People anywhere on the planet have become accustomed to managing their lives through laptop or smartphone screens. Armed with a gadget, the modern user can take out a loan, invest in a project, or trade cryptocurrency; in short, keep financial matters under control. Against the backdrop of the global pandemic that unfolded a few years ago, digital options have gained even greater popularity. As a result, traditional business models and financial players have to compete against steadily growing new technologies (global investments in fintech projects reached $70 billion annually).

 

Given all this, and thanks to the emerging opportunities, more entrepreneurs are contemplating how to establish a FinTech company abroad. Even if this market may seem saturated, believe that there is definitely a place for your company in it. The key is to take the right steps that will help your innovative financial product become competitive alongside industry giants. Lawyers from the Lawrange Law Association are ready to provide a full range of services highly beneficial for those wishing to enter the foreign fintech market. In this article, we want to share some secrets and discuss how to create a FinTech company abroad, the nuances to consider, and what to pay attention to.

 

Varieties of FinTech Companies

The trendy term FinTech, an abbreviation for financial technologies, is used in the IT industry to denote companies that employ innovative methods, processes, and tools to improve the traditional finance world. The more FinTech solutions a financial institution adopts, the better it serves customers, thereby increasing its revenue. If any of you have ever made payments with a phone or watch or applied for online credit, then you already know about FinTech.

 

FinTech is one of the rapidly developing industries actively used in various sectors where financial services are provided:

 

  • Banking infrastructure
  • Business tools
  • Personal finance
  • Payments
  • Lending
  • Investments
  • Analytics, forecasting

 

There is a vast variety of FinTech projects differing in their activities. Some allow, for example, earning on cryptocurrencies, others create alternatives to banks, and some simply provide financial consultations and accounting. As the owner of a future FinTech project, it is crucial to determine the direction in which you will operate. In this regard, we suggest familiarizing yourself with the most popular types of FinTech enterprises.

 

Digital Payments

A consistently growing FinTech segment that will continue to attract investor attention. By 2024-2027, digital wallet and mobile payment services are expected to become so widespread that they will cover more than half of users worldwide. The development of e-commerce, as well as more advanced and personalized options for other types of payments in niche scenarios, will contribute to the continued growth in popularity of companies operating in this direction. Digital payment processing becomes more secure and intuitive, valued by users, thereby ensuring the growth of economic activity.

 

Personal Finance

In recent years, the financial technology industry has experienced unprecedented growth, altering traditional approaches to personal finance management. The widespread use of smartphones has led to the emergence of mobile banking apps and digital wallets, allowing users to seamlessly manage transactions, monitor balances, and make payments.

 

Automated investment platforms use algorithms to provide personalized investment recommendations, making asset management more accessible to a broader audience. Thanks to these and other tools, it has become quite simple and comfortable for the modern user, regardless of their location, to:

 

  • Control and analyze their expenses.
  • Receive real-time personal financial advice.
  • Make informed decisions without being an expert in the financial world.

 

Blockchain and Cryptocurrencies

When contemplating how to create a FinTech company abroad, it is impossible to ignore the rapidly evolving cryptocurrency sector. Decentralized money based on blockchain technology is now synonymous with anonymity, security, and high transaction speed. Although cryptocurrencies are characterized by high volatility, more and more people are eager to start working with them. This is not surprising, as decentralized money is bringing about a significant transformation in the FinTech sphere.

 

Cryptocurrency lending, crypto exchanges, and other blockchain-based tools and solutions are becoming increasingly popular among users, making this direction highly promising for those looking to start a FinTech business abroad. However, careful consideration is needed in preparing and managing a cryptocurrency business. Experienced lawyers in the cryptocurrency field in the cryptocurrency field can help avoid critical errors during registration, licensing, and solving other business tasks.

 

RegTech

The surge in popularity of decentralized, highly confidential solutions has led to the emergence of a new technological subsector – RegTech. It is represented by modern technologies such as cloud computing, artificial intelligence, etc. Companies operating in this direction focus on improving the regulatory processes of FinTech projects. The demand for supervision and control arises from the need to protect all market participants and ensure transparency. You can use RegTech solutions in various areas, such as managing financial operations – all transactions are automatically scanned for compliance with AML/KYC rules. RegTech also allows:

 

  • Controlling data transfer.
  • Analyzing employee behavior.
  • Conducting multi-factor identification.
  • Organizing test cyber-attacks to identify vulnerabilities in the financial system and more.

 

InsurTech

Insurance technology is one of the rapidly evolving segments of FinTech. Until recently, the insurance sector was closed to any innovations. However, thanks to the development of modern technologies, it is undergoing active transformation. Cloud technologies and centralized databases allow secure information transmission between multiple devices simultaneously. InsurTech comes into play when more efficient claims processing, risk assessment, contract drafting, or insurance policies are needed.

 

InsurTech companies also help improve pricing models. Using AI and machine learning technologies, they offer tools to address brokers’ tasks and find the right combination of policies upon completing specific individuals’ insurance coverage. There is interest in using apps to consolidate disparate policies into a unified platform for management and monitoring, creating on-demand insurance for micro-events, implementing a peer-to-peer model for forming individual group coverage, etc.

 

Neo-Banks

One of the most sought-after FinTech trends in recent years is neo-banking. The number of companies operating in this direction is steadily increasing. Neo-banks provide banking services exclusively in digital format, either online or through mobile apps. They do not have physical offices, making them less financially costly than traditional banks.

 

The popularity of neo-banking is explained by the ability to use fast, accessible, and flexible solutions with minimal fees and low service charges. Currently, it is possible to register various types of neo-banking companies various types of neo-banking companies, including a bank-aspirant, niche neo-bank, autonomous establishment, or one focused on the external interface.

 

Key Stages of Creating a FinTech Company

Before creating a FinTech company abroad, thorough market research and planning are necessary. Entrepreneurs should understand what their potential customers need. To achieve this, they should create a detailed business plan that describes the company’s activities, potential risks, and forecasted revenues. After that, they need to overcome several stages, which are described below.

 

Determine Jurisdiction

In theory, it is possible to open a FinTech company in any country. Still, in practice, not all of them are suitable for such projects (and for comfortable business management in general). Those that are suitable may differ in various characteristics. For example, some offer comfortable taxation, others have legislatively established regulations for the FinTech sector, and others offer quick registration and licensing, etc. Therefore, when choosing a jurisdiction, various criteria should be considered, including the features of:

 

  • Taxation (tax rates, benefits).
  • State regulation of the IT sphere (how the state protects the interests of businesses and users).
  • Consumer market (access to international markets).
  • Company registration and licensing process (how easy this process is).
  • Company maintenance, opening a bank account, etc.

 

Considering these and other criteria, some of the best countries for registering a legal entity in the FinTech field include Malta, the United Kingdom, Estonia, the United States, and Singapore.

 

Malta

A small country providing entrepreneurs access to the large European market. This jurisdiction is considered prestigious for conducting gambling and IT businesses, including fintech. Company registration in Malta is also attractive due to comfortable taxation, the absence of currency control, low inflation rates, and a stable economic and political environment.

 

United Kingdom

The jurisdiction ranks among the top financial centers globally and is characterized by organization and strict government control in the financial sector. The fintech market here is transparent and secure for entrepreneurs and their clients. Certainly, opening a company in the United Kingdom is somewhat more expensive, and the process is comparatively more complex than in most jurisdictions. However, the invested finances and efforts are compensated by significant advantages in conducting business in this country:

 

  • Prevalence of electronic document management.
  • The opportunity to benefit from tax incentives for IT businesses.
  • Working with a stable banking system, among other benefits.

 

However, a drawback is that most banks and payment systems are reluctant to work with LLPs. These legal entities cannot participate in double taxation avoidance conventions.

 

Estonia

The financial sector of Estonia underwent a fundamental transformation with the emergence of fintech companies. Recognizing the potential of this sector, the local government has taken all necessary measures for the innovative transformation of the domestic financial market. That’s why Estonia is considered one of the most digitized countries in Europe today. The electronic format extends to practically all aspects of the lives of the population and businesses.

 

Before you open a FinTech company abroad, we recommend familiarizing yourself with all the advantages and disadvantages of Estonia. Among the advantages are:

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  • The opportunity to benefit from an already well-developed fintech environment.
  • Government support for innovations and developments.
  • Comparatively easy and inexpensive registration of a company in Estonia.
  • Signing agreements to avoid double taxation with almost all countries worldwide.

 

The main but quite manageable drawback is the difficulty of opening a corporate account in a local bank.

 

USA

The fact that most globally renowned and best fintech projects are registered in the United States is a convincing argument for choosing this jurisdiction. American fintech companies lead in cryptocurrency issuance, electronic payment implementation, and digital services provision. The local financial market is characterized by the widespread use of a broad spectrum of payment systems, alternative lending, innovative pricing, insurance, attracting those who want to register a company in the USA, etc. The fintech sector here is characterized by its prospects, and its regulation is carried out at the federal and state levels.

 

Singapore

This jurisdiction is known for its economic and political stability and well-developed regulation in the fintech sector. It is relatively easy and fast to register a company in Singapore. Foreign fintech companies enjoy low taxation and various tax incentives. Additionally, if you register a company in Singapore, you will get access to prestigious Asian markets. Fintech company owners have access to a local pool of highly qualified IT specialists from around the world. The talent pool is characterized by a high level of professionalism and proficiency in English, minimizing challenges in business communication.

 

Registering a Company and Obtaining a Financial License

Usually, opening a company takes much less time than licensing. To operate a business in a particular jurisdiction, you need to obtain a financial license, which is a special permit required depending on the type of business. Obtaining a financial license means that the company has undergone a thorough check by the regulator and is ready to comply with all market transparency and client asset security requirements.

 

Develop an In-Demand Product

To achieve this, you need to hire a team of experienced professionals – developers, designers, marketers, etc. Professionals should fill all positions in your company; otherwise, obtaining a quality license (in prestigious jurisdictions) may be challenging, or substantial costs may be incurred without the prospect of significant income. Moreover, it is essential to provide your team with quality equipment and software to accomplish all assigned tasks.

 

Types of Financial Licenses

Financial licensing differs in:

 

  • Cost
  • The scope of preparatory work
  • The range of services that can be provided

 

Licensing typically takes 6-10 months. Therefore, before creating a fintech startup abroad, you must clearly understand the type of activity you want to engage in.

 

Cryptocurrency License

This type of permission is required for fintech projects involved in crypto activities. Holding a cryptocurrency license instills trust in the company, facilitates banking partnerships, allows the provision of a wider range of services and products. Moreover, having such permission makes it much easier to enter international markets. Cryptocurrency licenses are usually issued for cryptocurrency exchange and wallet opening. Obtaining a cryptocurrency license entails compliance with various requirements that vary from country to country. However, mandatory adherence to basic anti-money laundering and know-your-customer (KYC) policies is common in all jurisdictions.

 

E-money Institution License (EMI)

This type of license is considered an optimal solution for fintech companies, as well as financial service providers and startups planning to engage in:

 

  • Money transfers
  • Payment orders
  • Providing information about accounts
  • Issuing electronic money
  • Exchanging issued electronic money for fiat currency, etc.

 

Obtaining an EMI license also allows companies to offer users services for working with their own funds in the current account, linking existing payment bank cards to clients’ sub-accounts, and issuing cards from major payment systems (VISA, MC).

 

Payment Institution License (PI)

This license grants the right to provide practically the same range of services as the previous permission, except for issuing electronic money. A licensed payment institution cannot issue its own electronic currency. It is also worth noting that, unlike an EMI, the regulation of PI is not as strictly governed. Without this regulatory document, the range of possibilities for the enterprise is sharply limited. Obtaining a PI license is accompanied by preparing a fairly extensive package of documents, including, among other things, a detailed financial plan for 3 years, a description of the company’s internal structure, and information about owners and beneficiaries.

 

Credit Institution (Bank) License

One of the most prestigious and, at the same time, expensive and complex financial licenses to obtain. This document gives the company the right to conduct various banking operations, including lending, working with deposits, currency transactions, etc. The license is issued indefinitely, but non-compliance with regulatory norms and requirements in the jurisdiction where it is issued can result in revocation. If you are considering how to create a fintech company abroad to successfully conduct banking activities, it is recommended to rely on professionals from Lawrange to address this issue. We provide comprehensive support to enterprises in many jurisdictions, including offshore ones.

 

Lawrange Assistance in Opening a FinTech Company Abroad

The fintech market is considered one of the promising directions for those wishing to do business abroad. However, based on all of the above, to enter it successfully, a series of exclusively correct steps must be taken – choosing the right jurisdiction, the most optimal type of activity, legal form, and the company’s registration, licenses, bank account, etc. Overcoming all stages of registering a FinTech company abroad is complicated by the requirements and conditions of the legislation of the country where you decide to do business.

 

Professional assistance from the Lawrange law firm may be an optimal solution. We will not only advise on the choice of jurisdiction and legal form but also offer a full range of services for registering and licensing a fintech company abroad. Our lawyers, legal experts, and other specialists will assist in:

 

  • Preparing the necessary documents.
  • Representing your interests in communication with the regulator.
  • Opening a company, a bank account.
  • Registering with the tax authorities of a specific country.
  • Supporting your business after its launch, etc.

 

Conclusions

The fintech market creates confident competition for the traditional financial system. Over the next few years, it will continue to grow, offering numerous solutions for individuals and legal entities. Against this background, the increased interest of entrepreneurs in such a rich and promising market is quite logical. If you also want to explore it but don’t know where to start, we recommend seeking assistance from specialists at the Lawrange law firm. We know how to open a fintech company abroad and in Ukraine, how to undergo the necessary licensing, how to establish important business processes, and much more. Contact us for help to start a promising fintech business more quickly.

 

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