Why Dutch banks often say NO to foreign startups that want a bank account, and a tip to bypass them 

Opening a Dutch bank account can be a real headache for non-European startups. Local banks keep startups waiting, only to refuse them in the end. Why do banks say no? And where can startups turn to? The new services of Fintech Ebury might bring a solution.

Starting a business in the Netherlands is an attractive option for non-European entrepreneurs. Over the years, the Dutch have built a thriving startup ecosystem with well-regarded startup accelerators. But there is a problem that has severely frustrated international startups in the Netherlands: Dutch banks refuse non-European startups a local bank account. Without it, entrepreneurs can’t operate.

Especially non-European startups that depend on international transactions are being rejected, says Egbert Ottevanger, co-founder and accelerator manager of Dutch-based accelerator World Startup Factory. “What we are seeing is that it’s becoming more difficult each year. Startups have endless conversations with the bank, open their books and show their business plans, but after a long, non-transparent process they are refused anyway.”

Risky, expensive and time consuming
The reason that banks refuse them, says Ottevanger, is that banks consider compliance for startups to be too risky, expensive and time consuming. “European banks are obliged to verify every (international) beneficiary that owns more than 25 percent of a company”, he says. “In order to exclude any risk of money laundering and other shady businesses, some Dutch banks have lowered this to 5 percent thus making it even more difficult for a Non-EU startup in The Netherlands.”

It means that banks have to screen every international investor, beneficiary or stakeholder that makes transfers to this account or receives payment from it. For banks, verifying all these accounts is too expensive, especially given the little profit startups make, Ottevanger says. After all, most startups begin as small companies with high risks and little return.

This obstacle has serious consequences, says Myrthe Hooijman of StartupDelta, a Dutch platform that aims to strengthen the Dutch startup ecosystem. Hooijman has heard of cases where promising international startups decided to leave the Netherlands after numerous of failed attempts to open a bank account.

“This is rather painful: it causes a real brain drain. These startups happen to be the companies of the future. The next Google could be among them. The Netherlands aims to get this talent on board but loses them. Banks should take their responsibility and come up with a solution.”

The Netherlands Enterprise Agency RVO, a government body that stimulates entrepreneurs, is aware of the problem. At the national point of entry, a helpdesk for international startups, complaints about this issue arise regularly. But the question is whether RVO can solve it, or whether it is up to the banks to take responsibility.

Possible solution
There is a newcomer that does provide an interesting solution: Ebury, one of the fastest growing Fintechs in Europe that services small business clients. The company was founded in 2009, has 17 offices with 600 employees worldwide, and offers payments in over 140 currencies. In the Netherlands, Ebury’s new service could tackle the problem that startups face.

“We can provide international startups in The Netherlands with an IBAN number”, says Ebury’s key account director Freerk ten Hoor. “Before they can make or receive payments, we ask them to specify from which accounts they expect payments, and where they transfer to. We screen receivers on the front end of the system, so before the transaction is made. This makes our process more efficient than the system of traditional banks, who need to go through all the books before even opening an account.”

This new service of providing startups with an IBAN number was the idea of the Dutch office of Ebury and World Startup Factory, as a direct response to the growing problems startups have. “This service in which customers pay a fee per transaction might be the only solution for many startups,” says Egbert Ottevanger.

In the future, accelerators could also play a role in solving this problem, says ten Hoor of Ebury. “Before international startups come to the Netherlands, facilitators have already run a substantial analysis on their financial ability and background. With this information, accelerators could possibly fulfill this role for banks in the near future.”

Egbert Ottevanger of World Startup Factory agrees. “During our program, we get to know the startup and its financial situation rather well,” he says. “And even before they arrive here, we have already done a part of the screening that banks also need to do.”

Ottevanger understands the banks’ predicament and precaution, but he believes the current state of affairs should change. “If you want a thriving startup ecosystem in the Netherlands in the long run, this obstacle needs to be removed.”

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