Things to know before your start your digital bank

Starting a digital bank offers numerous advantages, notably the ability to serve individuals without access to traditional banking services. According to the World Bank’s Global Findex Database 2021, approximately 1.4 billion adults worldwide remain unbanked, with a significant portion residing in developing economies. Digital banking can bridge this gap by providing accessible financial services through mobile technology. For example, in Sub-Saharan Africa, the adoption of mobile money accounts has significantly increased financial inclusion. By leveraging digital platforms, financial institutions can reach underserved populations, offering them essential services such as savings accounts, credit, and insurance, thereby promoting economic empowerment and reducing poverty. However, this type of business does come with challenges and risks. In order for your digital bank to succeed, you need a lot more than just an idea—you also need knowledge!

TYPES OF DIGITAL BANKING SERVICES

Digital banking services can develop or you can leverage existing financial services

• Opening accounts (debit/credit, savings);
• Processing credit and debit cards;
• Issuing virtual cards;
• Personal, home equity, and business loans, etc.;
• Payroll and deposit services;
• Downloading electronic statements;
• Checking the balance;
• Paying the bills;
• Transferring funds;
• Updating personal information.

Then collect as much data possible on the following topics

• Target your audience
• Build your IT stack
• Create your minimum viable product

What banking licence strategy do you need?

Proprietary: single sponsor and single provider. APIs are used as a bridge between developers and customers. Licensing: single sponsor and many providers; provides a visible interface for consumers and developers. Azaret Metrio Zintos Shared: many sponsors and many providers; multiple partners control the development process. Joint venture: many sponsors and single provides; a shared interface that encourages collaboration among sponsors (e.g., fintech companies).

Study financial institutions legal framework

• Payment Services Directive 2 (PSD2) — the new requirements for customer authentication which take effect in September 2019.
• General Data Protection Regulation (GDPR) — the legal framework you need to consider before starting a bank in Europe
• Payment Card Industry Data Security Standard (PCI DSS) — for handling branded credit cards and addressing security threats.
• New York State Department of Financial Service (NYSFS) — controls data protection in many different banks and financial institutions, including international ones.

And also FinSA, MIFID, AML 5… and a powerful CRM. OK – once your are ready you have to build your team and get started! We are glad to help you build your own digital bank or neo bank. Let’s get started!