What Is a Neobank? How Digital-Only Banks Work and How to Launch One

Introduction

Traditional banking systems often struggle to meet modern user expectations. Long onboarding processes, limited digital services, and slow innovation make it difficult to provide fast, mobile-first financial experiences.

At the same time, businesses entering the financial services market need flexible and scalable platforms that can be launched quickly and adapted to regulatory requirements. This gap has led to the rise of neobanks, fully digital banks built on modern technology.

The market growth reflects this shift. According to Fortune Business Insights, the neobanking market is projected to grow from USD 210.16 billion in 2025 to USD 3,406.47 billion by 2032, with a CAGR of 48.9%.

In this guide, we explain what a neobank is, how digital-only banks work, their key features and benefits, and how businesses can launch a neobank successfully.

This article was prepared by ilink, a company with over 13 years of experience in software, blockchain, and digital transformation.

What Is a Neobank?

A neobank is a digital-only bank that provides financial services through mobile apps and web platforms without physical branches. Neobanks focus on user-friendly experiences, fast onboarding, and lower operational costs compared to traditional banks.

Unlike conventional banks, neobanks rely on modern cloud infrastructure, APIs, and automation to deliver services such as payments, cards, and account management entirely online.

Neobanks are often created by fintech companies, technology startups, or traditional banks expanding into digital banking platforms.

In simple words, a neobank is an online-only bank that lets people manage their money through an app or website without visiting a physical branch.

How Neobanks Work

Neobanks operate as fully digital banks, meaning all services are delivered through mobile apps and web platforms without physical branches. Their work is based on automation, cloud technology, and partnerships with licensed financial institutions.

Step 1: User Registration

A customer downloads the neobank app or visits the website and creates an account.
They enter basic personal information and upload identity documents.

Step 2: Identity Verification

The system automatically checks the user’s identity using digital KYC tools.
This replaces in-branch verification and usually takes only a few minutes.

Step 3: Account Activation

Once verification is complete, the user receives access to a digital bank account.
They can see their balance, receive money, and make payments through the app.

Step 4: Payments and Daily Banking

All transactions happen digitally:

• Transfers are processed through banking networks;
• Card payments go through global payment systems;
• Peer-to-peer payments work inside the app.

For the user, everything feels instant and mobile-first.

Step 5: Banking Infrastructure Behind the Scenes

Most neobanks either:

• Work with licensed partner banks;
• Or operate under their own banking license.

This allows them to legally hold funds and process financial transactions while focusing on digital experience and technology.

Step 6: Continuous Operation

Neobanks monitor systems, update software, and improve services without disrupting users.
New features are added through app updates instead of branch upgrades.

In simple terms, neobanks replace traditional branches with software, automate most processes, and deliver banking services entirely online.

Discover the best approach for your neobank launch.

Connect with ilink’s fintech team.

Leave a request

Key Features of a Neobank

A modern neobank is built on a modular, API-driven architecture that enables secure, scalable, and fully digital financial services. Its features combine core banking functionality, compliance systems, and user-facing applications.

1. Digital Onboarding and Identity Verification

Neobanks automate customer onboarding using:

• KYC workflows with document and biometric verification;
• Integration with identity verification providers;
• Automated risk scoring and user profiling;
• Real-time account activation.
   

This allows users to open accounts remotely within minutes.

2. Core Banking and Account Management

The core system handles:

• Account creation and lifecycle management;
• Balance tracking and transaction history;
• Multi-currency account support;
• Interest and fee calculations;
• Ledger and reconciliation processes.

All operations run in real time.

3. Payment and Transfer Infrastructure

Neobanks support multiple payment channels:

• SEPA, SWIFT, ACH, and local transfer systems;
• Card payment networks (Visa, Mastercard);
• Peer-to-peer transfers;
• QR and in-app payments;
• Cross-border remittances.

Payments are processed through secure financial APIs and clearing systems.

4. Card Issuing and Card Management

Neobanks provide:

• Virtual and physical card issuance;
• Tokenized card payments;
• Spending limits and merchant controls;
• Card freezing and reissuing;
• Transaction notifications.

Card services are integrated with global payment networks.

5. Security and Authentication

User and system security is ensured through:

• End-to-end data encryption;
• Multi-factor authentication;
• Biometric login (Face ID, fingerprint);
• Device-based security checks;
• Fraud detection engines.

6. Compliance and Regulatory Tools

To meet financial regulations, neobanks use:

• AML monitoring systems;
• Transaction risk analysis;
• Regulatory reporting modules;
• Audit trails and logs;
• Sanctions screening tools.
   

7. API Ecosystem and Integrations

Open APIs allow neobanks to connect with:

• Payment providers;
• Credit bureaus;
• Identity verification services;
• Fintech partners;
• Embedded finance platforms.

This makes the platform extensible and scalable.

8. Cloud Infrastructure and Scalability

Neobanks rely on:

• Cloud-native deployment;
• Microservices architecture;
• Auto-scaling systems;
• High-availability environments;
• Disaster recovery solutions.

This ensures reliability and performance under high user demand.

9. Data Analytics and Personalization

Advanced analytics enable:

• Real-time transaction insights;
• User behavior analysis;
• Fraud pattern detection;
• Personalized financial recommendations;
• Business intelligence dashboards.

Benefits of Neobanks for Users and Businesses

Neobanks offer practical advantages for both customers and companies by simplifying banking processes and reducing operational complexity.

• Faster and Easier Account Setup. Users can open an account in minutes using a mobile app instead of visiting a bank branch.
  For example, a freelancer can register, verify their identity, and receive a working account on the same day.
• Lower Operating Costs. Neobanks do not need physical branches or large in-person support teams.
  This allows businesses to reduce infrastructure and staffing costs while offering competitive pricing to users.
• Better Digital Experience. Customers manage their finances through intuitive mobile apps.
  For example, users can track spending, freeze cards, or make transfers instantly from their phones.
• Faster Service Delivery. Automated systems process transactions in real time.
  A small business can send and receive payments without waiting for manual approvals.
• Easier Market Entry for Businesses. Companies can launch financial services without building a traditional bank.
  For example, a fintech startup can offer banking features using a ready-made neobank platform.
• Scalability for Growth. Cloud-based systems grow with demand. A neobank can support thousands of new users without opening new offices.
• Global Reach. Digital platforms make it easier to serve international customers.
  For example, a company can offer cross-border payments through a single app.
• New Revenue Opportunities. Businesses can add services like lending, cards, or digital wallets. This creates multiple income streams from one platform.

Types of Neobanks

Neobanks can be designed for different audiences and business models. While all operate digitally, their services and focus areas may vary depending on target users and financial goals.

Retail Neobanks

These neobanks focus on everyday banking for individuals.
They offer digital accounts, cards, payments, and personal finance tools.

Business Neobanks

Designed for small and medium-sized businesses, freelancers, and startups.
They provide tools for invoicing, expense management, and business payments.

Crypto Neobanks

These combine traditional banking services with digital asset support.
Users can manage both fiat and cryptocurrencies in one platform.

Embedded Finance Platforms

These neobanks are built into non-financial apps such as e-commerce or travel platforms.
Banking features are offered as part of another service.

Regional Neobanks

Focused on specific countries or regions.
They tailor services to local regulations, currencies, and user needs.

Niche Neobanks

Target specific user groups such as students, gig workers, or travelers.
They offer specialized financial tools for those audiences.

Each type of neobank uses digital banking platforms to deliver services efficiently, but the features and business models are adapted to the needs of different markets and user groups.

How to Launch a Neobank

Launching a neobank requires a structured approach that balances technology, compliance, and business strategy.

Step 1: Define the Business Model. Identify target users, services, and revenue streams.

Step 2: Choose a Licensing Approach. Decide between obtaining a banking license or partnering with a licensed bank.

Step 3: Select the Technology Stack. Use cloud infrastructure, APIs, and secure banking software.

Step 4: Build or Buy the Platform. Choose between custom neobank development or ready-made solutions.

Step 5: Ensure Compliance. Implement KYC, AML, and data protection systems.

Step 6: Launch an MVP. Release a minimum viable product to test the market.

Step 7: Scale Services. Expand features, regions, and user base over time.

Explore your options for launching a neobank platform.

Get expert guidance from ilink.

Get expert guidance

Custom Neobank Development vs Ready-Made Neobank Solutions

When launching a neobank, businesses usually choose between building a custom platform or using a ready-made neobank solution. Each option fits different goals, timelines, and budgets.

Custom Neobank Development

Custom development means building a neobank platform from the ground up.
 This approach is suitable for companies that need full control over features, architecture, and business logic.

With a custom neobank platform, businesses can:

• Design unique user experiences;

• Build specific financial products;

• Integrate proprietary systems;

• Adapt to complex regulatory requirements;

• Scale without technical limitations.

   

This option works well for established fintech companies, traditional banks, or enterprises with long-term digital banking strategies.

Ready-Made Neobank Solutions

Ready-made neobank platforms come with pre-built core banking systems, mobile apps, compliance tools, and payment integrations.
They are designed for fast deployment and lower technical risk.

With a ready-made solution, businesses can:

• Launch faster;

• Reduce development costs;

• Use proven infrastructure;

• Start with built-in compliance;

• Focus on marketing and growth.

   

This approach is ideal for startups, new fintech projects, and companies testing the financial services market.

Choosing the Right Approach

Custom development is better when:

• You need unique features;

• Your business model is complex;

• Long-term flexibility is critical.

   

Ready-made solutions are better when:

• Time to market is a priority;

• Budget is limited;

• You want a tested platform;

• You need faster regulatory readiness.

   

Both approaches can lead to successful neobank launches when supported by the right technology partner.

Why Partner with ilink

ilink has over 13 years of experience in software development, blockchain solutions, and digital transformation for financial and enterprise clients worldwide.

The company provides both custom neobank development and ready-made neobank platforms, allowing businesses to choose the approach that best fits their goals.

For custom projects, ilink builds scalable, secure, and regulation-ready neobank systems tailored to specific business models.
 For faster launches, ilink offers ready-made neobank solutions that have already been tested and deployed in real-world environments.

Partnering with ilink helps businesses:

• Reduce technical and regulatory risks;

• Shorten time to market;

• Lower development and maintenance costs;

• Launch stable and scalable digital banking platforms.

   

This combination of experience, tested technology, and flexible delivery models makes ilink a reliable partner for neobank projects at any stage.

FAQ

How long does it take to launch a neobank?

Custom neobank development usually takes several months to over a year.
With ready-made neobank solutions, a fully functional platform can be launched in as little as 3 months.

How much does neobank development cost?

Building a neobank from scratch typically starts from $50,000, depending on features and compliance requirements.
Ready-made neobank platforms are more affordable because the core system is already built and tested.

What is the difference between a bank and a neobank?

A traditional bank usually operates through physical branches and relies on legacy systems, while a neobank works entirely online through mobile apps and web platforms. Neobanks use digital infrastructure, automated processes, and cloud technology to offer faster onboarding, lower operating costs, and more flexible services without in-person visits.

What does a neobank do?

A neobank provides everyday banking services such as opening accounts, sending and receiving money, issuing cards, and managing finances through a digital platform. All services are delivered online, allowing users to access their accounts, make payments, and track spending directly from a mobile app or website.

Do I need a banking license?

Some neobanks operate under their own license, while others partner with licensed banks.

Can startups launch neobanks?

Yes, many neobanks are created by fintech startups using digital banking platforms.

What technology is required?

Neobanks use cloud infrastructure, mobile apps, APIs, security systems, and compliance tools.