How to launch a neobank without a banking licence

Your own e-money licence, an EMI's agent, a partner bank or a bank licence: how each route works, who holds the money, and what safeguarding and deposit protection cover.

· Head of IT
· 7 min read
A phone showing a euro account balance with an orange payment card, a gold euro coin and ledger and identity blocks

You can launch a neobank without your own banking licence, which is what lets a company take deposits. Accounts, cards and transfers can run on electronic money (e-money), under your e-money licence or a partner's, or on a partner bank's licence. The route decides who holds customers' money, how it is protected if a firm fails, and what the app may offer.

This guide is general information, not legal advice: the details depend on your services and your market, so confirm them with a lawyer and the regulator before you apply.

How a neobank works, step by step

  1. Sign-up. The customer passes identity and sanctions checks (KYC, know your customer); your compliance team reviews what the rules cannot clear.

  2. Account. The licensed institution, yours or a partner's, opens the account and issues an IBAN (international bank account number).

  3. Payments. Money moves over SEPA, Europe's euro transfer system, or Faster Payments in the UK, and your ledger, the record of every balance, is reconciled daily with the bank holding the money.

  4. Card. Debit cards, virtual then physical, come from a licensed issuer, often a BIN sponsor issuing for others' programmes, and each payment is checked against the balance.

  5. Operations. Your team monitors transactions, handles complaints and reports to the regulator or partner.

Four routes to a licence

Route

Who holds the money

What the customer holds

Before you launch

Your own e-money licence

You, as an e-money institution (EMI)

E-money

Authorisation

Agent or distributor of an EMI

The EMI

E-money

The EMI's approval; registration, for an agent

Partner bank (banking-as-a-service)

The bank

A deposit

The bank's approval

Your own bank licence

You, as a bank

A deposit

Authorisation and far more capital

1. Your own e-money licence

E-money is stored value issued in exchange for money: a claim on the issuer, redeemable at par at any time (E-Money Directive, Articles 2 and 11; UK Electronic Money Regulations, regulations 2 and 39). An EMI issues it and may provide payment services, but may not take deposits (Article 6) or pay interest or any benefit tied to how long the balance is held (Article 12; regulation 45). It needs initial capital of at least €350,000 in the EU and the UK (Article 4; Schedule 2). See the EU and UK licence guides.

2. Agent or distributor of an EMI

You run the app; the EMI issues and holds the money.

  • As an agent, you provide payment services for the EMI once the regulator has registered you, which it decides within two months (Payment Services Directive (PSD2), Article 19; UK regulation 34). The EMI vouches for your controls and managers, and customers must be told you act for it.

  • As a distributor, you distribute or redeem e-money but provide no payment services, as the UK's Financial Conduct Authority (FCA) notes (Approach Document, 5.5).

Neither may issue e-money, and the EMI answers for what you do (E-Money Directive, Article 3; PSD2, Article 20).

3. A partner bank, or banking-as-a-service

Banking-as-a-service (BaaS) means a licensed institution provides accounts and payments through your app. If it is a bank and the balances are deposits, they may earn interest, and deposit protection covers them. Settle your legal role, such as agent or outsourced provider, with the bank. A BaaS provider may be an EMI instead, and then route 2 applies; the register shows which (FCA).

4. Your own bank licence

Only credit institutions may take deposits from the public (Capital Requirements Directive, Article 9). An EU bank needs initial capital of at least €5 million, or at least €1 million for categories a member state allows (Article 12), with a decision due within six months of a complete application (Article 15); in the euro area, the European Central Bank takes it. In the UK, the Prudential Regulation Authority (PRA) authorises banks with the FCA's consent, also within six months of a complete application (Bank of England). Once authorised, a new bank may spend up to 12 months in mobilisation, holding at most £50,000 of deposits in total.

Safeguarding is not deposit protection

Safeguarding protects e-money if the EMI fails. The EMI keeps customers' money apart from its own, in a separate account at a bank or central bank or in secure, low-risk assets, beyond its creditors' reach, or covers it with insurance or a guarantee (PSD2, Article 10; E-Money Directive, Article 7). After a failure, customers should get most of their money back, the FCA says, but it may take time and the administrator's costs may come out of it (FCA). UK rules tightened on 7 May 2026 (PS25/12).

Deposit protection repays depositors if their bank fails:

  • UK: the Financial Services Compensation Scheme (FSCS) covers up to £120,000 per eligible person, per authorised firm. The limit rose from £85,000 on 1 December 2025, under rules the PRA published on 18 November 2025 (PS24/25). Temporary high balances, such as home sale proceeds, are covered up to £1.4 million for up to six months (FSCS).

  • EU: the Deposit Guarantee Schemes Directive sets €100,000 for the aggregate deposits of each depositor at the same credit institution (Article 6).

E-money is not a deposit: the FSCS does not cover an EMI's failure (FSCS), and the directive excludes it (recital 29).

  • The limit is per bank, not per app. Brands sharing a banking licence count as one bank (FSCS; Article 7), so a customer who also banks directly with your partner bank has one limit for both.

  • Safeguarded money at a failed bank. The FSCS may pay compensation for an EMI's safeguarded funds if the bank holding them fails (FSCS). Directive (EU) 2026/804, in force since 10 May 2026, adds EU cover from 11 May 2028: up to €100,000 per identifiable client, not added to the client's own deposits at that bank (Article 8b). Neither scheme pays when the EMI itself fails.

The UAE: stored value, payments and banks

Onshore, the Central Bank of the UAE (CBUAE) licenses deposit-taking, stored value and retail payments, and arranging, promoting and marketing them (Federal Decree-Law No. (6) of 2025, Article 61). Article 62 puts anyone operating a platform that facilitates payments or deposits within its jurisdiction, so check your role before fronting a partner's product.

  • Wallets that hold a balance are stored value facilities (SVF) under the SVF Regulation; banks need the CBUAE's no-objection letter first. The float, customers' money, sits in segregated accounts at licensed banks, or under a bank guarantee or insurance, and is reconciled daily (Article 11). The SVF guide also covers the financial free zones.

  • Payment accounts under the Retail Payment Services and Card Schemes Regulation hold money only in transit. Agents are reported to the CBUAE yearly (Article 15).

  • Customer data stays in the UAE under both regulations.

  • Deposit protection: the law lets the CBUAE set up funds to protect depositors (Article 151). The CBUAE Rulebook carried no such regulation on 7 October 2026.

Decisions that shape the build

  • Deposit or e-money. E-money earns no interest, so interest-paying savings need a bank in the chain.

  • Whose ledger is the record. On a partner's licence, its books are the legal record and yours mirror them. On your own, your ledger records what each customer is owed: in the UK, safeguarding is reconciled against it every reconciliation day (CASS 15.8), and the EU's 2028 cover needs each client identifiable.

  • Markets. An EU authorisation is valid across the EU (PSD2, Article 11); the UK and the UAE each need a local licence or partner (regulation 63; SVF Regulation, Article 3).

  • Exit. Agree who keeps the data, account numbers and ledger history if you switch partner.

What drives the cost

  • The licence route. Your own EMI licence brings initial capital, own funds that grow with your e-money (at least 2% of the average outstanding in the EU, Article 5), a compliance team and, in the UK, an annual safeguarding audit once you safeguard more than £100,000 (Approach Document, 10.65). On a partner's licence, its onboarding and oversight set the work.

  • Compliance operations: checks at sign-up, transaction monitoring, a money laundering reporting officer, complaints.

  • Cards: design, production, programme set-up, disputes.

  • Each market or currency: a partner, rules, reports.

  • Software: apps, ledger, back office, hosting, security testing (white-label or custom).

Common mistakes

  • Calling e-money a bank account, or showing the FSCS logo. The FCA treats both as misleading (Approach Document, 8.35).

  • Assuming a BaaS provider is a bank. Check the register.

  • Starting as an agent before the register lists you.

  • Storing balances on a UAE payment account.

What this means for your platform

The software is the same on every route; only the contracts around it change. Paynoramic's white-label banking app ships with accounts and IBANs, cards, KYC, a double-entry ledger reconciled daily against bank statements, compliance reporting and an admin backoffice. Its accounts module connects to ClearBank, Banking Circle, Modulr, Solaris, Swan, Treezor and Griffin, or to your own licence and safeguarding accounts.

Paynoramic never holds your customers' money: the platform runs on your infrastructure. The software is ready in about 30 days, or 2 to 3 months if custom, with all the source code and no licence fee or revenue share. Your partner's onboarding or your licence, and the card programme, set the launch date. We help you choose a partner bank or EMI and get the provider contracts. The banking app is a starting point: the same modules assemble a business account, a family banking app, a super app or your own product.

Sources

All checked on 7 October 2026.

Written by

Paynoramic's Head of IT

Head of IT

Head of IT at Paynoramic, responsible for the module library every platform is built from. Has worked on payment, banking and workforce platforms for companies including American Express, Teya and Indeed Flex, and for a global card issuer-processor. Writes about what a fintech or crypto launch needs beyond the software: licensing, certification and the real cost.

Keep reading

All insights

Building something like this?

Tell us the idea and we will show you the platform it maps to.

Start your project