It’s Often Harder for Existing FinTechs to Keep Their Bank Accounts than to Open New Ones
Five of my FinTech clients lost some of their banking relationships this year, despite the fact that they had been partnering for 3 years prior to that. There were 2 main reasons for account terminations:
- FinTech startups commenced new activities with new clients and the banks refused to support these new financial flows. Unfortunately, FinTech management forgot to announce their new activities to the banks in advance and did not properly justify why these new activities were not really risky. So – it did not go well.
- Banks received some warnings from their correspondent relationship partners and decided that instead of additional audits by their banking partners they prefer to cut off certain verticals. The FinTechs were actually not in the risky verticals but, again, they did not know how to prove it and defend their case.
These FinTechs were not unicorns but were decently profitable and moderately growing. Nevertheless, the banks decided that the risk or inconvenience of keeping them was higher than the commercial opportunity.
Which is why opening new accounts could be easier and simpler in some cases comparing to trying to keep your existing accounts. It’s almost the same as with hiring external candidates versus promoting from within: the external candidates always look shinier and more promising and internal candidates always have some history, legacy, and baggage.
Yes, in some cases, the bank would rather take a new FinTech on board rather than spend time understanding what’s going on with their existing clients, especially, if they have some audit findings or complaints, or disputes.
The same goes for any other financial service providers – card issuers, payments processors, on/off ramp services, IBAN providers, and other financial infrastructure platforms. They may get acquired or merged, their risk appetite changes, their pricing changes, or otherwise, they don’t want to be the same.
As a FinTech, you are ALWAYS looking for new banks, new partners, new currencies, new payments channels, and backups and redundancies. You ALWAYS need more partners and these partners ALWAYS need more information and ALWAYS change the criteria how they assess and evaluate you as an applicant.
So – if you’d like to learn about the latest trends with bank account applications, latest requirements, and least expected reasons for being rejected, you ABSOLUTELY NEED TO REGISTER for this new workshop that’s happening on August 24th – How to open bank accounts for FinTech startups.
It’s a 90-minutes laser-focused workshop where we will cover all key areas of the bank account opening phases:
- Before you go to the bank – how to get your online presence in order
- Documentation package and application forms
- How to answer questions about your business, your existing clients, and your flows of funds and stay out of trouble
- How to overcome initial rejection … and MORE!
