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Opening a Bank Account for Your Fintech Startup [Full Guide]


Starting a fintech company is an exciting and challenging journey. First you draft your MVP, then start the licensing process and once that is done you must start opening bank accounts that will be used for your day to day operations, safeguard clients’ money and transact on behalf of clients. Let’s take it step by step.


opening-bank-account-for-fintech-startup

 

Why Operational Bank Account Is Essential?


An operational bank account is key for several functions and reasons. Firstly, it facilitates management of daily transactions that ensures that all business operational functions are covered and bills are paid.

 

Moreover, an operational bank account is used for cash flow management, allowing a fintech to track income and expenses accurately, such as IT costs, payroll, rent, marketing expenses and so on.

 

And finally, having a dedicated operational account is a commitment to the regulatory compliance which clearly dictates that company funds have to be segregated from the clients monies. If you would like to get a list of fintech friendly banks that can open an operational account, fill out our contact form and we will send it to you by email.

 

 

Some Facts About A Safeguarding Account

 

A safeguarding account is required by the regulators in order to protect customer funds, ensuring they are kept separate from the operational funds of the business. This is particularly important for fintech startups that handle client money, such as payment processors or digital wallets. One key fact about safeguarding accounts is that they provide an extra layer of security, as these funds are ring-fenced and cannot be accessed for any purpose other than returning to customers.

 

Additionally, funds in safeguarding accounts are typically protected from claims by creditors in the event of the business facing financial difficulties, providing peace of mind to both the fintech company and its clients.

 

Getting a safeguarding account isn’t an easy task as many traditional banks do not have such financial product. Regulators require banks to issue a written statement that account opened for a fintech is a safeguarding account and only allows 1st to 1st party payments. Not many banks have gone through product development stage to implement such requirements. However, there are several banks in the EU, UK and Switzerland that do open safeguarding accounts for different types of fintech’s. If you would like to get a list of banks that could open a safeguarding account for your fintech, tell us more about your business and we will send you our suggestions by email.

 

 

Opening Client Money Accounts

 

Opening a client money accounts is the most important step because they will allow you to manage funds on behalf of your clients (make and receive payments, exchange currencies).

 

Having dedicated client money accounts will enable your end clients to receive, send and convert funds independently. That’s why you need to have as many as possible client money accounts so that your clients can easily receive and send funds across the globe via multiple payment rails and in multiple currencies. Moreover, having at least several such accounts will help you to diversify the reliance on one or two particular providers.

 

The process of opening a client money account is based on enhanced due diligence checks by the bank to ensure that your fintech startup has all the KYC and AML policies in place and is set to manage client funds appropriately.

 

If you are looking to open client money accounts for your fintech startup, fill out our contact form and we will share an up to date list of best banks and BaaS providers for opening such accounts.

 

 

Basic Requirements To Open An Account For Fintech Startup

 

 Prepare Documentation

 

- Business Certificates: Proof that your business is legally registered.

- License: Issued by the regulator, necessary for fintech activities.

- Founders’ Identification: Government-issued IDs of all business owners.

- Operating Agreement: Outlines the structure of your business and its operations.

- Business Plan: Some banks may require a detailed business plan and investors backing, especially for startups.

 

 

Application Process

 

- Submitting Documents: Provide the necessary documentation to the relationship manager. If there are any additional questions, respond with as much details as possible.

- API Integration: Once documents are approved, you may start implementing API connectivity for further process automations.

- Testing: After documents are approved and API setup, you should start the test transactions to make sure everything works smoothly.

 

 

Keep The Track Of Your Fintech Operations

 

- Payment Processing: Set up your account to handle payment processing for customer transactions.

- Expense Tracking: Use accounting software to link your bank account for real-time expense tracking and management.

- Financial Reporting: Regularly monitor account statements to maintain accurate financial records.

-Transaction Monitoring: Implement a good transaction monitoring system to ensure that you are able to prevent illicit transactions going through your fintech accounts.

 

 

Conclusion

 

Opening a bank account for your fintech startup is a foundational step towards establishing a credible and efficiently managed business. By carefully choosing the right bank, preparing necessary documents, and integrating your account with your operations, you can ensure smooth financial management and set your startup on a path to success.

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