What it takes for start-ups to open bank accounts?

Many newly established companies, or “start-ups”, have reflected to me that it had been very difficult to open corporate accounts at banks in Hong Kong: voluminous information and documentation were required; processing time was very long; and often ended up with applications being rejected. Is it true that banks do not welcome start-ups because they do not appear as profitable businesses? Let me share with you some tips for start-ups to open bank accounts.

First of all, let us find out why banks take time and require various information/documentation to process a start-up’s account opening application. As we all appreciate, customer due diligence requirements have been tightened globally to combat money laundering and terrorist financing. Yet it may be challenging for banks to distinguish between the vast majority of bona fide businesses and those few businesses created as front companies for money laundering, especially in the case of a start-up since there is no business history or records to refer to. Banks therefore need information and documents from start-ups to better understand their business and risk profiles.

Among the complaints lodged with the HKMA regarding rejection of account opening applications, quite a number of these cases were related to fintech companies or start-ups engaging in high-tech products. The business models of some of these companies are new in Hong Kong or involving new tech applications which banks are not familiar with. Nevertheless, I understand that in a number of cases, bank accounts were successfully opened for the start-ups upon their providing to the banks concerned the relevant information about their business models and clientele, such as projected profit and loss, funding source, directorship, mode of operations, expected bank account activities, and business plans supported by agreements or communications with potential buyers or suppliers.

More time and efforts notwithstanding, I think a win-win situation can be achieved if banks can work together with start-ups in a proactive and cooperative manner during the account opening process. Banks should make sure that their information and documentation requirements are relevant and pragmatic and that such requests are accurately and fully communicated to start-ups. It is relevant to note that compared with the past, banks are more forthcoming to consider establishing business relationship with start-ups and tech firms. At the same time, start-ups can assist in the process by thorough preparation, explaining to banks their business models in layman terms and providing the relevant information and documents to help banks make proper assessment of individual cases.

If your company had unpleasant experience in opening a corporate account with a bank, please write to us at accountopening@hkma.gov.hk to share your experience and our dedicated team will follow up as appropriate.

Last revision date : 26 August 2019