Are you a startup founder that has tried to open a corporate bank account in Hong Kong? Then you’re probably aware of the many challenges and the bureaucratic nightmare you will get into when you start the process. While some entrepreneurs are lucky and get their bank accounts set up in a few days, many others have had to wait for months and could only open a bank account after numerous rejections. These are the most common reasons why you may have a hard time opening a bank account and we will also explain whether this is valid for Neat Business.
1). You’re not profitable for a bank
First and foremost a bank looks for profit. Sounds logical, but it’s an often overlooked factor in the discussion on opening bank accounts. While many people think – and banks claim – that the reason it’s difficult to open bank account is because of strict risk management policies, this is only part of the story. Even the Hong Kong Monetary Authority does not deny that lack of profitability is the real reason for rejection.
Banks will be reluctant to go through their expensive due diligence process for a customer that is starting up and of which it's unsure they will be successful and profitable. Therefore, often it’s a commercial decision not to onboard a startup, rather than a decision that is related to risk. With Neat Business, we have the advantage of operating no branches and having a digital onboarding process which reduces our cost of signing up customers immensely. It means this concern is less relevant to us and we absolutely welcome startups to apply for the business account.
2). You’re not physically in Hong Kong
Hong Kong banks have not yet adapted to the 21st century where almost anything can be done online. There are tons of entrepreneurs and digital nomads that have incorporated an (offshore) company in Hong Kong, but they may not be based in Hong Kong as it’s not necessary when for example running an e-commerce business that can be run from anywhere in the world.
While some banks may allow you to appoint a legal representatives in Hong Kong or video conference from your local branch, this is not a guarantee and more often than not this is not possible. Neat Business allows you to open your account online, which means you can do it from anywhere in the world.
3). You're a non-(permanent) resident or the ‘wrong’ nationality
Hong Kong is a cosmopolitan and international city in many ways, until it comes to opening a corporate bank account. If you’re a (permanent) resident, it may be easier for you to open a corporate bank account than if you are not living here or have a certain nationality.
This SCMP article discusses some examples of ethnic minorities having difficulties opening bank accounts. While there are some nationalities that banks and related services (including Neat) are legally restricted from opening accounts for (see here), there are no restrictions for many other nationalities, but some banks are reluctant to help customers from these countries.
4). You have a complicated ownership structure
To open a bank account, a bank performs a so-called ‘Know-your-customer’ process (KYC). During this process, the bank needs to verify different elements, for example it needs to understand what the business does and conduct checks on the shareholders and directors.
If you own a business together with 1 business partner and both of you own 50% of the company, the structure is simple and conducting all necessary checks will be straightforward. Some companies, however, may have multiple companies as their shareholders and the bank will need to check who the owners of those companies are (which may be other companies etc.) and the process is more complicated.
Neat Business follows stringent due diligence processes, so for companies with more complicated structures, it will take longer to perform all necessary checks. We do, however, aim to onboard any customer with legitimate businesses, which have passed our compliance review.
5). You have a new business model or high-tech products
Especially for new businesses and startups without financial history, a bank will want to know more about the nature of your business to make sure you are not engaged in for example money laundering or criminal activities.
This is understandable, but regrettably, many traditional banks do not understand new business models very well. Because of an anti-risk mentality, paired with the uncertainty about whether the company will be profitable for the bank, they would rather automatically reject an application than spend time to investigate and better understand it.
At Neat we need to understand what your business is doing in order to open your account. But, because our processes are newer and because we cater to startups and SMEs, getting your business account approved typically only takes a week.
So if you're looking to open an account for your business, it's a smart idea to start with Neat.