At Neat, we’re on a mission to enable the entrepreneur economy – we want to give ambitious entrepreneurs the tools they need to operate their finances smoothly, in a modern, seamless and efficient way.
We make it a priority to support the underbanked - SMEs, startups, entrepreneurs - and are able to open accounts for most customers that come our way. We pride ourselves in the fact that we serve an audience that is often ignored by banks.
Unfortunately, however, we can’t always open accounts for every business that we encounter.
We understand it can be frustrating to have your application rejected when you’re trying to get your business off the ground. Especially when you just don’t know why.
So we wanted to take some time to share some information that will hopefully help you understand why we sometimes reject applications.
When it comes to onboarding new customers, our decision affects more than just us
As a regulated FinTech company that processes large amounts of transactions daily, it’s our responsibility to obstruct financial crime and make sure we don’t let any fraudulent funds enter the system.
Our compliance decisions have a network effect, which is why we are extra careful about when to say yes and when to say no.
We’re not only protecting ourselves and our partners, but also our existing customers, our customers’ customers, and other people down the line who might otherwise come into contact with illicit funds.
We unfortunately cannot explain every single reason
Besides restricted countries and industries, which is information we make publicly available, there are other factors we take into consideration when we decide whether or not to onboard a new customer.
We know it can be a let down, when we can’t elaborate on the reasons we can’t open an account for you.
However, if we told all our rejected customers the exact reasons we can’t onboard them, we run the risk of fraudulent customers knowing how to cheat the system. Keeping our proprietary risk-scoring model confidential is essential in protecting the integrity of our compliance and Know-Your-Customer process.
To make sure we don’t onboard customers that are too risky, sometimes that means turning away good applications too
We pioneered a fully digital and fully compliant Know-Your-Customer onboarding process which we use to evaluate each application. In fact, we won an award from the Hong Kong government for it back in 2017.
However, even with the best technology, it’s not a small task to differentiate honest businesses from criminals who are trying their best to come across as perfectly legitimate.
While we’re confident in our systems, there is currently no foolproof way to guarantee that someone will not try to commit a financial crime. Therefore, we have to err on the side of caution.
This is something even the regulators recognise, and so they recommend financial institutions to take a “risk-based approach”.
We realise that this sometimes leads to rejecting companies that are legitimate. But if the risk is above our threshold, we have to say no.
You can compare it loosely to the process taken during university entrance exams. Is it always fair? Does the examiner always identify the person that has the most potential?
The answer of course is no. There are several students that will be rejected by top colleges who go on to outperform.
However, since university examiners can’t accurately predict the future, they will use a proven model and look at a limited number of factors that are known to correlate strongly (yet not perfectly) with future performance.
We’re building new systems that will enable us to onboard a wider variety of customers
While we could decide to open up to more industries or countries that don’t exceed our risk appetite – and we will in due course! – it does take time to build accurate and robust processes to onboard companies that we don’t yet support today.
As a young business, it’s also very important for us to focus. Over time, we will build out processes to support a wider variety of customers, while adhering to all regulatory requirements, but in the meantime we must make sure we avoid spreading ourselves too thin by trying to serve everyone at once.
The industry we operate in is highly regulated – and for good reason
Our aim is, as ever, to enable the entrepreneur economy. We do this by giving entrepreneurs the tools they need to grow their businesses; today, that means providing multi-currency business accounts that can be opened online with a 15-minute application, corporate expense cards, and the ability for companies to send and receive money globally.
When it comes to signing up with Neat, we make it fast, intuitive, and straightforward – but we don’t compromise on compliance. We will do everything to ensure that our customers, our customers’ customers, and we ourselves are protected against financial crime – unfortunately this means having to sometimes turn down some account opening applications.
We hope we’ve been able to shed light into this topic.
Thanks for reading!