Banking License: Offshore and Digital Banks

Banking startups and the system as a whole are rapidly evolving to provide customers with 24/7 transaction capability and the easiest possible access to financial products. These new generation banks or neobanks have revolutionized the sector and are of increasing interest to the younger generation and executives who are constantly on the move and interested in global service. 

Neobanks and digital banks are both online-only financial institutions, but they differ in their regulatory status and approach. Neobanks are typically fintech startups that operate entirely online, often without a banking license. Neobanks often partner with traditional banks to offer services like deposit accounts and lending, as they may not hold a full banking license themselves. Revolut, Monzo, and Chime are often cited as examples of neobanks. The players you may have heard of are in the UK (Starling Bank), France (Qonto), Finland (Holvi), Germany (N26), and other European countries. Digital banks, on the other hand, are often subsidiaries of established banks or operate under their own banking license, offering a full range of banking services through digital channels. They are fully regulated entities, adhering to the same regulations as traditional banks. They offer a full suite of banking services, including checking and savings accounts, loans, and more, all accessible through digital channels. Ally Bank and Goldman Sachs' Marcus are examples of digital banks. In essence, while both neobanks and digital banks are transforming the banking landscape with their digital-first approach, they differ in their regulatory status and the extent of services they offer.

The choice of the banking license type obviously depends on preferences and objectives. Tech giants, fintech startups, and neobanks are significantly impacting the world of payments and investments, and traditional banks are projected to lose 30 to 50% of their investments. The losses are related to robotization, new scoring models, and high physical office and operational costs. 

Features and advantages of an offshore banking license

The main advantages of obtaining an offshore bank license are unlimited financial freedom and security, as well as the ability to increase income through offshore companies. Offshore banks are also attractive because they either pay no taxes at all or at a much lower rate than resident banks.

Offshore bank licenses come in several categories, but it is important to remember that the types of activities of an offshore bank may be partially limited compared to those of resident banks.

Benefits of an offshore bank license:

• operating activities are not subject to exchange control;

• avoidance of excessive regulation by the Central Banks;

• fairly low start-up capital to set up a bank;

• opportunity to provide an unlimited list of financial banking services to the population;

• optimization of taxation;

• tax planning of both banking structures and companies;

• strict confidentiality of banking operations performed;

• security of keeping funds in one’s own bank and settlements through one’s own bank;

• owning a bank is a highly profitable business.

How to Get a Digital Bank License and Offshore Banking License in Dominica [Pros and Cons]

Advantages	Disadvantages
The license allows you to serve both non-residents and residents of Dominica.	Obligatory confirmation of the origin of shareholder funds.
Only income from transactions with residents will be taxed.	Mandatory shareholder verification procedure. All bank employees through private investigative agencies regarding their reputation, criminal record, publicity, etc.
Registration of offshore banks in Dominica is subject to the Offshore Banking Act, 1996 and the Offshore Banking (Amendment) Act, 1997, which allows for the registration of a bank in just 1–2 months.	The cost of checking one person is approximately 10,000 USD.
The required amount for the authorized capital of a bank in Dominica is a relatively lenient requirement for registration.

To get more information, please book a consultation with the Zorg World team.