Debanking is a growing concern for fintech and cryptocurrency startups.
If you’re not sure what the term means, it’s the fintech sector’s version of cancel culture.
It’s when a large financial institution withdraws banking services to a business for any number of reasons – perhaps commercial, or regulatory, such as compliance with counter terrorism financing (CTF) or anti-money laundering (AML) laws.
But more often than not, it occurs without explanation. Think of it like being locked out of Facebook for an unknown violation, except the consequences can be devastating.
There are increasing concerns in the fintech sector that anti-competitive motives may also be playing a part.
Debanking has been a growing trend and a major concern to the tech sector and the Australian Senate Select Committee looking into technology and financial services. Chaired by Senator Andrew Bragg the committee has been hearing that debanking is a significant threat to competition in the finance sector and the rise of local fintechs.
Fintech Australia told the committee more than 20 of its member companies had reported being debanked, including one that had it happen four times since 2018.
The ACCC is concerned and has been looking into the issue for more than two year. The Small Business Ombudsman has warned that debanking risks stunting Australia’s technology and financial industries.
In one of more than 200 submissions to the inquiry, Westpac revealed it had debanked eight fintech firms in the past year.
Following the third and final day of public hearings by the select committee yesterday, Senator Bragg said he wanted the Committee to resolve these issues with market solutions.
He said: “We do not tell banks who to bank in Australia, but it’s not a blank cheque for banks to stifle Australian innovation.”
Fintech Australia’s submission to the Bragg inquiry said: “Debanking undermines the entire fintech industry. For Australia to be a world class centre for financial technology, fintech companies must have equal access and opportunity when it comes to access to banking services.”
The Startup Daily show explored the issue in a special edition in partnership with Fintech Australia.
Fintech Australia CEO Rebecca Schot-Guppy told the show that in one instant, a member received a letter from their bank on December 23 telling them they had 30 days to find a new banker.
Among the people we spoke to today was Tristan Dakin from Wise. Hear what he had to say clicking below.
You can watch the rest of the program here.
You can turn into the Startup Daily show every weekday from 2-2.40pm on ausbiz.com.au, for the latest news in tech and startups.
If you can’t make it, then you can always catch up on what our guests had to say on demand via the ausbiz site. It’s free once you sign up.