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Insights and Expertise

Banks build these systems to protect themselves from not only to update their internal systems but also to set a
penalties, so they prefer to stop an account too early rather new risk profile that matches the new circumstances. This
than too late, but this often leaves honest businesses locked transparency builds trust and keeps the account safe from
out of their own funds. In practice the situation becomes automated flags. I have seen a successful ecommerce com-
even more problematic when the startup submits its initial pany lose their account simply because they introduced
onboarding forms incorrectly. This happens a lot, as most a new product (a fungal cream) to their beauty product
young founders do not know "how banks think" and sim- line without knowing this would be considered a pharma-
ply guess the numbers, activity and risk. Also, providers ceutical product, which was not accepted by the provider.
are motivated to open the account as quickly as possible, From one day to the next, this small hiccup resulted in
often via automated forms, without actual checks of the the loss of payment processing for a whole month for a
viability or reality of the operation. $300,000-per-month operation.

But once the real transactions arrive and the fraud alert The importance of a solid payments
system realizes that the figures or the actual activity are and banking strategy
far from the original description, the account gets re-
viewed and often closed within a few weeks of launch. A responsible business manages its banking relationship
like a legal or tax obligation. Each change in clients, geog-
This happens frequently with large global processors, raphy or transaction structure should come with support-
where startups begin trading, spend marketing budgets, ing documents ready for submission. The more structured
take payments from real users and then face sudden ac- the updates, the easier it becomes for the bank to defend
count blocks because the actual activity does not match the account internally.
the information provided at signup.
Payment and banking today impact customer experience,
The lack of a proper payment and banking strategy be- risk management, technology, product development, data
fore going live can cause significant damages: both repu- security, compliance, finance and more. It should be con-
tational (angry customers) and monetary (as the company sidered a standalone function, an essential element of the
already paid for the ads). business strategy, not just a part of finance's side function.
The real damage The future

Risk scoring does not only affect access to accounts or Building and maintaining an overall payment and bank-
the smoothness of operations; it also directly defines the ing strategy is of utmost importance for any business that
cost of doing business. Every bank and financial institu- wants to survive in today's changing environment. As
tion builds its fee structure, terms and available services startups grow, enter new markets and target new cus-
around the individual customer's risk profile. Clients tomers, dealing in new currencies and increasing their
marked as lower risk usually receive faster settlements, transaction volumes, the fintech industry also continues
fewer security deposits and lower fees. Higher-risk ones to change with new regulations, technologies and require-
face restrictions and premium pricing for the very same ments challenging businesses daily.
service.
Business owners, finance managers, directors and, really,
Once this initial profile is set, it determines the full plan- everyone handing money in any way must understand
ning and cash flow for the operation. how banks think and how money moves internationally
However, when the profile later changes because the com- to make informed decisions about their own fund move-
pany grows or its activities shift, the entire structure re- ments and build mutual trust with their banks and finan-
calibrates. Even a small change in the risk category can cial institutions.
significantly affect both margins and risks.
If it seems increasingly difficult to manage, that's because
To put this in perspective, a typical company operating it is. But sometimes, the difference between stability and
on a 10 percent profit margin can lose approximately 15 collapse often lies in a single conversation with the bank.
to 18 percent of its profit from a 1 percent increase in card Perhaps, a bit of seeing the future, too.
processing fees, depending on VAT and margin (as these
fees are calculated on taxed, gross revenues). This can be a Viktoria Soltesz is the CEO and founder of PSP Angels and The Soltesz
very steep challenge for a startup. Institute. She is a leading advocate for strategy-led financial operations,

Keeping the bank informed ethical industry practices, and structured education in an area too often
overlooked in traditional business training. PSP Angels is a globally
Regular communication with the bank and the payment awarded, independent payment and banking consultancy that has sup-
providers is the only effective way to prevent this. Every ported over 1,000 companies in building scalable, secure financial infra-
time the company expands, changes activities (even in- structures. The Soltesz Institute is the first and only independent online
troducing slightly new products or services), or starts to organization offering EU-accredited training and certifications focused
serve new clients, the relationship manager needs to be in- exclusively on payments and banking. To contact Viktoria, please email
formed in advance. This allows the financial institutions viktoria@pspangels.com.

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