How Not to Open Bank Accounts for FinTech Startups
So, I have written a post on a related issue before, but since this question keeps coming back, I thought we should play a little game I call "Do's and Don'ts of Fintech startup bank accounts".
Without too much generalization, entrepreneurs in the Fintech industry are usually people with big ideas, broad objectives and sometimes revolutionary aspirations. Traditional banks, on the other hand, tend to be conservative, transactional and risk-averse.
You have to understand that your bank is a stakeholder that needs to be managed with care.
Form and formalities are important in the world of banking:
- If you are applying for a bank account, but the Articles of Association and/or Trade or Commercial Register information states that your company's mission and sole purpose of existence is to disrupt traditional banking or investment services industry, you are not helping yourself gain an ally (your future bank and your future account manager);
- Avoid including scary (for bankers) words into your company name - "blockchain", "coin", "crypto", "fintech", "investments" and so on. The more boring you look, the more relaxed will be the person reviewing your application;
- Make sure that your Commercial Register information is consistent with your website. If you mention "next generation banking" on your website and offer to sign up for beta-testing, and say "IT service provider" in the Commercial Register, your future bank might ask questions that you won't like. Or simply refuse your application.
Build credibility:
- Believe it or not, but if your future bank asks you to provide elements relating to your financial history, and you show them a credit card statement with penalties for late payments, gambling and adult services, it doesn't help your case;
- If your business plan has a lot of astronomical projections in it, but you are unable to display a single proof of concept (partnership agreement, contract, memorandum of understanding, data...) from your potential partners or clients, you will not be taken seriously.
- Do not declare in your banking application that 10% of your future revenues will be donated to a charity organization that you will eventually create, or to the political movement that you are planning to organize in the future. Just don't.
I know it's not really fun and often feels unfair, but the best advice I can offer is this: When you are a newly created entity and you don't have any real clients or financial activities just yet, your business should look simple, small and boring. Once you have an account, you will start building your business and your banking relationship from there.
On a related note - I still have this freebie giveaway regarding faster compliance due diligence - check it out!
