. It is an online-only financial institution and offers banking services through apps and websites without physical branches. These neobank startups provide seamless online banking experiences.

Usually, neobanks are licensed to handle transactions and traditional banking tasks independently. Sometimes, they partner with offline banks to offer services remotely, combining digital convenience with established banking infrastructure. Now that you know what is a neobank let’s take a look at how it works.

How Does a Neobank Work?

To keep it practical, how does a neobank work? Let’s look at some of the best neobanks in the US.

  • Chime. With 13.1 million account holders, Chime is popular for its no-fee banking. No monthly or overdraft fees, and features like rounding up purchases to the next dollar. However, cash deposits can be expensive.
  • Current. Serving 4.0 million account holders, Current offers hybrid accounts that combine checking and savings features. It provides cash-back rewards and a 4% interest rate on savings up to $6,000 but lacks phone-based customer support.
  • Aspiration. Aspiration, with 3.0 million account holders, is noted for its ethical banking model, donating 10% of its income to good causes. It offers accounts with both checking and savings features. It has options for a basic fee-free account or a premium Aspiration Plus account with extra benefits and a higher interest rate on savings.


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What's the Difference Between the Neobank and the Bank?

Traditional banks have existed for 2,500 years, lending, storing, and transferring money. Digitalization has made these services more convenient. Now, you can pay bills, transfer money, get a card, withdraw cash, file complaints, and get advice through apps, online consultants, and ATMs, without visiting a bank branch.

Neobanksare the next step in banking. They operate entirely online with no physical branches, using ATMs for cash services. Digital-only banks provide the same basic services as traditional banks but are fully digital, offering enhanced convenience and accessibility.

Traditional banks provide general services. This specialization allows neobanks to tailor their offerings to specific customer needs. It provides more personalized and efficient services.

Additionally, digital-only follows different regulations. Bodies like the Central Bank govern traditional banks. They use flexible business models and are not bound by strict state banking rules. This flexibility allows them to innovate and adapt more quickly to changing market demands.

Neobanks also make financial services more accessible. People who cannot visit a bank branch can open accounts and access services remotely. It broadens the reach of banking services to underserved populations.

Why should you Start a Neobank?

Considering how to start a neobank? Here's what you need to know:

  • Cater to specific banking needs, like those of freelancers or e-commerce owners, without physical branches. Focus on creating a top-notch app that meets customer needs and market it effectively.
  • Digital-only banks are increasingly popular. In the USA, 13.7% of people use digital banks, projected to rise to 20% by 2025.
  • They simplify banking with online account openings, appealing to tech-savvy consumers. In Europe, signing up for a digital bank requires ID, residency proof, and employment or school enrollment.

Statista projects 386.30 million global neobank users by 2028, with user penetration reaching 4.82% by then.

Digital-only banks are revolutionizing banking, especially for tech-savvy consumers. They focus on customer satisfaction with personalized services and low-cost financial solutions. This removes traditional banking fees. Features like budgeting tools, real-time alerts, and easy-to-use digital interfaces make banking simpler and more accessible.

How does Neobanks make a Profit?

Neobanks make a profit through several business models

Interchange-Led Model

The interchange-led model generates revenue through transaction fees. Whenever customers use the neobank's debit or credit card for purchases, the merchant pays a fee, a portion of which goes to the neobank. This model relies on high transaction volumes to maximize earnings. Example: Chime

Credit-Led Model

In the credit-led model, neobanks offer credit products, such as credit cards, as their primary service. After establishing a customer base with these credit offerings, they expand to provide traditional banking services like checking and savings accounts. The interest and fees from credit products are the main revenue sources. Example: Nubank

Ecosystem-Led Model

The ecosystem-led model creates a full financial system around the customer's checking account. The checking account might not be very profitable on its own, but it allows the neobank to offer other services. These can include personal loans, investment options, and premium accounts. Example: Monzo.

Asset-Led Model

The asset-led model attracts deposits with high interest rates on savings accounts. This model aims to gather many customer deposits to lend or invest and earn interest. Some also focus on ethical or sustainable banking. Example: Aspiration.

Product Extensions Model

The product extensions model diversifies the services by venturing beyond traditional banking. This often involves partnering with tech companies or other financial institutions. For instance, they might provide investment options, insurance, or advanced financial planning tools. This model allows neobanks to tap into new revenue streams and cater to a broader customer base. Example: Robinhood.

Must-have Neobank Features

Neobanks offer special features for their target audience and appealing solutions for everyone. If you're interested in how to set up a neobank, look into the core functions you'll need to include in your app.

Secure transactions

The most important thing in finance is security. Your app must protect customer data from fraud, hacks, and data leaks. Secure your servers where customer information is stored.

When using payment gateways like Visa or Mastercard, ensure they are trustworthy and verified. Encrypt financial transactions and use the 3D secure protocol. Make the sign-in process simple yet secure, and offer an additional layer of protection with a PIN code for logging into the app.

Opening an account

Creating an account and getting a card is essential for any app. This allows users to manage financial transactions, receive, and withdraw money. For example, Current offers both virtual accounts and plastic debit or credit cards, used by over 4 million people in the US.

Basic financial operations

The basic financial operations include money transfers, paying bills and taxes, and managing account deposits and withdrawals. You can also offer currency conversions and additional services like savings accounts, deposits, or investment accounts.

Push notifications

Push notifications are an excellent tool for informing users about their account activity. For example, debits, credits, and other transactions. They can also send important updates, promotional offers, and alerts about new features or services. This helps keep users engaged and aware of any changes or opportunities related to their accounts.

What to Consider Before Opening a Neobank

Neobanks are FinTech company apps, so they must follow financial regulations and international standards. Key requirements include:

  • Anti-Money Laundering Policy (AML)
  • Payment Card Industry Data Security Standard (PCI DSS)
  • Know Your Customer (KYC)
  • General Data Protection Regulation (GDPR)

A banking license, (not mandatory), indicates that government authorities verify the bank and can be trusted. It allows the bank to handle deposits, payments, and currency transactions.

Also, make sure that:

  • Your banking services comply with industry norms.
  • Your app is secure against fraud and can handle high traffic.
  • You use a suitable technical stack for development.

Choose appropriate programming languages, development kits, and frameworks. For example, using Flutter can help you create an app for both Android and iOS simultaneously.

How to Start a Neobank: 6 Main Steps

When you start building your own platform, remember it's not just about creating a sleek mobile app. You'll also need to develop essential web applications that work together with the mobile app.

Conduct the Discovery

Product and market discovery are crucial steps in ensuring the success of your neobank platform.

At Stfalcon, we prioritize Product Discovery as a critical part of the product development process. It ensures that your neobank meets market needs effectively and stands out in a competitive landscape. If you need assistance with discovering the neobanking app market and refining your value proposition, we're here to support you.

Discovery phase for logistic company

Clients approached Stfalcon with an idea to create a platform where anyone can transport anything with just a few clicks. We recommended starting with the Discovery phase.

This process provided a thorough understanding of the project's goals, scope, and limitations. We collected and analyzed data about the project, market expectations, and audience. We created MVP and Release 2, estimated budgets, and timelines for both phases of development.

Read the full case study

Create UI/UX Design

When you're making an app, focus on user experience. Gather examples for the design team to craft a great interface. Study competitors' solutions and user reviews for insights on what works best. Use a mind map to plan your design process. Work closely with your UI/UX team to develop your app effectively.

Stfalcon is a respected UI/UX design company with extensive industry experience.

Recently, our team designed an interface for Credit Agricole payment kiosks.

These kiosks aim to reduce queues in bank offices and ease cashier workload. We created an intuitive interface that's easy to use, even for less tech-savvy users. Our design covers a wide range of functions with clear and simple solutions. The result is a scalable system that's straightforward and convenient to operate.

Read the full case study

Develop the app

Now, it's time to create your neobank app. Our skilled team suggests some handy tools, but there are other choices too. For the web version, consider JavaScript, Vue.js, and React.js. If you're making a mobile app, Flutter is ideal. Remember, banking is heavily regulated, so be sure to understand industry rules.

We specialize in developing iOS, Android, and cross-platform apps:

  • iOS: We create native iOS mobile apps. Our expertise includes implementing machine learning algorithms, Touch ID or Face ID authentication, and integrating Apple Pay.
  • Android: We develop native Android apps. Our skills cover GPS tracking, real-time synchronization, and integrating third-party payment systems.
  • Cross-platform: We build cross-platform apps that cater to client needs. These apps can operate seamlessly across different device platforms.
  • Backend: Essential to our cross-platform app development is building the app's infrastructure, designing business logic, and managing API communication.


We designed Vethem specifically for Swedish users. We focused on integrating the country's top payment systems: Klarna and Swish. When using Klarna, a dedicated widget appears where users can enter their personal and card details or use their BankID.

The biggest challenge we encountered during the integration of these payment systems was debugging and testing. Klarna and Swish are local Scandinavian systems, not widely used globally. Despite this, we successfully ensured both systems functioned flawlessly within Vethem. can customize all our apps and products to meet customer requirements and local preferences. We're able to integrate any system, payment method, form, or option based on customer requests.

Read the full case study

Secure Your Solution

Security is absolutely vital when establishing a neobank, as trust is the foundation of the business. Securing your solution involves a series of practices that cover the entire process, not just one step. Here’s what you can do to ensure your app’s safety:

It’s crucial to implement multiple lines of defense for a robust neobank security strategy. This begins with securing the development and staging environments and extends to safeguarding the live production setup of the platform.

When you want to strengthen your business, turn to Stfalcon for expert help. We specialize in enhancing business resilience, ensuring data privacy, and providing strong cybersecurity against online threats. Count on Stfalcon to help your business thrive with our dedicated cybersecurity services.

Test the app

From our years of experience, we've found that testing the application alongside development is the best approach. This way, errors are caught early, saving time and effort later on. Quality Assurance (QA) ensures all bugs are fixed, ensuring your application runs smoothly and efficiently.

Quality assurance ensures that the outcomes meet expectations by improving processes to prevent future problems.

Deploy a Neobank

Running a successful neobank involves constant updates. For instance, Chime updates its iPhone banking app nearly five times each month. Behind the scenes, this often means dozens, if not hundreds, of updates on the server-side.

DevOps is essential for launching a neobank online. It includes practices and tools that speed up deploying new software versions. In practice, you set up a new version of your neobank with tested features. Then redirect DNS servers to this version, and switch traffic to the latest version while shutting down the previous one.

At Stfalcon, we utilize Kubernetes for container orchestration. Kubernetes makes development easier by speeding up software creation, testing, and product releases offering great flexibility, adapting to your project's complexity to consistently deliver applications. For scaling, Kubernetes allows easy adjustment with commands, a user interface, or automatic changes based on CPU usage. Automated rollouts and rollbacks streamline updates, automatically managing containers for seamless deployment transitions.


We've crafted a versatile system to launch smoothly in the market. Our services include designing screens for both clients and drivers, developing native iOS and Android apps, and setting up APIs and backend infrastructure. This setup enables future business growth, making it easy to adapt and scale the system as needed.

Read the full case study

Challenges of Creating a Neobanking App

Creating a neobanking app comes with several challenges that require careful consideration. Here are some key factors:

Navigating Regulatory Requirements

Compliance with banking regulations is crucial for neobanks. Each country has its own rules, so understanding and following these guidelines is essential. Consult legal experts to ensure your app meets regulatory standards. It includes identity verification and fraud prevention measures.

Key US Regulations for Neobanks

In the US, neobanks must comply with laws like the Bank Secrecy Act (BSA), USA PATRIOT Act, Truth in Lending Act (TILA). These regulations help prevent money laundering, ensure customer identification, and protect consumer credit information.

Embrace Technology Standards

Adopt standards like Payment Card Industry Data Security Standard (PCI DSS), ISO 27001, GDPR (for European operations), and PSD2 (for European payment services) to maintain high security and operational efficiency. Regular audits and updates are necessary to stay compliant and reassure customers about the safety of their data.

Building Your Team

Whether you're an established bank or a startup, having a skilled team is crucial. Consider partnering with a dedicated development service.

Strategic Funding

Securing funding is a significant challenge. Explore options such as venture capital and crowdfunding. Be transparent with potential investors about your business plan and unique value proposition.

Customer Support

Deliver exceptional customer support and personalized experiences to succeed. Offer multiple support channels and use AI for personalized financial advice based on customer feedback.

You can manage the complexities of neobank app development and regulatory compliance. And provide value and security to customers.

How Much Does It Cost to Start a Neobank?

Developing a mobile banking app can be a major project, with costs varying based on features, technology stack, regulatory compliance, and development location.

At Stfalcon, we're here to assist you in estimating the cost and timeframe for developing your neobank app. Our team will design and develop your app according to your specific requirements. To develop an application with basic functionalities will cost $80,000.

For a more precise estimate, you can use our calculator tool, and we'll tailor a personalized offer to meet your needs.


Unlike traditional banking, neobanks offer more flexibility to innovate and cater to the users needs. With no need for physical offices and extensive staff, your initial investment can be significantly lower.

Creating a neobank is an exciting journey with immense opportunities in a growing market. However, it comes with challenges like ensuring app security, fostering innovation, and leveraging advanced technologies.

The experienced Stfalcon dedicated team is here to assist you along the way. Contact us to share your idea, and we'll be delighted to help bring it to life.

Now that you’ve gone through our guide, you have a clear path on how to develop a neobank. Let’s draw a line by looking through the FAQ section.

FAQs about setting up a Neobank

How to build a neobank from scratch?

Building a neobank isn’t simple, but with our tips, the end result will be rewarding. The key is to blend basic and advanced features to distinguish your neobank. One of the most important things to conduct the Discovery.

How do neobanks make money?

Neobanks utilize diverse business models to generate revenue and cater to customer needs. Each model aims to optimize profitability and enhance customer satisfaction in digital banking. Whether through transaction fees, credit products, competitive savings rates, or innovative product extensions.

How much does it cost to start a neobank?

The cost of developing a mobile banking app depends on features, technology stack, and regulatory compliance. Basic functionality development starts at $80,000.