Neobanks and Banking as a Service: Adding Investing on Top of Deposits and Cards

Digital first banking platforms have solved the hard part of consumer and business finance, which is becoming the place where money arrives and sits. Checking, savings, cards and payments create the account relationship. What they rarely create is a reason for the balance to grow rather than to leave for a brokerage app.

Investing is the product that closes that gap. For a neobank serving individuals, it is a retail brokerage or managed account experience. For a platform serving businesses, it is treasury management on operating cash. In both cases the deposit relationship becomes an asset relationship, and revenue shifts from interchange and spread to fees on balances.

Banking Rails and Securities Rails Are Not the Same

This is the point most banking as a service platforms underestimate. Your existing structure, whether a sponsor bank relationship or a licensed entity, does not extend to securities. Advising on investments and holding customer securities are separate regulated activities with a separate regulator, separate registration and a separate examination regime.

Practically, adding investing means adding two relationships to your stack. A registered investment adviser to provide the advice and manage the mandate, and a broker-dealer and custodian, such as Alpaca, Apex or DriveWealth, to open brokerage accounts by API, custody the assets and settle trades. Your existing bank partner has no role in either.

Two Ways to Acquire the Adviser Layer

The first is to register your own investment adviser. Platforms that deliver advice through an application rather than through human advisers often qualify for SEC registration as an internet adviser. NextReg runs the registration, drafts the Form ADV and disclosure set, builds the compliance manual and then operates the recurring program with you.

The second is to launch under NextReg Advisors, our investment adviser that is pending registration with the SEC. Once registration is effective, platforms can offer the product through our regulatory and investing infrastructure without holding a registration of their own, which shortens time to revenue and defers the decision to take on fiduciary liability.

Where Neobanks Get Into Trouble

The failure mode is language. Banking products are described with certainty: a rate, a guarantee, insurance coverage. Investment products cannot be described that way, and mixing the two in the same interface is how firms end up with disclosure problems.

Deposit insurance coverage does not extend to securities positions, and the distinction has to be unmistakable at the point of decision, not buried in a legal page. Yield presentations need to be accurate and complete rather than optimistic. Any in product prompt that steers a user toward an allocation is advice and falls under the advertising rules. Where balances sweep automatically between a deposit product and an investment product, the authorization, timing and disclosure of that sweep deserve careful design.

Beyond language, the program needs the standard obligations built properly: suitability and best interest analysis, Form CRS where the structure calls for it, books and records covering data that lives in your systems, advertising review, cybersecurity and vendor oversight, an annual compliance review and genuine examination readiness.

The Business Case

Deposits are expensive to hold and easy to lose. Invested balances behave differently. They are stickier, they generate fee revenue in basis points rather than depending on rate cycles, and they raise the cost of switching for the customer because their positions and history live with you.

For a business focused platform, treasury management on idle operating cash produces the same effect with larger balances and a narrower product set, typically Treasury bills, short duration government instruments, government money market funds and cash equivalents under a documented mandate.

Either way the constraint is the regulated layer, not the interface. Neobanks are already good at interfaces. We build the part that lets the interface be legal.