Navigating financial services requires more than a great app; it requires a solid legal foundation. Whether launching a neobank or a payment processor, understanding the nuances of a banks licence is the first step toward success.
According to industry data, the global fintech market is expected to reach $600 billion by 2026. To capture a share of this growth, new entrants must first navigate strict bankers license requirements and understand exactly how to get a banking licence.
Why Banking Licenses Exist in the Financial System
Protecting Consumers and Financial Stability
A banking license is a commitment to safety. Regulators use licensing to ensure any entity handling public money has the capital to protect it, preventing systemic collapses and maintaining public trust.
Preventing Money Laundering and Fraud
Fintech regulation focuses heavily on Anti-Money Laundering (AML). By regulating fintech through strict licensing, authorities track financial flows and ensure digital platforms are not exploited for illicit activities.
Enforcing Accountability in Financial Services
Licensing creates a framework for accountability. If an entity fails its obligations, regulators can impose fines or revoke the license entirely.
Main Types of Banking Licenses Worldwide
Full Banking Licenses and Their Scope
A full banks licence allows an institution to offer the widest range of services, including taking deposits and licensing lending. However, the banking licence requirements for a full permit are the most stringent, often requiring millions in initial capital.
Limited or Specialized Banking Licenses
For many startups, a full license is overkill. Instead, they may opt for:
- EMI License (Electronic Money Institution): For issuing e-money and digital wallets.
- PSP License (Payment Service Provider): For processing transactions without holding deposits.
- MSB Licence (Money Services Business): Essential for currency exchange and money transmission.
Digital and Neo-bank Licensing Models
Many jurisdictions now offer "lite" versions of a bankers license specifically for digital-only banks – neobanks, allowing startups to launch with lower capital requirements.
Differences Between Banking and Financial Institution Licenses
The main difference lies in operational rights. While a full bank takes deposits, a firm with a money lending license can only provide credit using its own capital, and a payment license strictly allows for moving money. Because full banking license requirements involve intense scrutiny and high capital, startups often choose a PSP license for specific use cases. For example, a peer-to-peer transfer app only needs a PSP to operate, whereas a startup offering checking accounts requires a full bank charter.
How Licensing Affects Business Operations
The specific type of license you hold dictates:
- Service Scope: You cannot offer mortgages if you only hold a payment license.
- Geographic Reach: Most licenses are national, though some can be "passported" across borders.
- Reporting: Entities must undergo regular audits and submit financial reports.
Choosing the Right Banking License for a Business
Understanding how to get banking license and matching the license to your business model is critical. If your goal is small business loans, a money lending license or specialized licensing lending permit might be faster than a full bank charter.
The process of getting approval can take 6 to 18 months. Cost and scalability are the final pieces—you need a license that supports growth without becoming a regulatory burden.
