FinTech dreams that slam into banks’​ internal policies

28 august 2020

an article written by Kostas Noreika, CEO Paysera Ltd

I remember the stir and excitement in the FinTech market when companies were looking forward for governments to adopt the Second Payment Services Directive (PSD2). The world was to become a better place and the grass was to turn greener. But then the Directive entered into force and the reality appeared to be different.

 It turns out that the Directive does little to protect FinTech companies from banks closing accounts.

 A credit institution can still easily close an account, limiting explanations to dry statements, like

„this is our internal policy”

or 

„our strategy model has changed”

or 

„you react slowly”

or 

„A story of one FinTech has broken nationwide in our country, so we are closing your account as well.” Are you serious?

However, sometimes banks do provide reasons for account closure. They tend to play the AML card in such cases, which becomes the almighty Joker in the hands of a credit institution.

This Joker can be played both against the entities concealing true beneficial owners that have been warned more than once and also against companies like us — an EU/EEA licence holder and the largest electronic money institution (EMI) in Lithuania, which has been successfully operating for 16 years.

Ironic, but before the entry into force of PSD2 and the FinTech boom in Lithuania, Paysera had more banking partners across Europe than after the Directive was adopted.

It is no secret that, a few years ago, Deutsche Bank even instructed the banks to which it is a correspondent not to work with EMI institutions and provided them with a list of almost a thousand such institutions. Deutsche Bank does not accept money transfers from our clients in any currency, regardless of the amount and client.

Paysera knows AML procedures and their purpose well, we sometimes close accounts of shady clients as well (about 3% of legal clients’ accounts in just the last year).

One thing is clear. If EU banks are pitted against a relatively large electronic money institution that has been in business for many years, I can only imagine the struggle that start-ups are put through. Therefore, it is no longer surprising that a newly established FinTech opens its first and perhaps only payment account with us, at least in order to pay its salaries.

Below I share a table with the reasons banks provided us when closing or refusing to open a bank account for us throughout the last two years. We do not claim to be absolutely impeccable. From these arguments, it is obvious that there is a tendency of closing accounts due to „internal policies” and „changed strategies”.

 Year / Bank / Country / Bank’s explanation for closing / refusing to open an account(s)*

 Deutsche Bank / All countries

Deutsche Bank, as a correspondent bank, warned European banks not to open accounts for electronic money institutions (EMI). The bank does not communicate with us, individuals who work at the bank say that they can neither help nor explain the situation.

2018 / BasisBank / Georgia

Because Deutsche Bank provided a list of ~1000 FinTech companies that the bank should not work with. Paysera was one of them.

2018 / Sabadell / Spain

The contract was terminated unilaterally one week after opening, without any arguments, before we even made a single transfer. But it has been said „off the record” that the account was closed because of another FinTech’s story that was prominent in the media.

2019 / SEB / Sweden, Denmark, Norway, Finland

In some cases, a three-day deadline for submitting additional data on ongoing transfers was not reached (AML).

2019 / UniCredit / Bulgaria, Czech Republic

Change in strategy at the level of the entire bank to refrain from working with non-bank companies making transfers on behalf of customers.

2019 / DNB BANK ASA / Norway

Strategic business model revision

2019 / ING BANK / Poland

The bank cannot fulfil its obligations with regard to AML. According to the bank, they must also implement customer due diligence of Paysera clients and expeditiously check all payment orders of our clients.

2019 / Credit Agricole / France

Change in the bank’s strategy: to refrain from working with non-bank payment institutions.

2019 / Banca Transilvania / Romania

The bank informed, without any evidence, that cryptocurrency transfers were being executed through Paysera, although Paysera legally and technically prohibits and suspends client orders from/to cryptocurrency exchange accounts.

2019 / Danske Bank / Poland

A condition for the opening of an account was set: AML verification costs ~30,000 EUR + min. annual fee of 150,000 EUR 

2019 / Bank Pekao / Poland

Translation of documents supporting client transfers were submitted without apostille

2020 / Santander / United Kingdom

The account was not opened because Lithuania is a high-risk jurisdiction

2020 / SEB / Latvia

Unilateral termination of the contract without providing any reasons

2020 / Getin Noble Bank SA / Poland

Internal policy

2020 / Komercni Banka / Czech Republic

Internal policy

2020 / Nordea / Sweden

Internal policy

2020 / Banca Comerciala Romana / Romania

Unilateral termination of the contract without providing any reasons

*Legal proceedings are still in progress regarding part of the closed / unopened accounts.

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Gabriela Nistor – director general adjunct BT

Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”

Sondaj

In 23 septembrie 2019, BNR a anuntat infiintarea unui Fintech Innovation Hub pentru a sustine inovatia in domeniul serviciilor financiare si de plata. In acest sens, care credeti ca ar trebui sa fie urmatorul pas al bancii centrale in 2020?