Starting an online bank can be a profitable venture for entrepreneurs. There are several things to consider when starting an online bank, from the technology you’ll need to the banking regulations you’ll need to comply with.
Here are eight steps to start building an online bank business.
Eight Steps to Launching a New Online Bank Business
1. Name Your Online Bank Business
Give your online bank business an identity so people will consider it a well-known and respected brand. You can take the name of your online bank business from your industry, focus on a geographical location, or use your name, among other options.
The main goal of naming your online bank business is to make it sound appealing and trustworthy so customers will want to do business with you.
2. Choose a Legal Form for Your Business
By incorporating your online bank business, you will limit your liability. You can incorporate as a Limited Liability Company (LLC), a C Corporation (C-Corp), or an S Corporation (S-Corp). Or you can operate as a sole proprietorship.
The business structure you choose for your online bank business will determine the amount of taxes you pay and which state or federal tax forms you need to file.
Read our article comparing the most common online bank business structures.
3. Write an Online Bank Business Plan
All online bank business owners should develop a business plan.
A business plan is a document that outlines the goals, strategies, and operations of a business. It can be used to secure funding from investors or lenders, as well as to guide the day-to-day operations of the business. The business plan should include the company’s products or services, market analysis, financial projections, and management team.
When developing your online bank business plan and strategy, you should think about the following questions your customers might have:
- What is an online bank?
- What services does an online bank offer?
- How do I open an account with an online bank?
- Can I deposit cash into my account with an online bank?
- Can I withdraw cash from my account with an online bank?
- Are there any fees associated with an online bank account?
- How do I transfer money between accounts with an online bank?
- Can I set up direct deposit with an online bank?
- What is the interest rate on an online bank account?
- What are the benefits of using an online bank?
- What are the risks of using an online bank?
- What happens if I forget my password for my online bank account?
- Can I cancel my online bank account?
- How do I contact customer service for an online bank?
- What is the difference between an online bank and a traditional bank?
Answering these questions will give you a good foundation for developing your business plan.
Read our article about how to write an online bank business plan.
4. Apply for the Necessary Permits and Licenses
You may need to obtain required licenses and permits before launching your online bank business.
For example, if you engage in any money transmitting activities, you will need to obtain a money transmitter license from the Financial Crimes Enforcement Network (FinCEN).
You must also register your online bank business as a legal entity with the state where you plan to do business. You can simply file an online form through your Secretary of State website.
Registering with the federal government is also essential so you can properly pay taxes for your business. You will also need an Employer Identification Number (EIN), which you can apply for at the IRS website, if you plan to hire employees.
Read our article about obtaining the proper online bank business licenses.
5. Determine Your Budget & Apply for Funding as Needed
In developing your online bank business plan, you will figure out how much funding you need to start and grow your business.
If you have funds to invest in your online bank business, you may consider taking advantage of that. In addition to your personal funds, other forms of potential funding for your online bank business include traditional bank loans, SBA loans, credit cards, angel investors, and family and friends.
Read our article about the costs associated with starting an online bank business to help you determine if funding is needed.
6. Get the Technology & Software Needed to Run Your Business Efficiently
When you start your online bank business, it’s essential to have the right technology in place to maximize efficiency. You need a computer with Internet access, and accounting software for tracking expenses and revenues.
You may also want to invest in customer relationship management (CRM) software to help manage your customer accounts and an email marketing program to communicate with your customers regularly.
In addition, you will need a secure server and an SSL certificate so you can process online transactions safely and securely.
7. Market Your Online Bank Business to Potential Customers
Before selling your products and services, you must let the world know you exist. The first step is to create a website so people can learn more about your products and services and how they benefit them.
After you launch your website, start promoting it through social media channels like Facebook, LinkedIn, Instagram, and TikTok. Also consider networking with other people in the online bank industry through social media and blogs so they can help share your business.
You also need to start gathering the materials needed to execute your promotions strategy, which is your strategy for attracting new customers. Online bank businesses should consider the following promotional strategies for which you should start getting prepared:
- Create a website that is user-friendly and easy to navigate.
- Use social media platforms like Facebook, LinkedIn, and Instagram to market your business.
- Join social media groups and discussion forums related to online banking to network with potential customers.
- Write blog posts and articles about online banking that will attract potential customers to your website.
- Develop an email marketing campaign that will promote your online bank business to potential customers.
- Develop print materials like brochures and flyers that you can distribute at trade shows or other events.
- Invest in search engine optimization (SEO) so potential customers can find your website easily online.
Read our article about how to market your online bank business for more tips.
8. Get New Customers & Grow Your Business
When you promote your products and services, you’ll start to get interest from potential customers.
Make sure you’re ready to serve these customers. Also, be sure to establish systems to ensure consistency and reduce costs. And be sure to find and train the right people to help you grow your online bank business.
Read our article about how to effectively grow your online bank business to learn more.
Starting an Online Bank Business FAQs
The online banking industry is growing rapidly as more people conduct their financial transactions online. This provides a great opportunity for entrepreneurs to start an online bank business and tap into this growing market.
To start a successful online bank business, you need the right technology and software in place to maximize efficiency. You also need to market your business effectively to potential customers. In addition, you need to find and train the right people to help you grow your business.
There are several ways you can market an online bank business online. You can start by creating a website and promoting it through social media channels like Facebook, LinkedIn, Instagram, and TikTok. You can also join social media groups and discussion forums related to online banking to network with potential customers. Additionally, you can write blog posts and articles about online banking that will attract potential customers to your website. Finally, you can develop an email marketing campaign to promote your online bank business to potential customers.
Here are some tips for starting an online bank business:
- Invest in the right technology and software to maximize efficiency.
- Market your business effectively to potential customers.
- Find and train the right people to help you grow your business.
- Be sure to establish systems to ensure consistency and reduce costs.
- Stay up to date with industry trends and developments.
A simple checklist to use when starting an online bank business is as follows:
- Name Your Online Bank Business: This should be done carefully, as your brand is important for attracting the right customers. A simple, memorable name will go a long way.
- Choose a Legal Form for Your Business: Whether you become a sole proprietorship, partnership, LLC, corporation or another option will depend on your business. Ensure that you are aware of all the implications of each type.
- Write an Online Bank Business Plan: Your business plan will also help you determine what your start-up costs will be and will provide a roadmap with which you can launch and grow.
- Apply for the Necessary Permits and Licenses: In most locations you will be required to apply for a business license and permits before you can begin operations.
- Determine Your Budget & Apply for Funding as Needed: You will need to know how much money you have to spend on your business-related expenses before opening any doors. If needed, apply for a small business loan or other funding options.
- Get the Technology & Software Needed to Run Your Business Efficiently: You need to have the right tools in place to succeed. Implement software that will help you manage your time, contacts, and business operations in general.
- Market Your Online Bank Business to Potential Customers: A solid marketing plan will be crucial to your success. It should focus on attracting the right customers so that you can provide them with the products and services they truly need.
- Get Customers & Grow Your Business: Once you have a solid marketing plan, it's time to actively pursue and secure those who could benefit the most from your products and services.
An online bank business can be a great way to enter the banking industry. Following these tips, you can be on your way to starting a successful online bank business.