You cannot start a bank the way you start a business

Opening a bank requires a federal charter from the Office of the Comptroller of the Currency (OCC) or a state banking charter from your state's banking regulator. This is not a business license you file for online. The process takes 18 months to three years, costs $500,000 to $5 million in startup capital alone, and involves detailed applications, stress tests, and approval from multiple regulators. Most people who think they want to "start a bank" actually want to offer financial services—and there are faster, legal routes to do that.

If you want to hold customer deposits and make loans under a bank name, you need a charter. If you want to move money, issue cards, or provide payment services without holding deposits yourself, you can use a different legal structure entirely. The path depends on what you actually want to do.

Key Takeaways

  • A bank charter requires federal or state approval, takes years, and costs hundreds of thousands of dollars before you serve a single customer.
  • Most fintech companies and payment services operate as non-bank money transmitters or partner with existing banks rather than getting their own charter.
  • If you want to hold deposits, you need a charter; if you want to move money or issue cards, you can use a money transmitter license or a bank partnership.
  • The OCC and your state banking regulator are the bodies that approve charters, and they evaluate your capital, management, business plan, and anti-money-laundering controls before saying yes.

What a bank charter actually requires

To get a federal bank charter from the OCC, you must submit a detailed application that includes your business plan, financial projections for five years, proof of capital, the résumés and background checks of all directors and officers, and a description of your anti-money-laundering and fraud prevention systems. The OCC then examines whether your plan is sound, whether you have enough money to absorb losses, and whether your management team has banking experience. This examination can take 12 to 24 months.

A state charter follows a similar path but through your state's banking department or division of financial institutions. Some states are more permissive than others; Wyoming and South Dakota, for example, have streamlined processes for certain types of banks. Even so, you will need to prove capital reserves, pass a background check, and demonstrate that your business model will not fail in the first few years.

Capital requirements vary by charter type and state, but a typical community bank needs $10 million to $50 million in startup capital. A smaller bank or a specialized bank (like a credit card bank or a trust bank) might need less, but not much less. You also need to maintain capital ratios after you open—the regulators will require you to keep a percentage of your assets in reserve at all times.

Why most fintech companies do not get a bank charter

Companies like Square, PayPal, Stripe, and Revolut do not have bank charters. Instead, they operate as money transmitters or payment processors, which requires a money transmitter license in each state where they operate. A money transmitter license is cheaper and faster than a bank charter—it can take months rather than years—but it comes with restrictions: you cannot hold customer deposits in your own account, you cannot make loans, and you must partner with a bank to offer services like checking accounts or savings.

This is why you see fintech apps that offer "checking accounts" but are actually partnering with a bank behind the scenes. Chime partners with Bancorp Bank and Stride Bank. Cash App's savings feature uses a partnership with Lincoln Savings Bank. The fintech company handles the user interface and customer service; the bank holds the deposits and provides FDIC insurance.

If you want to move money or issue payment cards without a bank charter, you need a money transmitter license. The cost and timeline vary by state—some states charge a few hundred dollars and take weeks, others charge $25,000 and take months. You will also need to post a surety bond, usually $250,000 to $500,000, to cover customer losses if you fail.

The actual steps to apply for a bank charter

If you decide a bank charter is what you need, here is the real sequence:

  1. Decide on federal or state charter. Federal charters are issued by the OCC and are recognized nationwide. State charters are issued by your state's banking regulator and are recognized only in that state (though you can apply for federal insurance and operate across state lines). Federal charters are often preferred because they preempt state regulations, but state charters can be cheaper and faster in some cases.
  2. Assemble your team and capital. You need a board of directors with banking experience, a CEO with a track record, and proof that you have the startup capital. This usually means finding investors or partners who believe in your plan.
  3. Write a detailed business plan. This includes your market analysis, competitive positioning, revenue projections, expense projections, and risk management strategy. Regulators want to see that you have thought through how you will make money and how you will stay solvent.
  4. Prepare your compliance infrastructure. You need policies and systems for anti-money-laundering (AML), know-your-customer (KYC) verification, fraud detection, and cybersecurity. Regulators will examine these in detail.
  5. File your charter application. For a federal charter, you file with the OCC. For a state charter, you file with your state's banking department. The application itself is dozens of pages and requires supporting documents.
  6. Undergo examination and approval. The regulator will ask questions, request more documents, and may conduct on-site visits. This phase can last 12 to 24 months.
  7. Receive your charter and open for business. Once approved, you receive your charter, set up your banking infrastructure, hire staff, and open your doors.

The cost and timeline in real numbers

A federal bank charter typically costs $500,000 to $5 million in startup capital, depending on the size and type of bank you want to open. This covers initial operating losses, regulatory compliance, technology infrastructure, and staff. The timeline is 18 to 36 months from application to opening.

A state charter can be cheaper—sometimes $250,000 to $1 million—but the timeline is similar. Some states offer expedited processes for certain types of banks, like industrial loan companies or trust banks, which can reduce the timeline to 12 to 18 months.

A money transmitter license, by contrast, costs $5,000 to $50,000 in licensing fees across all states where you operate, plus a surety bond of $250,000 to $500,000. The timeline is 3 to 12 months. This is why most fintech companies choose this route.

Who actually approves your charter

For a federal charter, the Office of the Comptroller of the Currency (OCC) is the primary regulator. The OCC is part of the U.S. Department of the Treasury and has the authority to issue, examine, and revoke national bank charters. The Federal Reserve and the FDIC also have roles: the Federal Reserve supervises bank holding companies, and the FDIC insures deposits and examines state-chartered banks.

For a state charter, your state's banking regulator (often called the Division of Banking or Department of Financial Institutions) issues the charter. That regulator then examines your bank regularly. If you want FDIC insurance—which most banks do, because it protects deposits and builds customer trust—you must also meet FDIC standards.

The regulators are looking for three things: capital adequacy (do you have enough money?), management quality (do your leaders know banking?), and compliance (do you have systems to prevent fraud and money laundering?). If you fail on any of these, your application will be denied.

Alternatives if a bank charter is not realistic

If the cost and timeline of a bank charter are prohibitive, consider these routes:

Partner with an existing bank. Many banks offer white-label services or partnerships for fintech companies. You build the customer interface; the bank provides the infrastructure, deposits, and FDIC insurance. This is how most modern financial apps work.

Get a money transmitter license. If you want to move money or issue payment cards, a money transmitter license is faster and cheaper. You will need to partner with a bank for deposit-taking services, but you can launch much sooner.

Become a credit union. Credit unions are chartered differently than banks and have lower capital requirements in some cases. However, they serve members, not the general public, and have different regulatory requirements.

Start as a payment processor or money services business. If you want to handle payments without holding deposits, you may only need a money services business license, which is even simpler than a money transmitter license in some states.

Frequently Asked Questions

How long does it actually take to get a bank charter?

A federal bank charter typically takes 18 to 36 months from application to opening. A state charter can take 12 to 24 months in some states, but the timeline varies widely. The OCC and state regulators do not publish may provide timelines; it depends on the complexity of your application and how quickly you respond to requests for more information.

Can I start a bank with less than $500,000?

Not legally. Federal and state regulators require minimum capital based on the type and size of bank. A very small, specialized bank might need less, but regulators will not approve a charter with insufficient capital. If you cannot raise the capital, a bank charter is not an option for you.

Do I need banking experience to get approved?

Yes, regulators expect your board and management team to have banking or financial services experience. You do not need to be a banker yourself, but you need to hire people who are. This is one of the most common reasons applications are denied.

What if I just want to offer payment services, not hold deposits?

Then you do not need a bank charter. A money transmitter license is the standard route. It is faster, cheaper, and allows you to partner with a bank for deposit-taking services. Most fintech companies use this model.

Can I get a bank charter in Wyoming or South Dakota instead of my home state?

Yes, you can apply for a charter in any state, and Wyoming and South Dakota have streamlined processes for certain types of banks. However, you will still need to meet federal standards if you want FDIC insurance, and you will need to comply with regulations in any state where you operate. A state charter does not automatically let you operate nationwide.