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.

N26 transparent Mastercard, Charcoal black Metal Mastercard and teal Mastercard.

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.

EU flag but the stars are Euro symbols.

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.
Old gloomy bank building.
Business man checking a bank contract.

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.

An N26 logo against a green background.
N26 Metal - Charcoal Black.
Transparent N26 Standard card.
N26 You card, Petrol.

N26—a fully licensed, 100% mobile bank

N26 earned its banking license in 2016. This distinction lets us provide our 7 million customers with a range of premium financial services, as well as the security you deserve. N26 account holders are protected up to €100,000 by the German Deposit Protection scheme,. Open a premium N26 account today to secure your finances, and access even more lifestyle and travel benefits.

What is Fintech?

Fintech refers to financial technology typically offered by financial services companies. Types of fintech include payment systems such as TransferWise, as well as mobile banking apps such as the N26 app. These systems are built using specialized software, usually with secure protocols to protect any money managed in the system.

What is a banking license?

A banking license certifies that a financial organization is running a secure banking business. Licensed banks must provide a full range of banking services while managing their customers deposits themselves. N26 has been a fully licensed bank since 2016.

What do banking licenses allow?

Banking licenses allow services such as managing deposits in personal and business accounts, issuing debit and credit cards, and processing foreign exchange services. It officially certifies that the license holder is a recognized bank, and provides protection to their customers deposits up to €100,000.

What is an e-money license?

An e-money licence is like a standard banking license, but with a set limit of transactions and banking services. These can include money transfers, currency exchange, the issuing of payment cards, and using digital e-wallets. E-money firms do not protect your deposits under the European Deposit Guarantee Scheme, nor do they allow services like lending and overdraft.

How do you get a banking license?

If a company wants to set up a banking license, they need to contact their national financial authorities. They must meet the requirements set by the authority, and have a business proposal to present. If deemed credible, the organization advises the firm on next steps. This process takes up to 18 months.

Related posts

N26 celebrates 7 million customers

Thank you to all 7 million N26 customers across 25 markets who have trusted us to put their financial interests first.

Banking Basics: EU banking rules and regulations

In this Banking Basics, we take a closer look at the rules and regulations that keep your money safe.

“Secure” doesn’t have to mean inaccessible—N26 Security

Just because we make banking simple, doesn’t mean it’s insecure. Learn about the security programs we use to protect your balance and personal data.