Major BANKING Challenges for FINTECH Companies – What is the Solution?

Within the world of payment service providers, remittance companies, Fintech companies, challenges are ripe and ever shifting. The question always arises, can you set up Banking for us.

If one were to take the time to see how the challenges are best dealt with, it often requires a custom grouping of licenses and Bank accounts, that can connect to software solutions via rails and AI, customer service solutions, and for the more sophisticated either a complex internal treasury department or an outsourced treasury department.

In Banking terms, the answer is custom, but it does exist.

What do you need today as a Fintech company?

Bank Accounts:

Banking has become more complex as has the KYC and AML. Fintech companies are now reaching the phase where a single company can be dealing with $100 million to $200 million dollars a month int transactions. These big and established companies have paved a way for the small companies who are just starting doing $5-$10 million dollars a month.

The problems exist however for the big and small, where even firms like Wise and Mercury, etc end up under the microscope for transactions due to their volume. This causes the Banking institutions individually to take a closer look at every transaction the smaller new-comers into the field do, because the hick-ups caused in the Banking and regulatory systems by their predecessors and in some cases for the failed businesses along the way.

It’s not easy to get good Banking for Fintech.

The solution of course is two-fold which most of the companies have attempted and some have succeeded with, which is setting up Fintech registered companies in multiple jurisdictions. This is what we do at Business Listings Group quite successfully, is registration of these companies with Banking solution per region. For example, a firm like XE.com, OFX.com, Wise, etc all follow the same pattern of setting up:

• A Canadian MSB
• A US MSB
• A UK EMI
• A Polish EMI/Fintech License
• New Zealand FSP
• Singapore MAS
• Cayman Islands Wealth Management
• South African FSB registered FSP
• Comoros Bank
• Australian Austrac MSB
• Swedish Trust Management Companies
• Hong Kong registration (one of the more expensive options)
• Mauritius Private Bank or FSP like structures, new legislation coming through soon.

The most common solutions used high-lighted above. Also, these are the solutions we most commonly have existing companies for sale as part of our mergers and acquisitions, or can build quickly from scratch. Especially popular is the New Zealand FSPs for their flexibility, and the US and Canadian MSBs for their Banking in those markets.

The set-up of multiple jurisdictions also helps to solve the second problem of Fintech companies, which is jurisdictionally, who you can market to, how you can market, what type of clients and services you can offer. Generally, a grouped together solution of multiple jurisdictions helps to solve this, but you have to be very careful to customize your interfaces for those markets.

This solution works, but doesn’t completely solve the problem. The reason why it doesn’t solve the problem is in each market you are dealing with isolated Banking within those markets. The Bank can decide at any time whether they still like the Fintech companies, Services, and types of offerings they are doing, and possibly challenge locally the Fintech company, causing them to lose their banking and often requiring them to have multiple back ups locally above and beyond their international subsidiaries or sister-companies accounts. One solution we have managed in some jurisdictions is to set-up Joint Ventures with local banks for their jurisdictions, which gives them a vested interest, but this solution is not for everyone.

The challenge then for banking is often a challenge of local appetite for risk based on transactions done in local banks at a local level, and international transactions in and out of those Banks.

When dealing with large volumes, this pushes for what is the third major problem that needs to be addressed which is the need for a multinational treasury team, somehow managing all of the accounts and subsidiaries globally, while maintaining the integrity of the company on a local level with the Banks and with the oversight of the regulatory bodies, without causing any international incidents.

From within this complex network of needs, there are large and small wholesale firms that can solve these problems for the Fintech companies, but it takes a pure understanding of the traditional “FOREX” companies, who have spent decades before the onset of Fintech companies transferring and moving forex via swift and multiple banking connections. Not even all Banks handle their forex, these are dedicated companies that handle the forex-treasury of financial institutions in volume.

Outsourced Backoffice Treasury Solution.

Simply put, the average Fintech company big or small is not generally prepared to manage 10 different accounts, multiple clients, multiple requirements, and jurisdictional challenges, however the traditional Forex companies live and breath these types of transactions from Trade Finance transactions to simply the movement of money into currencies for hedging or transactional purposes in the financial world.

Although the Fintech market has embraced this content pattern of setting up multiple jurisdictions, as discussed above, it doesn’t totally solve the problem and often causes the companies to be constantly be putting out fires on multiple fronts.

This is where solutions like the custom ones recommended by myself for Fintech companies often includes a combination of multiple jurisdictions, with multiple accounts, where all the companies hold accounts with an outsourced custom Treasury for easily making international transfers and transactions.

The forex company can clear through their Tier One Banking in companies like HSBC, CITI, LLOYDs, Bank of America, Royal Bank of Canada, Standard Bank, ABSA, ICBC, China Construction Bank, etc etc, Forex for and on behalf of the multiple licenses the Fintech companies has centralizing their Forex needs where their domestic accounts are primarily for the domestic clients. This solves a lot of the headaches seen today where the mixing of international and domestic clients into the Fintech Grouping of companies causes their local banks to be uncomfortable, as too much business coming and going through their markets reduces their abilities to take action or have proper oversight, and increases their risk as a Bank to international exposures they are trying to reduce as a Financial Market place as a whole.

The wholesale Forex market, or institutional forex therefore as an outsourced treasury appears to be one of the best custom solutions that solves all of the problems for Banking.

© Ryan Gibson 2024

If you would like to use this content for an article or part of your AI, feel free to ask me, and I will approve its use. Thank you.

If you enjoyed this article, and or would like to expand your company into New Zealand, Australia, Canada, US, England, Europe, Asia, South Africa, in general, you can always contact me, Ryan Gibson, for advice. My personal whatsapp number is +27794910225 and email is Ryan@businesslistingsgroup.com or ryan.gibson@silverbearcapital.com

If you would like to know more on how to improve your Fintech companies Banking, and to expand the number of jurisdictions you are working in with registrations, licensing, and Bank Accounts already preset up, we have some turn-key companies built for sale or we can do this from scratch or customized to your needs.

Often its best for me to know what you are trying to achieve before prescribing any one solution, you may not even need all the different jurisdictions, maybe you only need the Forex Treasury solution. It will take an understanding of your companies clients and transactions to better advise.

At Silverbear Capital, we also can assist in listing companies on NASDAQ and various other markets, and have divisions that specialize in capital raising for expansion of existing Fintech, AI, and Platform businesses in the IT sector.