Digital Banking and Neobank License Requirements in 2026

The word "neobank" gets thrown around loosely, but the licensing behind it determines everything: whether you can hold deposits, lend money, or simply move it around. Most so-called neobanks operate on electronic money licenses, not banking licenses, and the distinction matters more than marketing departments admit.

The licensing spectrum: bank vs. not-a-bank

There are three broad paths to launching a digital banking product. Each comes with different capabilities, capital requirements, and regulatory burdens.

Full banking license. Lets you accept deposits, lend money, and offer the complete range of banking services. Capital requirements are high (typically EUR 5 million to EUR 25 million in Europe, more in the US and Singapore). The application process takes 12 to 36 months. You are supervised as a bank, with all the reporting, liquidity ratios, and stress testing that entails.

Electronic money institution (EMI) license. Lets you issue electronic money (essentially digital account balances), provide payment services, and issue payment cards. You cannot accept deposits in the banking sense and you cannot lend from customer funds. Capital requirements are much lower (EUR 350,000 in the EU/UK). Application timelines run 6 to 18 months. Most "neobanks" in Europe operate on this basis.

Restricted or special-purpose charter. Some jurisdictions offer intermediate licenses. Singapore's digital banking license, the UK's bank authorization with restrictions, and the US OCC fintech charter fall into this category. They offer more capabilities than an EMI but fewer than a full bank, often with a pathway to upgrade.

The practical reality is stark: fewer than 20% of companies marketed as "neobanks" hold full banking licenses. The rest are EMIs or operate under banking-as-a-service arrangements where a licensed bank provides the regulated infrastructure and the neobank provides the customer-facing app.

UK: two distinct paths through the FCA

The UK offers both full banking authorization and EMI licensing through the FCA and the Prudential Regulation Authority (PRA).

Full banking license (PRA authorized). Monzo, Starling, and Atom Bank all hold full UK banking licenses. The process involves joint assessment by the PRA and FCA and typically follows a two-stage approach:

Stage 1 (mobilization): Authorization is granted with restrictions, allowing the firm to complete build-out and testing. Minimum capital at this stage is GBP 1 million.
Stage 2 (full authorization): Restrictions are lifted after the firm demonstrates operational readiness. Capital requirements increase based on the bank's risk profile, but a new digital bank should budget GBP 5 million to GBP 20 million in regulatory capital.

Timeline from first engagement with the PRA to Stage 1 authorization: 12 to 24 months. Stage 1 to Stage 2: another 6 to 12 months. Total staff required at launch: typically 30 to 80 people including compliance, risk, finance, technology, and customer service functions. The PRA expects a credible board with banking experience, not just tech founders.

EMI license (FCA authorized). Revolut operated on an EMI license for years before obtaining its UK banking license in 2024. The EMI path is faster and cheaper:

Initial capital: GBP 350,000 (or 2% of average outstanding e-money, whichever is higher)
Application timeline: 6 to 12 months
Key requirement: safeguarding of customer funds (must be held in segregated accounts at a credit institution or covered by an insurance policy)
What you can do: issue e-money, provide payment accounts, issue cards, execute transfers
What you cannot do: accept deposits (legally distinct from e-money), lend customer funds, offer interest on balances (with some recent regulatory softening on this point)

The EMI license is the right starting point for most digital banking startups in the UK. It lets you launch a product, build a customer base, and generate revenue while you decide whether to pursue a full banking license later. The upgrade path is real but not easy. Revolut's journey from EMI to bank took years and significant regulatory engagement.

EU: banking license via ECB plus national regulators, or EMI

In the eurozone, a full banking license requires approval from both the national competent authority (NCA) and the European Central Bank. The ECB has final say on all banking license applications in the eurozone, though the NCA conducts the initial assessment.

Full banking license in the EU:

Minimum initial capital: EUR 5 million (CRD requirement), but the ECB typically expects EUR 10 million to EUR 25 million for new digital banks depending on the business plan
Application through the NCA of the member state where the bank will be headquartered
ECB assessment takes 6 to 12 months after the NCA submits its recommendation
Total timeline: 18 to 36 months from first application to authorization
Passporting: once licensed in one EU member state, the bank can passport services across the entire EU/EEA

Lithuania has become a popular entry point for digital banking licenses in the EU. The Bank of Lithuania has actively courted fintech applicants and processed banking licenses in as little as 12 months. The country now hosts over 140 fintech companies, many using Lithuanian licenses to serve the broader EU market. The trade-off: Lithuania's small domestic market means your customers will primarily be elsewhere, which brings cross-border compliance considerations.

Germany's BaFin is slower (18 to 30 months typical) but carries more reputational weight. N26 obtained its German banking license and used it to scale across Europe. France's ACPR offers a middle ground on timing but has its own bureaucratic tendencies.

EU EMI license:

Initial capital: EUR 350,000
Timeline: 3 to 12 months depending on member state (Lithuania is fastest)
Full EU passporting rights for payment and e-money services
Same limitations as the UK EMI: no deposit-taking, no lending from customer funds

For founders planning a digital banking product in Europe, the EMI license in Lithuania, followed by an eventual banking license upgrade (in Lithuania or elsewhere), is the most common playbook. It lets you launch in 6 months rather than 24.

Singapore: MAS digital banking license

Singapore took a different approach. Rather than forcing digital banks into the traditional banking license framework, the Monetary Authority of Singapore created specific digital bank license categories in 2020.

Digital full bank (DFB) license: Allows deposit-taking, lending, and the full range of banking services. Only available to applicants headquartered in Singapore. Capital requirement: SGD 1.5 billion (yes, billion) once fully operational, though the initial paid-up capital starts at SGD 15 million with a ramp-up schedule over 3 to 5 years.

Digital wholesale bank (DWB) license: Serves SMEs and other non-retail segments. Cannot take deposits from individual consumers. Capital requirement: SGD 100 million once fully operational.

MAS awarded only four digital banking licenses in its 2020 round: two DFBs (to the Grab-Singtel consortium and Sea Group) and two DWBs (to Ant Group and a consortium led by Greenland Financial Holdings). No additional licenses have been issued since. MAS has indicated it may open a new application window, but no timeline has been confirmed.

The capital requirements alone tell you this is not a startup play. Singapore's digital banking licenses are designed for well-funded, established technology companies entering financial services, not for three founders with a prototype. Startups targeting Singapore typically use a Major Payment Institution license under the Payment Services Act instead, which functions similarly to an EMI.

United States: a fragmented landscape

The US has no single "digital banking license." Instead, fintech companies navigate a patchwork of federal and state options.

OCC special purpose national bank charter. The Office of the Comptroller of the Currency has offered a fintech charter since 2018, though its legal status has been contested in court by state regulators. The charter allows deposit-taking and lending at the federal level without requiring state-by-state licensing. Capital requirements are determined on a case-by-case basis but typically start at $20 million or more. Few companies have pursued this path due to legal uncertainty and political opposition from state banking regulators.

State bank charter plus FDIC insurance. Some neobanks have obtained state bank charters (Varo Bank received a national bank charter via the OCC in 2020). The process requires FDIC deposit insurance approval, which adds another layer of regulatory review. Timeline: 18 to 36 months. Capital: $15 million to $30 million or more. This is the path for companies that want to be actual banks in the US.

Banking-as-a-service (BaaS) partnership. The majority of US neobanks (Chime, Current, and dozens of others) do not hold their own bank charters. Instead, they partner with chartered banks that provide the regulated infrastructure: FDIC-insured deposit accounts, debit card issuance, and ACH access. The neobank provides the customer interface and experience.

This BaaS model has come under intense scrutiny. The FDIC, OCC, and Federal Reserve have all issued guidance tightening expectations for banks that partner with fintechs. The Synapse Financial Technologies collapse in 2024 highlighted the risks: when the BaaS middleware provider failed, customer funds held at partner banks became difficult to reconcile. Regulators are now requiring partner banks to maintain direct customer records and closer oversight of fintech relationships.

State money transmitter licenses. For companies that only want to move money (not hold deposits or lend), state MTLs are the baseline requirement. As covered in payment licensing discussions, this means licensing in each state individually, with surety bonds, net worth requirements, and ongoing reporting. Total cost for nationwide coverage: $500,000 to $2 million.

Germany: BaFin and the banking license for fintechs

Germany deserves special mention because BaFin has emerged as one of the more demanding but also more credible regulators for digital banking in Europe.

N26 obtained its German banking license in 2016 and used it to scale across Europe. Solarisbank (now Solaris) holds a German banking license and provides BaaS to other fintechs. The German license carries weight with institutional partners and customers that smaller EU jurisdictions cannot match.

The cost is proportionate. BaFin expects:

Minimum capital of EUR 5 million, with the practical expectation of EUR 10 million or more
A fully staffed compliance, risk, and audit function before authorization
IT infrastructure audited under MaRisk (BaFin's minimum requirements for risk management) and BAIT (supervisory requirements for IT)
Two managing directors with demonstrable banking experience, approved by BaFin

Timeline: 18 to 30 months. Total setup cost including legal, staffing, and technology: EUR 3 million to EUR 8 million before launch.

The honest assessment

If you are a startup with less than EUR 5 million in funding, you are not getting a banking license. You are getting an EMI license (in the UK or EU), a payment license (in Singapore), or a BaaS partnership (in the US). This is not a failure. It is the correct starting point.

The upgrade path from EMI to bank is real but requires scale. You need millions of customers generating sufficient revenue to justify the capital requirements and compliance costs of a banking license. Revolut did it. Monzo did it. Most EMI-licensed neobanks never will, and many don't need to.

For founders choosing where to incorporate their digital banking venture, Lithuania offers the fastest path to an EU EMI license with full passporting. The UK offers the deepest fintech talent pool. Singapore offers the most structured digital banking framework but at capital levels that exclude startups. The US offers the largest market but the most fragmented regulatory landscape.

Whatever you choose, call your product what it actually is. If you hold an EMI license, you are an electronic money institution, not a bank. Your customers deserve to know the difference, and your regulator will eventually insist on it.