How To Start a Neobank App Development From The Scratch?

Neobanks have challenged traditional banks’ functioning. What once looked like a three-day task with conventional banking is now transformed into a few-minute task with a Neobank application.  As a new player in the fintech app development industry, neobanks are revolutionizing financial services by offering unmatched convenience without the need for a physical presence, setting them apart from conventional banks. 

In this article, we will understand the concept of neobank application, how it differs from traditional bank concepts, and what changes it brings to the table. 

A Small Backstory About The Origin of Neo-bank Apps: 

The idea of neobanking application was conceptualized in 2015 when the open banking concept became popular. With open banking, traditional banks and various other financial institutions can securely share data and manage financial flow. 

During the same period, Revolut, Monzo, and Atom Bank were released. This completely changed the way how financial services are handled and managed using apps. Revolut and Monzo’s apps laid the foundation for neo-banking compelling banking industry experts to make a quick shift to mobile apps. 

Neobanks offers a wide range of banking services including account opening, lending, saving accounts, payment processing, etc. However, all of these can be done by using only web or mobile applications.  

The Future Of Neo-banking:

• According to Grand View Research, the neobank market had a worth of $47.39 billion in 2021 on a global scale, and it’s projected to have a compound annual growth rate (CAGR) of 53.4% from 2022 to 2030.
• In 2023, the global neobanking market boasted a valuation of $98.4 billion.
• By 2032, experts predict that the global neobanking market will reach an astonishing $5070.8 billion, maintaining an impressive CAGR of 54.09%. 

These numbers indicate the rising demand for neobanks and we believe the timings are just right if you initiate neobank app development right now. 

Opportunity scope: There are just 272 neobanks in the world, so get ready and jump into the world of mobile banking. 

Difference Between Neobank App and Digital Bank App:

Let’s learn the difference between Neobanks, Digital banks, and Traditional bank services. 

The above information highlights the neobanks concept, let’s now understand how it is different from digital banks and traditional banks.

Digital banks:

A digital bank is a mobile version of traditional banks. Traditional banks function offline and have a physical presence, whereas digital banks are the digitally operated traditional banks. 

They are extensions of traditional banks helping users connect with the branch without visiting it. 

However, both neobank apps and digital bank apps operate to provide online banking services to customers.  Here is a table that highlights the difference. 

Why Prefer Neobanks? 

Neobanks are constantly attracting younger generations making financial services more accessible and convenient for use. The quick and hassle-free services are much appreciated by the new generation and to our surprise there are nearly 146.42 million neobank users already. It is expected that this number might cross 386.3 million by 2028. 

Popular companies such as Revolut and Wise have already launched their mobile apps reaching millions. Revolut has nearly 25.5 million consumers worldwide, and Wise has nearly 16 million users, helping them generate a wealth of money for their business. 

By adopting the mobile-first approach, you too can put yourself at the forefront of the fintech industry and capture benefits. 

How To Monetize Using Neobank Apps? 

Below are the five common ways to make money using Neobank apps.

Neobank apps are not just about offering smooth digital banking experiences — they are also powerful business models designed to generate sustainable revenue. Below are the five most common ways to monetize neobank apps:

Interchange-Led Model

• Every time a customer uses their debit or credit card linked to the neobank app, merchants pay a small interchange fee.
• This fee is shared with the neobank, making it one of the most reliable revenue streams.
• Many neobanks enhance this model by:
  • Offering cashback rewards to attract card usage.
  • Partnering in affiliate programs where spending earns commission.
• Why it works: Higher transaction volumes = steady income.

Credit-Led Model

• In this model, credit cards come before bank accounts.
• Neobanks earn from:
  • Interest charged on outstanding balances.
  • Late payment fees and other service charges.
• Some neobanks also bundle personal loans or Buy Now Pay Later (BNPL) features.
• Why it works: Credit-based models have higher revenue margins compared to pure interchange.

Ecosystem-Led Model

• Neobanks build a complete financial ecosystem around users.
• This may include:
  • Budgeting tools to manage expenses.
  • Investment dashboards for stocks, crypto, or ETFs.
  • Savings insights and financial health reports.
• Monetization happens through premium subscriptions, transactional fees, or partner tie-ups.
• Why it works: It builds long-term customer loyalty by making the app a “one-stop finance hub.”

Product Extensions Model

• Beyond core banking, neobanks can offer value-added financial services such as:
  • Insurance policies (health, travel, life).
  • Wealth management tools and robo-advisors.
  • Personal and business loans with competitive rates.
• These services are often tiered or premium-based, creating opportunities for upselling.
• Why it works: Customers prefer having all financial services in one app rather than switching platforms.

Freemium & Subscription-Based Model (Emerging Trend)

• Many neobanks adopt a freemium model — offering core features for free but charging for premium perks.
• Examples include:
  • Higher withdrawal limits.
  • Priority customer support.
  • Advanced analytics & financial coaching.
• Why it works: Predictable recurring revenue while still keeping entry barriers low for new users.

All of these inclusions, be it in features or operations can help neobank apps attract new customers.

Also Read:- How to Build a P2P Payment App: A Complete Guide

What Are The Most Demanding Neobank App Features?

The next-gen neobank apps need to have innovative features to attract young and new audiences. However, this has to be achieved creatively and intuitively. Here are the core features that you should include in the Neobank apps. 

What Are The Legal Requirements For a Neobank App Development? 

Neobanks need to be strictly regulated, violation of any rule might just lead to some big financial thefts/crimes. This is why strict adherence to various below-mentioned licenses is necessary. Here are a few things that you need to take care of during app development. 

Full banking license:

To call your neo-bank a bank, you must have a banking license. These are usually issued by central banks to perform various banking operations, such as taking deposits, loan issuance, money lending, etc. 

If you are operating in the US, you need to get license approval from the Fed and in Europe from the ECB. however, obtaining these licenses can be time-consuming, costly, and complicated. 

Fintech license:

The fintech industry is continuously evolving, making it a necessity for the fintech industry to come up with new regulated licenses. With a fintech license apps can provide banking services but in a restricted manner. For example, apps can not transact beyond a certain threshold. 

What Are The Current Neo-bank Market Trends?

If you are developing a neobank app from scratch, it’s essential to stay updated with the latest digital banking trends. Here are the top trends you should consider integrating:

AI/ML (Artificial Intelligence & Machine Learning):

• Enhance mobile banking experience with AI-powered tools.
• Create virtual financial assistants to guide users in budgeting, account management, and investments.
• Provide personalized financial recommendations using machine learning.
• Automate routine banking tasks for a smoother user experience.
• Strengthen fraud detection with real-time transaction monitoring.

Internet of Things (IoT):

• Enable smart payments through connected devices like smartphones and wearables.
• Track revenue and expenses in real-time for better financial management.
• Use device-based authentication to enhance security.
• Integrate IoT for streamlined payment processing and user convenience.

Security Enhancements:

• Protect sensitive data with biometric authentication, multi-factor verification, and end-to-end encryption.
• Allow users to freeze or block accounts instantly if suspicious activity occurs.
• Build trust and credibility by prioritizing user data protection.
• Ensure your neobank app meets regulatory compliance and mobile banking security standards.

Transparency:

• Provide real-time transaction alerts and notifications for all account activities.
• Offer detailed financial dashboards for easy expense tracking and account overview.
• Ensure fee transparency to avoid hidden charges.
• Empower users with clear access to transaction history and financial insights

What Is The Cost Of Neobank App Development?

Developing a Neobank application can cost you around $30,000 to $60,000. However, this is just an estimate and the actual fintech app development cost may vary depending on your project specificities, like, complexity of the project, UI/UX design, features integration, third-party API integration, cost of hiring experts, location of app development partner, etc. 

To get an exact cost of Neobank app development, feel free to get in touch with us.

What Are Some Popular Examples of Neobank Apps?

Chime as of now offers unparalleled competition by acquiring nearly 12 million customers. The next on the list of popular neobank apps is Monzo, which offers a wide variety of features and user-friendy operations. 

Wise, also previously known as TransferWise facilitates access to Wise Borderless Account and allows to manage finances on the go. 

N26 is also a great app that provides a range of functionalities to the users to manage cross-functional transactions. 

Revolut offers a complete solution to all monetary issues.

Let’s Launch Your Neo Bank App With IT Path Solutions Today!

Digital banking software development is not as easy as you might think. You need expert experience to successfully launch your application. We, at IT Path Solutions, follow a comprehensive app development process that helps us achieve neobank app development on time. 

Do you also want to achieve a promising result with app development? Get in touch with us and let us help you navigate through your business plan!

FAQs 

Q1. What is a neobank app?
A neobank app is a fully digital banking platform that operates without physical branches, offering services like payments, savings, loans, and investments through mobile or web apps.

Q2. How do neobank apps make money?
Neobank apps monetize through interchange fees, credit-led models, product extensions (like insurance and loans), premium subscriptions, and affiliate partnerships.

Q3. What are the advantages of using a neobank over a traditional bank?
Neobanks offer faster onboarding, lower fees, real-time account updates, AI-driven insights, and better user experience compared to traditional banks.

Q4. What technologies are used to build a neobank app?
Core technologies include AI/ML for personalization, IoT for payments, blockchain for security, and cloud-based infrastructure for scalability.

Q5. How secure are neobank apps?

Modern neobank apps use advanced encryption, multi-factor authentication, biometric logins, and real-time fraud detection to keep customer data and transactions safe.