With the increasing reliance on financial technology (often shortened to fintech), traditional banks are no longer the only option for opening a bank account, instead, thanks to the developments in fintech, people now can open bank account with a virtual bank provider. Currently, Hong Kong has 8 virtual banks and a growing number of fintech providers that provide alternative to traditional banking solutions.
What is a virtual bank or neobank?
A neobank is a based bank that operates solely digitally or via a mobile app. That means that the bank carries out all the tasks that a conventional bank do with the exception of the physical branches.
There are two types of neobanks:
- Companies that have applied for their own banking license and therefore are named as virtual banks.
- Companies that have partnered with a traditional bank to provide those banking services such as fintech providers providing alternative banking solutions. These are generally griped under the name fintech providers.
Neobanks vs Traditional banks
Below table summarises (however this summary list is not exhaustive) the pros and cons of traditional banks, virtual banks and fintech providers when opening a corporate bank account:
Is a virtual bank adequate for your company?
When considering the right banking solutions, it is also important to consider other factors such as commerciality and practicality as well as the pros and cons for each of the solutions. Neobanks are less regulated than traditional banks in many jurisdictions and are not considered as actual banks in some legal terms.
Furthermore, one need to be aware that for tax substance purposes, conventional banking accounts may be more suitable than those provided by a virtual bank or fintech provider. We can assist with choosing the right banking solution and opening of any bank account.
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If you have any questions regarding the above or other tax matters, please do not hesitate to contact us on +852 2804 0889 or by email [email protected].