Natalie Monko Lead Project Manager

    Developing a Neobank From Scratch: Challenges, Process, and Tips

    Developing a neobank from scratch is a challenge but the rewards are well worth it. reports on the global neobanking market growth from $54.36 billion in 2021 to $78.02 billion in 2022 and further to $359.46 billion in 2026.

    The growth can be attributed to the gradual shift away from traditional banks as they are no longer working for many people. The tech-savvy consumers (in particular, Millennials and Generation Z) are looking for banking service software that offer them greater convenience, can be used in places without physical locations or with limited access, and exclude additional costs. 

    Neobanks caters these needs with its digital and mobile services that do not require any physical presence. 

    Being interested in building your own neobank from scratch, you should keep in mind several key points.

    • It’s vital to have a clear understanding of the market and what customer needs you’re trying to address.
    • You’ll need to be prepared for a significant investment of time and money.
    • Remember, you’re creating an entirely new financial system, not a new bank, and this covers compliance with regulations, applying cutting-edge technology, and building trust with customers.
    • You’ll need to put together a strong team of experienced professionals who can help you navigate the challenges of developing a neobank platform.

    Surf has developed apps for various industries since 2011, and fintech and banking is one of our focus domains. In this article, we’ll explore the challenges, process, and tips for creating your own neobank.

    ten screens

    Fintech and banking apps developed by Surf: from trading apps to B2C and B2B banks

    Why is it worth it to build your own neobank in 2023?

    Creating a neobank from scratch in 2023 offers many benefits and possibilities for startups and established companies. These are such pros as lower overhead costs as compared to traditional banks’ expenses, technology focus that helps digital-first neobanks offer a superior customer experience, lower customer acquisition costs due to word-of-mouth and referral marketing, and increased customer loyalty due to transparency and lower account maintenance fees.

    Neobank market size and prospects

    According to Statista, the average transaction value per user in the neobanking segment amounts to US$17.28k in 2022. While the number of users is expected to amount to 376.89m users by 2027. Below are some digits to demonstrate the growth of the digital-only bank account holders for the period 2021-2025.


    In general, the neobanking industry is estimated to be worth $300 billion, with 400 neobanks around the world. But despite mass consumer adoption and lots of attention, and capital, from investors, only 5% of neobanks are profitable. The reasons behind can vary but this only proves the need of thorough planning and preparation.

    Winning neobanking cases

    Let’s have a closer look at the neobanks that have already achieved success to clear up what aspects to take into account if you plan to get ahead.

    Monzo: partnership model

    Founded in 2015, Monzo is one of the first challenger banks in the UK. In February 2016, Monzo raised £1m in 96 seconds via the Crowdcube investment platform. This was the record for “quickest crowd-funding campaign in history”.

    In October 2018, Monzo reached their first one million customers. The same year, LinkedIn UK named it the best tech startup to work for.

    On 13 June 2019, Monzo announced that it plans to start offering services in the US. But in 2021, Monzo withdrew its application for a U.S. banking license as the company faced a different regulatory environment in the US than in the UK. Monzo chose a partnership with Ohio-based Sutton Bank to launch in the USA. Sutton will hold user deposits and provide protection with FDIC insurance. 

    SoFi: from alumni-funded model to a full service company

    SoFi is an online personal finance company and online bank based in San Francisco. It was founded in 2011 based on an alumni-funded lending model to connect students and recent graduates with alumni and institutional investors via school-specific student loan funds. Gradually, SoFi expanded its lending to personal and home loans and now it offers various products in the spheres of lending, investing, cryptocurrency trading, banking, insurance, credit score monitoring and budgeting.

    sofi dashboard

    Nubank: game-changing technology

    Nubank is a Brazilian neobank headquartered in São Paulo and was founded in 2013. By December 2021, Nubank had over 52.4 million customers in Brazil and 1.51 million in Mexico and Colombia. In 2022, the bank was featured on Forbes’ World’s Best Banks and elected the best bank in Brazil.

    As the company grew extremely rapidly, the team needed a way to develop and ship new products quickly and with high quality and chose Flutter for their needs. It was a good match for both platforms from the point of view of developer experience, documentation, API stability, lack of platform specialization, excellent testing capabilities, and better UI consistency.

    Since Flutter was chosen for mobile development, all new features have been created with this technology, with legacy features migrated over time. The build time has improved dramatically. For example, with Flutter, Nubank launched a new life insurance feature in just three months, faster than ever before.

    Nubank success metrics

    Mercury: niche bank

    Many banks focus on a specific niche and create a unique offer for a separate target group (for example, family banking) or for a specific business sector. This way banks are able to confidently compete for users and attract a new audience.

    Mercury is a financial technology company, founded in 2017. It serves startups and offers services according to their needs such as automated recurring payments, accounts payable, and other banking busywork, and reliably seamless integrations, from QuickBooks to Stripe. Mercury offers FDIC-insured accounts, virtual & physical debit cards, currency exchange, domestic and international wires. 

    We developed a neobank app for Y Combinator startup designed for tech-savvy millennials. Need more info?

    Read case study

    5 steps to build your own successful neobank

    As clear from the above facts, starting a neobank requires a thoroughly thought-out  strategy and accurate implementation. Every case will differ from the point of view of target audience, business model, services and products to be offered, technologies to power the project, etc. But we suggest considering 5 steps to take to build a neobank that will stand out in today’s competitive market.

    Step 1: market and audience research

    A project starts with research: for any business it is vital to clearly set goals and objectives. You need to research the market and understand the needs of your target customers to plan how to position a neobank in the market, what services and\or products to offer, and how to sidestep competitors.

    Skipping the stage or choosing unsuitable methods can lead to spending the budget without the desired result. And on the contrary, an appropriate research method will help save money and time and exclude the risk of erroneous goals and messages, collecting incorrect or unnecessary data, or making mistakes in design. 

    To simplify the methodology choice, we at Surf have developed a framework for fast and informed selection of research approaches. Having combined the product development matrix with typical questions and the types of research, we got a tool to find the most effective method to solve project tasks at different stages.

    surf landscape

    Step 2: UX/UI design

    The UX/UI of banking apps is not only aimed to make your product more attractive. It shall meet the target audience needs and expectations and respond to their requests. This is the way it adds value and impacts business results.

    After the research of your target audience and competitors another point is to create intuitive interfaces optimized for conversion and comprehensive design systems to make it easy for you to test, maintain and scale your product. 

    In the Surf team, we have built up the processes in such a way that UX/UI designers always stay involved in the process. This allows timely discussion of any issues within the team and saves time and resources.  

    developnment process by surf

    Step 3: testing

    Money and personal data are two key subjects where thorough quality assurance is a must. Your customers will not overlook any minor bug searching for the highest security and reliability.

    Testing neobanking apps requires special attention, as they have many features with complex logic and use multiple integrations with third-party systems (bill payments, trading accounts, etc). Besides, the financial domain is ever-changing and the app functionality is extended and updated on a regular basis. Taken together, all this turns banking app testing into really challenging. 

    Along with the industry-specific rules and approaches, we have developed testing practices to ensure high coverage and quality such as early review of requirements and design by QA engineers, applying common structure for test cases, using component tests for new features, and implementing test automation.

    mobile app

    For our Flutter-based bank project we implemented test automation and infrastructure for the automated tests. This resulted in reduced time for testing and bug fixing and improved app quality.

    Step 4: neobanking app development

    A neobank platform should be secure, scalable, and easy to use and maintain. Therefore, the development team shall not only be professional in terms of technology but to be aware of the industry-specific requirements and practices.

    From the point of view of coding, the development team shall be keen in choosing or recommending you the best suitable architecture, technology stack, tools and approaches and to apply secure coding practices, including advanced authentication, data encryption, and DevSecOps to ensure data security.

    The workflow is no less important. All processes shall be transparent and well-documented, so that at any point of the project you were well-informed of the project progress and prospects. Another point is well-tuned communication that helps avoid any misunderstanding.

    online banking

    For the first neobank of Pakistan we developed a super app from scratch on a tight schedule, in less than a year

    Step 5: further improvement and growth

    After release, you need to monitor your progress and make adjustments as needed. This includes tracking key metrics such as customer acquisition, retention, and satisfaction levels. Neobanks are still a relatively new concept, so it is important to stay agile and adapt as the market evolves.

    Monitoring users’ feedback will help correct UX errors such as complex processes, incomprehensible registration forms, intricate navigation. In the long run, this will lead to better ratings and higher LTV.

    Need more details about a banking app development process? Check how we do it at Surf.

    Read more

    Top neobank app development challenges

    Despite the growing popularity of neobanks, there are still various challenges that need to be addressed before they can reach their full potential. Here are some of them.


    Banking and fintech services are strictly regulated by local regulators or governmental bodies and vary widely across jurisdictions. Regulatory frameworks refer to various aspects: licensing requirements, regulations with a focus on increasing minimum capital requirements, holdings of high-quality liquid assets, decreasing bank leverage, regulating high-risk financial products to protect consumers, or establishing credit loss accounting standards, etc.  

    If you plan to develop a neobank, be ready that complying with the regulatory requirements will be one of the most vital aspects, both at the foundation stage and in an ongoing capacity.

    Top-level security

    Financial industry is the most frequent target for cybercrimes as risks are really high. Any successful attack can lead to loss of money and confidential data, let alone trust and loyalty of your customers. 

    Be careful to give the security solutions the top priority. For example, there are some  must-have security features:

    • HTTPS and SSL security protocols;
    • End-to-End Encryption (E2EE) in transactions and private messages, with cryptographic keys;
    • sophisticated authentication solutions such as biometric or two-factor authentication;
    • remote wipe feature to give your customers a possibility to remove data in case of phone loss or theft.

    Right tech stack

    Another challenge is to choose the technology and tools that will help you create a reliable high quality platform that will be easy to maintain, develop and scale.

    For our clients we recommend Flutter as an open source framework for apps for various domains, including banking and fintech. First, it allows to reduce finance app development time and costs as with the cross-platform SDK we can use a single codebase for different operating systems. 

    Besides, Flutter contributes to improved product delivery speed due to the Hot Reload feature (programmers observe the front-end and back-end changes in real time) and to application security as Flutter code makes the process of reverse engineering more complicated for hackers. 

    Summing up: where to start neobank development

    Consider starting with a neobank MVP to check whether your app meets customers’ approval with a minimal set of features and save time and money avoiding  excessive design and development activities at the initial stage.

    Finally, remember that building a successful neobank takes time, patience, and hard work. There is no magic formula for success, so don’t give up if things don’t happen overnight. Just keep moving forward, one step at a time.