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    How to Create a Mobile Banking App: a Definitive Guide For Startups

    Back in the day, even the most basic operations with your banking account required a visit to the bank branch during office hours. Now, you can have it all in the palm of your hand. The functionality of the traditional bank’s app has become a deciding factor for users, and rightfully so.

    If you’re looking to get your own banking app development started, you must have a clear picture of what makes one great, what is the process behind getting one done on order, and what is the cost of developing a mobile banking app.

    So, the question is, where and how do you get started? Let’s see.

    What problem do you want to solve?

    The number of fintech startups has dramatically increased in recent years, and all of them are aimed to meet high customers’ expectations in an effective and fast way. The intensified competition in the market has been further heated up by such initiatives as Open Banking and the Revised Payment Services Directive (PSD2) set to make a market entry for smaller fintech projects easier and end the indisputable monopoly of large traditional banks. 

    In this context, the concept of open banking is helping to transform implacable competition between banks and fintech into a potential alliance and lay the foundation for better products and services for customers. Recently, Surf has accumulated all its expertise regarding banking app ideas, to help you better understand the types of smaller challenger firms that have flooded the market.

    But before you start looking for an attractive business model and figuring out how to create a mobile banking app, a more important question to answer is: what problem do you want to solve?

    Speaking about the future trends of mobile banking, it’s important to note that customers are increasingly seeking for fast and multifunctional remote services to manage personal finances. Several years ago so-called neobanks or challenger banks took the lead: in 2018, there were 60 worldwide digital challenger banks, while now, only three years later, that number has increased by more than four times to over 250 live neobanks, with many more in the process of being launched. The leading neobanks today are Chime, Revolut, Monzo, N26, Nubank, and others. 

    Neobanks offer solutions that make customers’ financial management more comfortable and favorable. Challenger banks offer lower fees (as they cut costs on maintaining physical branches), better customer service (users even with poor credit history can open accounts in minutes), and better technology (conservative and bureaucratic physical banks are not as fast in applying innovations). 

    Moreover, neobanks are doing a great job in terms of providing services for different segments of the population. For example, Chime, the most valuable neobank today, sets as its mission to provide a suite of services for all customers across the US, not only the top 25-30% of the top American wage earners. A huge segment of Americans has a lot of anxiety around their money and day-to-day finances, and Chime helps individuals achieve financial peace of mind: it charges no monthly or transaction fees and allows users to receive salary up to 2 days in advance. Instead of charging account fees, Chime takes a portion of the transaction fees that Visa charges merchants when customers use Chime’s debit card.

    Meanwhile, Revolut, a famous fintech startup with headquarters in London, stipulates in its vision the goal to remove any fees involved in foreign exchange transactions. It gained a following with a service that lets users spend abroad at the real exchange rate, with no fees attached. The idea attracted a lot of loyal customers, and the company has recently added a number of new features to the app, including cryptocurrency trading and business accounts.

    Neobank business models

    Mobile banking development always requires the choice of a business model. When it comes to neobanks, there are five different business models that are leading globally:

    • Interchange-led. This business model suggests that a neobank gets the biggest part of the revenue from interchange fees. Every time a customer uses the neobank’s card as a payment method a neobank gets paid. Such a business model is used by Chime and Neon, for example. 
    • Credit-led. Leverages a credit-first model, starting off with a credit card or similar offering, and later providing a bank account. Brazil’s Nubank is a prime example of using the credit-led business model. 
    • Ecosystem-led. Challenger banks with this business model at the base make money by integrating all services in one place. Most important and value-added services may be brought in-house with time, increasing profit potential. The best examples here are N26 and Monzo. 
    • Asset-led. In accordance with this model, neobanks gain money from offering savings accounts and acquiring deposits with competitive rates, like Goldman’s Marcus and Beam. 
    • Product extensions. This business model is centered around product extensions that remove the barriers between financial domains (Robinhood, Wealthfront). According to some forecasts, the biggest drivers here will come from product extensions from larger tech companies (for example, Square Cash App). 

    Currently, we are witnessing the second wave of neobanks emerging, which are less widely targeted and aiming at more specific opportunities. For example, for the agricultural community, freelancers, SMBs, or specific companies working in e-commerce.

    Bank license and compliance regulations

    Spinning off the mobile banking trends in terms of product characteristics and technologies, let’s look at another crucial challenge faced by all entrepreneurs engaged in banking app development — conformity with compliance regulations. This is especially important for small fintech startups that often pay more attention to the product itself and engineering — sometimes there is a lack of knowledge of how to manage risks and follow multiple fintech compliance requirements to avoid penalties from various regulators. 

    The main challenge here is that compliance regulations exclusively for fintech are still not drafted officially and evolving in multiple directions as an addition to guidelines for banks. Like banks, fintech companies should interact with regulators and stay updated on the latest compliance developments to ensure consumers have access to the most innovative digital financial services and products. 

    Below are a few key regulations affecting fintech firms:

    • US anti-money laundering (AML) regulations: Bank Secrecy Act (BSA) and US Patriot Act that measure the level of fintechs’ involvement in the authorities’ attempts to confront money laundering. 
    • Gramm-Leach Bliley Act (GLBA) or the Financial Modernization Act, in accordance with which all financial institutions should explain to their customers how their information is being shared, and take measures to protect their sensitive data. 
    • 2012 Jumpstart Our Business Startups Act (JOBS Act) is aimed to make the activities of crowdfunding platforms more secure, introducing maximum fundraising amounts and disclosure requirements. 
    • Fair Credit Reporting Act (FCRA) sets up ways to protect information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services. 
    • Truth in Lending Act (TILA) contains consumer protection requirements for credit card holders that are designed to improve credit card disclosures, rate increases, and payment allocations.
    • Security Act and Exchange Act regulating Initial Coin Offerings (ICO). 

    And several US key licenses that fintech products of today must obtain (depending on their particular line of business): 

    • Money Service Business (MSB) registration is needed by all market players that are prone to fintech AML risks and subject to the BSA reporting and compliance rules: digital wallets, mobile payment systems, and peer-to-peer transfer systems.
    • Money Transmitter License (MTL) should be obtained by any business performing money transmissions. In the US, activities falling under this category vary state-by-state, and the process for obtaining coverage could be lengthy and costly in some states.
    • Offerings through Reg A. Reg A is an exemption from the registration requirements, allowing companies to offer and sell their securities, which are capped at $50 million for one year, without having to register the offering with the Securities and Exchange Commission (SEC). At the same time, state and federal jurisdictions still fall under the SEC. There are similar frameworks for private placements and smaller companies (Reg D). So, fintech companies with new security offerings must ensure proper registration and adherence to these requirements before launch. 
    • BitLicense is needed by firms that deal with cryptocurrency activities. The document is issued by ​​the New York State Department of Financial Services (NYSDFS).

    What do users want from mobile banking apps? 

    The more businesses learn about the user experience and their needs, the more precise and effective the design and feature set becomes. Let’s figure out what are the main aspects to focus on during mobile banking development. 

    Balance of impeccable security and ease of access

    With the increasing use of gadgets to perform daily financial operations, app security issues come to the fore. Even the best mobile banking apps are vulnerable to breaches and data theft, as customers use them to store and manage confidential financial information. Moreover, mobile operating systems themselves are vulnerable to bugs, viruses, and malware. All these open wide doors before cybercriminals. 

    At the same time, for users, ensuring safety of their operations often means extra steps to take. However, the more steps users have to take, the more annoyed they become. An ideal app is capable of providing seamless, yet precise authentication (including biometric) in several steps, to ensure maximum security with minimal friction.

    Bank of America (4.8 App Store score) is one notable example of a bank that got its security at the right level, with multiple layers of protection. Two-factor authentication, unauthorized access safeguards, card blocking, single-used card numbers, and next-day cash reimbursement, all onboard.

    Slick, user-centric interface design

    Bank apps, for the most part, are notorious for clunkiness. Banking and mobile financial services on the whole adapt to changes slower due to how difficult it is to move the considerable back-end complexity onto a new interface and ensure a bug-free user experience.

    Revolut (4.7 App Store rating), a UK-based online bank and app, takes the user experience to the next level, placing it at the near top of what Revolut is as a business. The navigation within the app is straightforward, it’s easy to remember where every particular feature is, and it looks nice

    Using design thinking methodology could become a perfect solution to many issues mobile banking app development implies in terms of interface design and, as a consequence, user experience. 

    Design thinking allows developers or business owners to get a clear understanding of the audience’s needs and apply this knowledge in fintech software development. The main idea behind this approach is to communicate with users instead of hypothesizing about what they want. As a result, a software solution meets such important criteria as desirability (it adds value to customers while ensuring great customer experience), technical feasibility (whole functionality to perform different tasks is in place) and economical viability (expenses for banking app development are reasonable). 

    Surf team’s experience with applying design thinking methodology is wide: in our other article, we have given a detailed account of two cases, where we applied design thinking in finance software projects to help our clients achieve success. 

    Availability of bank products and services

    The best mobile banking app should be able to offer anything a bank branch can offer. A good example here is the phenomenon of neobanks’ popularity: since breaking into the global fintech market, challenger banks have constantly improved their apps and broadened the range of features to make their offerings attractive enough to fully displace the brick-and-mortar institutions. Services offered by neobanks seem to be available and advantageous for different segments of customers: no transaction fees, instant access to all features, faster customer service, and sometimes even the whole ecosystem of accompanying services. 

    For example, Ally (4.7 App Store score), an American digital-only bank, is famous for seeking to offer the most of its service suite through its app while driving the percentages down as much as possible. Credit cards, debit cards, savings, certificates of deposit, overdrafts, stock market access, business tools, and so on.

    How to prepare for mobile banking app development?

    While we strongly recommend resorting to the help of a business analyst to help you connect the dots between existing business processes and the app development scope, there is some work that can be done on your own. 

    What features should you aim for?

    In their recent mobile banking app trends research (2021), Statista researchers outlined the most popular app features used in banking apps are multi-layered access, onboarding, customizable dashboards, deposits check, card management, mobile payments, cardless ATM access, notifications, and account balance/transactions history. 

    Let’s take a look at each of the above-mentioned features:

    • Multi-layered access and transaction protection

    You want your users to be able to log in quickly with their biometric data – FaceID, fingerprint, and PIN codes. Ideally, a user must be able to combine these security methods at will, having one of the selected steps inactive during active use.

    • Onboarding

    Show the user key features of your app and where to find them via guides and highlighting. An online and mobile banking app is often complex and needs time to get comfortable with. Keep the steps to a minimum, however. It’s a good idea to keep the initial registration fields to a minimum, too. 

    • Customizable dashboards

    Imagine forming your own main page dashboard with widgets that show exactly what you want at a glance. This feature will add a lot of value to your app, even though it’s not part of the core system functionality. 

    • Check deposits

    Customers should be able to deposit checks into their accounts without having to go to the branch office. Simple.

    • Card management

    Virtual, physical, or otherwise – the ability to issue, close, or change PINs, set limits, specific cashback programs, and more is a must for the best mobile banking app. 

    • Mobile payments

    Bills, services, loans, mortgages, depositing to a friend’s account, you name it. The key advantage is in providing ease of access – storing the account number of a given service, the mobile phone number to find the right bank account, and similar. Don’t forget to include the exchange rates, the ability to pay through Google Pay and Apple Pay, and QR code scanning. 

    • Cardless ATM access and NFC payments

    The ability to get rid of plastic altogether can be a strong part of your unique value proposition, as opposed to other financial services or banks.

    • Notifications

    By text, push, email, even messenger integration is possible. Very handy and highly configurable notifications are the best option – to let the user choose how and when they would like to receive notifications.

    • Account balance and transaction history/tracking

    An absolute must that can be taken a step up with expense planners, bill-splitters, per-month stats, pie-charts, spending filters, and more. Help the users see how much they spend and on what. 

    What tech stack to use?

    There are several approaches to app development, each with its benefits and drawbacks. But when it comes to mobile banking app development, there are two competing options: native and cross-platform development. 

    Native

    Native development is centered around a certain operating system, with Android and iOS being notable examples. A native app will only function properly on the platform it was designed for, and is delivered to the smartphone’s memory in the system-specific package. 

    Native development requires intricate knowledge of the given platform’s framework and code. If you’re looking to develop an app for both iOS and Android, you will have to create two separate apps as a result, similar in design in functionality, but completely different in the backend. For instance, Android apps are often made with Java or Kotlin, while iOS apps are usually made with Objective-C or Swift. The native approach is often used during the development of highly complex apps that rely on high performance, security, and overall quality of the product. 

    Cross-platform 

    Cross-platform development is often confused with hybrid development. Both approaches have code shareability as a benefit, but that’s where their similarities end. Hybrid apps are written with web technologies (HTML5, CSS, and JavaScript), whereas cross-platform apps are developed with a single codebase to run on both platforms (Android and iOS) smoothly. Cross-platform apps often approach near-native levels of user experience because such apps use the platform’s native rendering engine. Generally, the cross-platform approach is gaining increasing popularity and is widely considered as one of the key mobile banking industry trends

    React Native and Flutter are popular frameworks used in сross-platform development. These frameworks are provided by Facebook and Google (based on Dart language) respectively. 

    In our case, one notable example is Rosbank – a bank app that we’ve made on Flutter. 

    Surf was hired to make the first version of a new business application within the framework of a smart banking concept. So, our team of developers managed to create a quality app with all the necessary features even with considerable time constraints. Special attention we put to the mobile banking app security: we compiled Dart code into native, non-human readable code to improve the security of the app. This plays a great role in ensuring resilience to cyberattacks, as it considerably complicates the reverse rendering process. The security of the solution is even higher than in Java, Kotlin, or React Native.

    Moreover, we at Surf strongly believe that using microservice architecture in mobile banking app development can help to preserve the high level of performance of software systems and thus, make the app more resilient to any internal and external issues. While developing the app for Rosbank, we used this approach, to make the final product more tolerant to any type of fault, as well as ensure high availability and scalability. Also, with improved deployment speed and facilitated infrastructure maintenance, Rosbank got the opportunity to deliver new functionality and customizations faster. 

    How to create a mobile banking app?

    Unless there is a structure in how the development process is approached, getting one done on order won’t be a pleasant experience. Below you can find the standard steps to develop a mobile banking app. Depending on the project the steps might change. Here’s the general development framework we follow at Surf

    Step 1: Conceptualize

    The most important step. Assess the costs ahead of time and set clear deliverables for the development team to follow. The more granular and tangible the approach to delivery is, the less chance there is that you will be disappointed or tricked into paying for an endless project. 

    Step 2: Build an MVP

    A minimum viable product version of your app is a crucial step on the development journey. In essence, an MVP contains just enough features and design to attract customers, thus helping you to validate the product-market fit and overall conception of the app. At this stage, it’s important to seek all available sources of user feedback. 

    The more you will learn from your MVP, the better assurance you will have that your fully-developed app will be a success. 

    Step 3: Get security in order

    This step requires extra checks from you and the development team working on it. Make sure the security features listed above make it to your app and work flawlessly – you can’t compromise or save on app security. One major data breach or money stolen from your users and your reputation is gone forever. 

    For the developer, that means coupling physical security with server-side security, including good security processes in the onboarding process, performing code obfuscation, encrypting traffic, and adding functionality such as transaction verification, biometric ID, PIN  change reminders, and more. 

    Step 4: Get the app built! 

    Monitor the milestones, the deliverables, and keep your hands on the app delivery process. This step will take a decent while to complete. The new app build will require testing, intensive feedback, and probably some things might change along the way. 

    Step 5: App design

    Once the app is built, it’s time to put a coat of paint on it. The app will have at least half of its interface work done at this point, but still, you will need a UI designer to make it really nice looking.

    Step 6: Release, integrations, good-to-haves

    The app is ready to be shipped, and all other work done on it will not significantly affect its course. Plan API (Application Software Interface, a way for two different apps to exchange data with each other) integrations with other apps that you might find beneficial for your users – like document sign software, third-party expense trackers, accounting software, and such – have them built as well. 

    Step 7: Maintenance

    Now, all you have to do is pay attention to customer feedback, fix whatever pesky bugs make their way to the surface, and ensure the best user experience possible. Ideally, you would have full documentation on app features available and usable by your audience. Help articles, chatbot advice, you name it – it will help cut down costs on Support to have it beforehand. 

    How much do banking apps cost to make?

    A banking app with a full suite of features and extra tough security, of course, is something worth paying a tidy sum for. In our case, we even have a full article on estimating a mobile banking app development cost. 

    Simply speaking, the project cost depends on 4 things:

    • App complexity
    • Tech stack used to make it
    • Dev team location
    • Type of cooperation

    An average banking app with a standard set of features (proper security, account data, transaction history, notifications, analytics, and in-app chat support) might take around ~2300 hours, which will equal ~$300,000. No project is alike, of course. 

    Explore Surf’s expertise in fintech software development to figure out the main steps and nuances behind building a solid fintech app, as well as all costs you need to be aware of. 

    How long does it take to create a mobile banking app?

    Again, it really depends on the scope, but you can expect the base app functionality (suitable for market release) in about 6-8 months.

    How to find and hire a fintech developer

    When we speak about the process of finding the right developers for your mobile banking app project, there are two viable options: hire them as full-time employees or think about the outsourcing development approach

    In the case of outsourcing development, the whole development project can be handled by a specialized development company on a contract basis. Requirements for both in-house employees and freelancers or contract-based employees are more or less the same: relevant expertise in fintech development, same values and working culture, as well as familiarity with the latest technologies. However, each approach has pros and cons. 

    By outsourcing app development you can get the best talent for mobile banking app development at affordable prices. Also, hiring an external contractor saves your management and HR department from a considerable set of problems. Another advantage of outsourcing is that when working on a client’s project, a professional development team always keeps in mind that, in the future, the project might be handed to another team, so they aim to make the project’s internal structure, code, and other features easy-to-understand by other developers. 

    On the other hand, outsourcing development has its pitfalls, including the risks of less control over the working process, compared to in-house development and less involvement, as in-house employees share the core values of your business and understand its needs better than external contractors. 

    Anyway, the final decision should be made depending on the unique features of your product, timeframe, and budget limitations, as well as the overall complexity of the app. 

    Final word

    The success of a good banking app relies on advanced security, good app design, and the availability of bank services and products within. Looking into the development of an app of this scale, it’s important to structure out the necessary feature set for the first and later app iterations and make sure the MVP helps to discover any serious design or product-market fit flaws. 

    At Surf, we pride ourselves on building Android, iOS, and cross-platform apps that make good things happen – happy clients, happy business. It’s challenging work but we love it nonetheless. However difficult or simple your project scope is, do send us a message – let’s chat. Your dream app can be made real, and we can tell you how.