April 19, 2021
You've had a great idea for a new fintech product. Let's say it's a payments platform allowing users to transact with users elsewhere in the world. You're excited and you get to work building an MVP. Other people are interested in your idea and initial conversations are positive. So you decide to give it a shot.
Next you need a bank account so that you can deposit your initial capital and so that any investors (friends, family or angel investors) can make their investments. You reach out to your bank but they say that they don’t deal with fintech companies. Hmmm.
Next stop are the neo-banks. They're fintechs too so they'll be sure to take you on board. Not so. Their compliance team say that you’re outside of their risk tolerance. Now what?
One of the biggest reasons that fintechs fail to even get going is because they can't get a bank account. And if you can't get a bank account, you can't even apply for FCA authorisation, let alone get authorised to start trading.
Fintech firms created a global horizon with their products. Consumers were suddenly given technology that would allow them to make payments around the world, invest in assets in multiple jurisdictions and receive services from companies located on the other side of the Earth - all from their mobile device. But regulation has failed to keep up and businesses are finding out that even if they can navigate the minefield of country-by-country regulation, their bank account partners aren't willing to accept the risk of funds being received from multiple overseas jurisdictions - the risks for them under the anti-money laundering legislation is too high when compared with the potential revenue they stand to make from you at the outset of your business.
There are also entire industries that the banks won't touch. Here's a list of some of those published on a popular business account provider's website:
If you provide any of these services, or you otherwise fall outside of the banks' risk appetite (probably because of the countries you transact with) you'll likely find yourself unable to proceed and your idea will be dead in the water.
Well, there’s no guaranteed solution. If you can’t pass the bank’s bouncers then you’re going to be stuck outside in the rain watching everyone else having fun inside. But there are some things you could do to help your cause: