What is a banking license?
A banking license certifies that a bank has met all the legal requirements when it comes to protecting its customers’ money and data. It’s a clear signal that you can feel safe and secure in the institution you’ve chosen. Read on to find out everything you need to know about banking licenses.

Banking license, defined
A banking license means that a financial company meets a set of strict government regulations. Only a company with a banking license can call itself a bank. To get a banking license, the institution has to meet a strict list of criteria, including keeping financial reserves on hand, and ensuring data systems are securely protected.

Types of banking licenses
Traditional licenses
Traditional licenses support big corporations with large scale operations, such as those with banking branches offering in-person services.
Fintech (or virtual) license
Fintech (or virtual) licenses are available to digital-only banks operating solely online to focus on digital customer experiences.
Extended licenses
Extended licenses allow a fintech company to partner with a parent bank so that they can operate under their license.
E-money licenses
E-money licenses allow companies to offer payment and financial services like transfers and currency exchange, but they don’t allow them to operate as a bank or manage deposits.
What does fintech mean?
“Fintech” stands for financial technology, and is a label applied to companies offering banking services through specialized software. The goal of fintech companies is to improve the delivery and quality of banking services—making money management simpler and quicker for the consumer. Fintech start-ups are disrupting the traditional banking sector. By offering banking services online instead of in branches, they give customers the power to handle their finances directly from their smartphones.Banking license vs. e-money license
The key difference between an e-money license and a banking license is where the customer’s money is held, as well as how it is protected.
- E-money firms must use a partner bank to hold funds, and your money isn’t protected by the European Deposit Guarantee Scheme (DGS).
- A licensed bank holds their customers’ funds themselves, and deposits are protected up to €100,000 by the DGS. This means that even if your bank should fail, up to €100,000 of your money would still be paid out to you.

How to apply for a banking license
To request a banking license, a company must contact their national supervisory authority, such as the European Central Bank, to start the review process.
- E-money license applications take up to 15 months and cost between €1,500 and €3,000.
- Banking licenses take up to 18 months and are more expensive—around €25,000.

Should I sign up for a licensed bank?
Licensed banks follow all the necessary government regulations to make sure their customers’ money is as safe as possible. In Europe, if a licensed bank fails (that is, when it can’t pay its creditors), then your money is protected up to €100,000 under the European Deposit Guarantee Scheme. Unlicensed banks and e-money firms do not offer this protection.N26 is a fully licensed bank.
