How to launch your own online bank in two weeks?

[Tomcat]

According to PWC, about 20% of businesses in the field of Financial Solutions are at risk due to the onset of the so-called fintech. This is due to young, ambitious, and tech-savvy companies taking advantage of the weaknesses of traditional financial institutions and offering the service that people need.

At the same time, about 25% of all fintech projects encroach on the “sacred” - money transfers. And as practice shows, they often offer conditions many times better than conventional banks: instant transfers around the world, low commissions, favorable currency conversion.

The demand for the services of modern payment systems or neo-banks is growing, which leads to the rapid emergence of more and more new projects in this area. The coronavirus pandemic has only increased the demand for remote services of all kinds, including financial ones.
In this material you will learn how you can open your own online bank and do it as quickly as possible.

Is it realistic to launch an online bank in two weeks?​

If you break down the process of creating your online bank into simple steps, the process will look something like this:

• Registration of a company that will become a bank;
• Obtaining a financial license;
• Installation of hardware and software;
• Attracting clients.

The longest and most important process, of course, is obtaining a financial license. Unfortunately, it will not be possible to complete it in two weeks.

However, we know from experience that some clients already have some kind of financial license. We will talk about the types of licenses in more detail later, but let me clarify right away: to open an online bank, it is not necessary to obtain a purely banking license. This may well be a license to issue electronic money and other permits.

And many entrepreneurs have exactly these licenses, obtained in Estonia, Lithuania, and Malta. They are the ones who can use an existing asset and launch an online bank in about two weeks - using ready-made software solutions and an infrastructure of special services.

Now let’s go through in general terms all the stages of launching your online bank.

Registration of a company – a future bank​

Before obtaining a license, it is necessary to create a legal entity that will receive this license. It is impossible to issue a banking or other financial permit to an individual.

Most often, it is recommended to register a company in the same jurisdiction where you plan to obtain a license - this will simplify the work. However, in some cases it is possible to open a company in one place and obtain a license in another. This is often required when you start working in several markets and each requires its own license.

Registering a company takes from a couple of days to several weeks - it depends purely on the country of registration and the chosen form. Incorporated companies often require more preparation than limited liability companies or corporations.

To register the company itself, you will need the following documents:

• A copy of the passport (certified and translated) of the owner of the company (owners);
• Copy of the passport of the director/directors;
• Proof of residential address of owners and directors - most often a utility bill no more than 3 months old.

Other documents may be required.

The cost of the company starts from 2-3 thousand euros without taking into account the authorized capital. The size of the fund is determined by what license and where you get it.

Obtaining a financial license for your own online bank​

When we talk about a modern online bank, we mean those financial institutions that can provide banking services: open accounts, provide money transfers, convert currencies, etc.

Thanks to changes in the legislation of many countries, to launch such a project you do not always need a full-fledged banking license. Often a license for issuing electronic money, a payment provider license - EMI, PI and others will be suitable.

In addition, such a license can be obtained faster and with fewer requirements. However, we will consider several interesting options for both obtaining a banking and electronic money license.

Let me clarify right away to avoid any discrepancies: you can obtain a banking license in almost any country. In theory. In practice, in most developed countries, a banking license is very expensive, and the procedure for obtaining it is tedious and lengthy. I offer ideas on how to reduce bureaucratic delays, at least a little, and launch your own bank.

Vanuatu Banking License​

Vanuatu is an offshore jurisdiction in the Caribbean Sea. Financial and business center, including allowing you to register companies and obtain a banking license.

A bank in Vanuatu can operate internationally. The authorized capital must be from $500,000. Obtaining a license will require at least one personal meeting with a representative of the Reserve Bank of Vanuatu. Accounting, reporting, payment of duties - this, as they say, is by default.

The period for consideration of an application for a license is 4 months.

It is worth considering that when obtaining a license, regulatory authorities - and this applies not only to Vanuatu, but also to all other countries - carefully check the company's owners, directors, managers and persons responsible for procedures, safety, and so on.

They will check the origin of the funds, the history of each top manager and the business plan in which you describe the structure of your work.

Dominica Banking License​

The offshore jurisdiction of Dominica also offers registration of international banks. A local license allows you to conduct any banking activity: open accounts, conduct transactions, issue loans, and so on.

To obtain a license, you will need to register a local company, prepare a business plan, and prove that your funds are of legal origin. Authorized fund – from 1 million US dollars.

The authorities demand to provide documents that will prove that the bank's managers are competent specialists, and the owners have a clean reputation and capital.

Financial license in Lithuania​

Perhaps the Lithuanian license is currently one of the most popular among various financial startups. This is due to several factors:

• Relative cheapness of the license;
• License holders are under the control of the Central Bank of Lithuania and in many ways this license is similar to a banking license;
• The license is suitable for a variety of types of business: electronic money, payment systems, peer-to-peer and others;
• Access to the European Union market;
• The license allows for remote identification of clients;
• The application can be submitted before the company is registered and it can be created only after confirmation.

Obtaining a license takes approximately 6 months. High demands are placed on company managers: reputation, education, experience. The authorized capital depends on the type of license: EMI – 350,000 EUR, PI – 125,000 EUR.

License to issue electronic money in Malta​

In Malta you can obtain an EMI - Electronic Money Institution license. Features of this jurisdiction:

• Authorized capital from 350,000 euros;
• Clear requirements for a company that wants to obtain a license;
• Malta’s focus on modern technologies and solutions, including at the legislative level;
• It is part of the EU, which means the license is valid throughout the entire European Union;
• The period for obtaining a license is from 3 months.

Banking license in Saint Lucia​

In Saint Lucia you can obtain two types of international banking license:

1. Class A – international activities are permitted with third parties. Authorized fund from 1 million US dollars;
2. Class B is a limited license that allows you to work only with those clients who were declared at the time of obtaining the license. Authorized fund from 250,000 US dollars.

You will need to prove the legality of the funds and provide information about the owners and managers of the bank.

In some cases, liability insurance of $500,000 or more may be required.

It is prohibited to do business with residents of Saint Lucia.

Registration of a payment institution in the Czech Republic​

The Czech Republic is a European country in which several large payment systems already operate. You can also get a local license.

You will need a local company for this. The authorized capital depends on the types of activity:

• Main activity – 20,000 euros;
• Main and electronic communication service provider – 50,000 euros;
• Provider of a full package of services, including accepting and issuing cash - from 125,000 euros.

The personnel, technical capabilities and procedures must also be in place to comply with legal requirements.

Financial license in Estonia​

At some point, it was the EMI license that became very popular in Estonia. It was called a crypto license, and many entrepreneurs rushed to get it, especially since it was relatively simple.

However, then many had problems opening accounts, since in Estonia it is impossible to open an account for a company not connected with Estonia. We helped resolve this issue and now the situation is much simpler - there are a variety of solutions for businesses with a similar license.

License holders can provide payment services, provide loans, create payment systems, and more.

Authorized capital – from 350,000 euros. Review of an application for a license takes 6 months.

***

These are not all existing solutions. For example, you can obtain a banking license in Sierra Leone or in EU countries. Sometimes you can buy an existing bank, for example in Panama or another part of the world. It is always better to discuss this point with specialists, taking into account your goals, target market and capital reserve.

Installation of online banking hardware and software​

The next step is to launch an online bank. Today it is not even necessary to have a physical representative office of a bank to start providing services. Everyone has before their eyes the example of Revolut or its older competitors - PayPal, Transferwise.

Having a financial license, you can go in two ways:

• Create your own infrastructure, write code or buy ready-made solutions and install them on your own hardware;
• Or use someone else's infrastructure.

The first path is the path of large players who have a margin of safety and resources for massive investments, often comparable to the price of a license. It takes time to start.

However, today you can delegate a lot, including creating your online bank and launching the project in 2-3 weeks.

Yes, thanks to the so-called white label solutions, you will be able to launch your own Internet bank, add a mobile application to it, and all this in about one month.
The best part is that your customers won't even know that you are using third-party services. In addition, a large number of headaches related to ensuring the functioning of the system are immediately removed for you. All technical and partly legal issues (for example, customer verification) are resolved on the side of the software supplier.
You create a product, offer it to customers, and other people handle the logistics, testing and maintenance. For the benefit of your business.

Search for clients​

At this stage, you are already using all your savings from the previous point and directing them to attracting clients and building relationships with them. And the more clients you have, the more promising your business.

***
The banking business, or more precisely the “business of providing banking services,” has today become simpler and more accessible to entrepreneurs. Fintech projects compete on a par with banks and often offer convenient solutions, beating banks on their own field.

You can join this game and do it in a short time. Why not try it?