For a lot of folks around the world, currency exchange isn’t something they think about. The ease and feasibility of exchanging and sending currency across international borders never crosses the minds of most people.
But a lot of people in the money service business (MSB) are all too aware of the difficulties in both opening bank accounts, as well as paying the absurdly high fees to exchange and send currencies, sometimes up to 5%.
One of the biggest challenges small business face is the initial opening of a bank account, as a lot of banks are very nervous doing business with such a high risk venture, and the money service industry is high risk, there are no two ways around that.
On this episode of Payments Innovation, we sat down with Johnathan Holland, Founder and CEO of Curexe to talk about what it takes to tackle those initial steps of acquiring that initial bank account and get on the right path.
Acquiring the bank account
So how do you jump through the initial hurdle of opening a bank account?
Step 1 is to register as a MSB, or money service business. Again, navigating these waters can be tricky, so the best idea is to find somebody who is an expert in the regulatory environment when it comes to currency transfer.
This way, when you go to a bank to get that account, you have a lot more credibility.
“When you’re building a money service business, you have to think about compliance first.” – Johnathan Holland
The more prep work you do here, the more confidence the bank is going to have in your abilities, your trustworthiness, and your acceptable level of risk.
If you build a technology-based business that doesn’t accept cash, and you’re dealing with legitimate, well-known businesses or individuals, it takes a lot of risk off of the table in the eyes of the bank.
The downside to a bank’s hesitancy to work with MSBs is that it can ultimately drive more of these businesses under ground. They start dealing with cash, and become more and more risky. Don’t let this be you. Do your homework, and do it the right way.
A money service business is riskier than other businesses
The reality is, an MSB needs to be categorized differently. They can’t fall into the same category as a coffee shop, or a cafe, or a fuel station. Banks see MSBs as a higher risk, so categorizing them into a separate risk level is a given.
What you need to do is go into the process knowing that you’re already viewed as high risk, and prove to the bank that your business model is much more sound than all the other MSBs out there.
You’ve done your homework, and you are a much better investment than anybody else.
Find smaller banks, hungry for business, who are looking to innovate and build a solid foundation of fintech products and pursue them.
It’s all about the customer
The reality is, at least in Canada where Curexe is located, is that there isn’t a lot of competition in the MSB marketplace. It’s such a niche market, but one that is so untapped, and the need for more competition is evident.
The more entrants into the MSB market, the more it drives prices down, and the better it is for customers in the long run. If you’re in the business to help people, this should be good news.
For Curexe, the typical client is a micro-sized business. One that is early on in the game, with perhaps no predictable cash flows, or a strong revenue growth.
They’ve got 5-10M in revenue, and they tend to be underserved because banks don’t want to give a platform to such a high-risk business, or because they’re so new.
Again, the MSB market is a small one, but a drastically underserved one.
Whatever you can do to get over that initial hurdle of landing that first bank account will put you well on your way to establishing a successful money service business that truly puts the customer first.
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