Debanked? The regulator forced us to do it (sorry)

I met the bank I debanked the other day. They apologised to me, as they knew I was talking about them during my presentation, and explained: “we cannot serve our customers because of the regulators”.

This made me wonder, as the reason why I debanked them is their interrogations of my dealings in cryptocurrencies. It made me wonder why I can use other financial companies that are crypto-friendly when my traditional bank is not.

The answer is that you have to understand cryptocurrency trading, regulations and the law. Most mainstream banks have interpreted MCiA and other rules in a hard line: it’s either OK or not OK; most challenger banks have interpreted the rules with more flex: it’s OK or not OK or maybe could be OK.

This flex is giving challengers an edge, as they stop alienating the customer. If you interpret the regulations in a hard line and communicate to staff that anyone trading with a crypto company needs interrogation, it alienates the customer and makes them want to debank you. This is what happened to me. I do dealings with Coinbase and, because of that, had some junior compliance manager asking me questions for an hour to explain what I was doing. That does not happen with the newer banks, and it makes you realise that the traditional bank had just set rigid rules with poor communications to ensure they were compliant with the new regulations.

“The regulator made us do it”.

In truth, this is not the case. In truth, it is that the way the bank interprets and implements the regulator’s rules made them do it. You can serve  customers well without breaking compliance if compliance is implemented ni a customer-centric way.

So, my interpretation of the rules and regulations is that some do this well and some do it badly. It’s all about interpretation and implementation. Many traditional banks purely take the rules and regulations and implement them in a rigid style, with little customer empathy and maximum focus on avoiding breaking rules using inexperienced staff members with scripts.

My feeling is that challenger banks, neobanks and others – which include First Direct – do things much better, with more flexibility and allowing staff to focus on avoiding breaking the rules whilst being good with customers.

And that is the crux: how to be good with customers and keep their trust and loyalty.

On the one hand, this may be allowing crypto trading within the bands of the rules. Then, it is when the rules look like they may be broken, handling an investigation sensitively without scripts and with staff who are experienced in these areas. Finally, it is around guaranteeing that the company enforces the rules in a sympathetic manner.

Unfortunately, most traditional banks seem to be much more arbitrary in this manner so, when I met my debanked bank and they said “the regulator made us do it” … I just thought no. You did it the wrong way. Any views?

Oh, and whilst writing this, does being crypto-friendly make a difference?

Revolut made a pre-tax profit of £438 million in 2023, up from losses of £25 million the year before. Revenues nearly doubled to £1.8 billion, from £923 million in 2022. It also added 12 million new customers last year, taking its total to more than 45 million. Interest income grew to £500million over the same period; that’s against £83million last year, and £1.7million in 2021.

Source: Sifted

Did I mention that Revolut is crypto-friendly?

Source: Sam Boboev