In recent months, U.K.-based FinTech companies have been increasingly exploring opportunities to acquire banks in the United States, driven by a more merger-friendly regulatory environment under the current administration. As reported by the Financial Times on September 2, prominent players like Revolut and Starling are considering such moves to gain U.S. banking licenses, expand lending capabilities, and operate across all 50 states. Revolut, Europe’s largest FinTech, has reportedly consulted advisors on potential acquisitions, while Starling’s CFO, Declan Ferguson, noted that buying an existing bank could accelerate their entry compared to applying for a new license. This trend is echoed by other international FinTechs, such as British lender OakNorth, which acquired Michigan-based Community Unity Bank in March to establish a U.S. foothold more quickly than building from scratch.

This surge in interest aligns with a broader shift in U.S. regulatory attitudes. Key overseers like the Federal Reserve, FDIC, and OCC have eased merger guidelines, with Fed Vice-Chair Michelle Bowman signaling faster approvals. Experts like David Portilla from Davis Polk emphasize that the “window is open” for these deals, urging FinTechs to act swiftly. Beyond the U.K., FinTechs from other jurisdictions are also eyeing U.S. bank purchases as a way to tap into the world’s largest economy, enhance cross-border payment solutions, and foster deeper bank-FinTech collaborations—research from PYMNTS Intelligence shows 62% of banks are pursuing such partnerships for innovation.

However, while acquiring a U.S. bank provides access to the domestic market, these institutions are primarily designed to serve American customers. U.S. banks are allowed to conduct business almost exclusively within the United States, with only a small percentage of their customer base permitted from abroad. This structure limits their ability to cater to a truly global clientele, focusing instead on local individuals and businesses in the states where they operate.

In stark contrast, an international bank licensed in the U.S. territory of Puerto Rico—known as an International Financial Entity (IFE)—offers far greater flexibility. These banks can open accounts for clients from the United States and virtually anywhere in the world, excluding sanctioned countries such as Russia, Venezuela, or others under U.S. restrictions. This makes Puerto Rico a unique gateway for FinTechs seeking to blend U.S. market access with international reach, enabling services like cross-border payments where, for instance, half the customers might be from the U.S. and half from Mexico or Brazil.

Puerto Rico’s dominance in the international banking sector has been solidified by recent legislative changes. In February 2024, amendments to Act 273-2012 (the International Financial Center Regulatory Act) were enacted to professionalize and stabilize the industry. Key updates include:

• Increased Capital Requirements: Minimum paid-in capital rose from $5 million to $10 million, with an additional $1 million required in unencumbered assets (up from $200,000). This brings Puerto Rico in line with standards in many small U.S. states, like North and South Carolina, and competitors such as Bermuda and the Bahamas. Existing banks have a phased timeline to comply, but new applicants must meet the full $11 million threshold upfront, plus a recommended $1 million startup budget.
• Higher Fees and Scrutiny: The application fee jumped from $5,000 to $50,000 (non-refundable), with potential additional investigation fees up to $25,000. Annual license fees increased to $25,000 (plus $5,000 per branch), and change-of-control fees for transfers of 10% or more voting shares are now $75,000. All share transfers, regardless of size, require regulatory approval.
• Staffing and Compliance Mandates: The minimum number of Puerto Rico-based employees doubled from four to eight, including a dedicated Chief Compliance Officer and at least one support staffer. All compliance decisions must be autonomous and made on the island, targeting banks that previously outsourced operations.
• Structural Changes: Offshore holding companies are no longer permitted; only U.S. or Puerto Rico-incorporated entities can own IFEs. Additionally, every IFE must have at least one independent director (with no economic ties to the bank) on a board of at least three members (odd-numbered total).
• Expanded Activities and Penalties: IFEs can now provide custody for virtual assets and currencies (but not operate as crypto exchanges). Fines for violations were introduced, ranging from $5,000 to $25,000 per infraction, with late renewal fees up to $5,000 per day.

These reforms are expected to weed out undercapitalized or non-compliant banks, potentially leading to closures or sales of a few IFEs, while improving the sector’s overall credibility. The elevated capital standards align Puerto Rico more closely with mainland U.S. banks, making it easier for IFEs to apply for Fedwire access. With Fedwire, the Federal Reserve serves as the correspondent bank, handling wires and ACH transfers at minimal cost (often under $1 per transaction) and enhancing efficiency. Approved IFEs can also obtain SWIFT codes and ABA routing numbers, fully integrating them into the U.S. banking system—benefits that reduce risks and boost stability for global operations.

In conclusion, while U.K. and other international FinTechs are drawn to U.S. bank acquisitions for domestic expansion, Puerto Rico stands out as the most efficient option. With a flat 4% tax rate on profits (no U.S. federal income tax for the bank, and tax-efficient dividends), it remains the only U.S. banking jurisdiction where you can seamlessly serve both U.S. and international clients. This combination of low taxes, global reach, and U.S. system integration is unmatched, positioning Puerto Rico as the premier choice for ambitious FinTechs.

For more information on purchasing an existing international bank in Puerto Rico or starting a new one in the U.S. territory, contact us at info@banklicense.pro. Visit our downloads section for more detailed information and supporting documents.