Instead of focussing all their energy on turning their professional project, idea or passion into reality, many self-employed people, startups and entrepreneurs are now faced with an (overly) complex and lengthy application process to open a bank account which--what’s more--all too often ends in outright rejection.
A problem that shouldn’t exist
The reputation of the Luxembourg banking sector is well established. As a systemic pillar of our economy, a source of wealth for the country and a force for innovation and expertise, its influence extends far beyond the borders of Luxembourg and even the European Union. At the same time, a whole ecosystem of startups and fintechs, as well as self-employed people and very small businesses, has taken off. This entrepreneurship needs to be encouraged, but also supported from the very first steps, including with accessible, simple and transparent banking services.
As we follow the news, however, a growing and paradoxical divide seems to be emerging between these two worlds. Increasing regulatory constraints? Disproportionate red tape? Limited risk appetite? High costs? Restrictive commercial policies?
An obstacle to entrepreneurship
In discussions with entrepreneurs, freelancers, facilitators, startup incubators and trade associations, the verdict is unanimous: access to a bank account has become a real problem. Surprising--but real and visible. Rather than simply being one of the many steps involved in bringing an entrepreneurial project to fruition, it has become a pure and simple obstacle. Paradoxical, when the imminent needs are frequently basic: a current account, payment services, a local, reliable banking player who speaks their language and gives them time to get started, take their first steps, grow.
Genuine dialogue is essential
The process of opening an account is highly regulated and, unfortunately, does not always go smoothly: KYC (know your customer), Fatca/CRS, identification of economic beneficiaries and shareholding structure, sources of assets and income, (draft) articles of association, RCS and RBE, authorisation to establish, business plan, main suppliers, sales channels and target customers, expected financial flows and potential countries, risky activities and sectors…
Yes, it’s complex, all the more so if you’re not constantly exposed to this terminology on a daily basis and your focus and energy are concentrated on your professional project.
This is where the bank’s role as facilitator falls: explain, in a language that everyone can understand, the steps to be taken, the terminology, the hows and whys, the expectations and documentation requirements
This is to enable the most comprehensive and high-quality application possible to be submitted from the first attempt, to reduce the back-and-forth between bank and client, and to ensure the most efficient onboarding process possible...
…with a bank account that facilitates the development and growth of your professional project, rather than constituting a first obstacle.
Illusory?
No, because the typical applicant for a bank account is NOT an opaque structure with many layers of shareholders based all around the globe, activity in risky sectors, money flows with countries subject to international sanctions, dubious suppliers and customers, a refusal to respond to requests for information from its banker essential to comply with its regulatory obligations, etc.
It’s the freelance translator, the grocer on the corner, the hairdresser across the road, the startup with a passion for AI, the coach in training, the painter who is setting up on their own, the physiotherapist, the restaurant owner, the sàrl-s, and so on. And there, we can--no, we must--give a helping hand and facilitate access to a bank account!
Claude Hansen is head of commercial at Post Finance.
This article was originally published in .