
Why Your Australian Startup Should Bank with NAB - zhoutong
http://blog.coinjar.io/2013/08/14/your-australian-startup-should-bank-with-nab/
======
patio11
It is the routine practice of banks that, if they close one account for
security concerns, they will close all affiliated accounts. They will also
likely flag you personally for enhanced scrutiny should you ever attempt to do
business with the bank again in any capacity. Ask if you're confused why this
would happen.

As to why a bank might be leery of having a Bitcoin exchange operating on it
despite you having only ~1% disputed transactions _at present_ , they don't
merely have to cover your risk _today_ , they also have to cover your risk _in
the future_ , against both the risks which you are presently exposed to and
cognizant of and _those which you are not_. A lot of the failure modes in
running a financial services operation leave you to wake up to a database
which suggests that you owe millions and a bank account with $0 in it.

Your bank has a very acute understanding of that risk, and does not want to be
holding the bag if CoinJar should happen to explode, hence they declined your
business.

n.b. I am trying to avoid saying "Bitcoinica" because I believe in fresh
starts, but the word does not have zero relevance here.

~~~
zhoutong
Thanks patio11 for the insight.

Of course we fully understand and respect the bank's decision if they choose
to close our business account. We already had the intention to close the
account anyway. What's unacceptable is the total lack of communication
(especially when they refused to stop incoming transfers to prevent further
fraudulent transactions). On top of that, we have already built in an advanced
fraud prevention system (partly outsourced to a YC startup in this field) and
in most instances fraudulent transactions were caught. However there was no
opportunity or channel for us to discuss _anything_ with the bank.

Personally I have no complaint regarding their decision. This blog post
written by my co-founder is more of a contrast of totally different reactions
of two big banks in Australia. One of the transactional banking specialists in
our new bank attended our startup pitch, and quickly arranged a meeting with
us to discuss the products and services they can offer. Not only they
acknowledged the risk of our business model, they gave us a great deal of
valuable advice and we discussed a new approach to transaction processing
(which will launch in September). With regards to the risk, we were more than
happy to put up a security to take more control over the banking arrangements
and they're happy to give us relatively customized solutions.

EDIT: Regarding the personal accounts closure, I was severely affected in
terms of my personal life and financial wellbeing, because majority of my
financial transactions happen with Commonwealth Bank and my only credit card
is with them (and it's blocked with full balance due Sep 2). Half of the cards
in my wallet became useless overnight. Technically speaking, they have every
right to do this and I don't think their Code of Banking Practice will ever
protect me in this circumstance. I believe that it's a fine line to draw
between "security risk" and "blatant discrimination". Unlike in the US, the
"good behaviors" in one's credit history aren't freely transferable between
financial institutions (only the "bad events" are recorded and shared). To me,
the personal banking relationship is a lot more than just an account number
and some dollars. It concerns the mutual trust between the bank and me that
both parties have spent real effort and time building and maintaining. I'm a
business guy and I know what the bank is doing can be considered "right", but
in the end I feel socially worse-off and discriminated against just because of
their issue with one of my startups.

~~~
jacques_chester
Keep us posted on how it goes with NAB.

I'm with Westpac (cost, convenience, pretty decent service so far), but if NAB
pans out as better for heavily transactional businesses then I will switch.

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jacques_chester
Welcome to the murky world of the Third Party Payments Aggregator (TPPA).

You look enough like one that every bank in the universe hates you. Why?
Because no goods or services are being exchanged in an easily-reversible way.

When a chargeback happens, it is the _processing bank_ who must immediately
make good. Not you the merchant. _The bank_.

As you can imagine, they _really_ don't like that. And so different businesses
are treated differently. If you buy and sell physical goods, you are less
likely to have your account locked because there is the option for repair,
return or replacement as part of the settlement. You are more likely to have
physical assets that the bank could seize. A shopfront address where they can
send process servers. Etc etc.

But a TPPA takes money in one hand and sends it with the other. The entire
model is moving money to and fro. That means, when a chargeback hits the bank
... you might have stopped being _to_ and become _fro_.

Unsurprisingly, TPPAs have an unusually rate of both chargeback (shady
"subscription" schemes) _and_ of there being insufficient deposited cash on
hand when a chargeback arrives (ditto).

That you put in an anti-fraud system doesn't really matter to a bank. _Anybody
can say they did_. What you get is a polite nod; they will still feed your
business model and transactions data into their own anti-fraud system. If you
score badly, expect to be frozen. Especially if you start moving transactions
of a size that attract the interest of AUSTRAC.

Finally, the Commonwealth Bank is a retail or consumer bank. That's its
history, it's baked right into their operational DNA. Both NAB and Westpac are
generally considered to be better at business banking. I've no idea what ANZ's
reputation is meant to be.

I suspect NAB got Pin because they're the only bank allowing you to deposit
multiple currencies in a single account. Everyone else requires you to open
separate accounts for separate currencies.

How do I know all this? The business model I'm working on is a TPPA. When I
discuss it with banks, what they want is a locked reserve that they can get
chargebacks from. The _most_ generous I've been quoted is 30% of my cash
locked for rolling 90 day increments.

~~~
elithrar
> I suspect NAB got Pin because they're the only bank allowing you to deposit
> multiple currencies in a single account. Everyone else requires you to open
> separate accounts for separate currencies.

NAB also has Braintree, likely for similar reasons.

~~~
zhoutong
From what I know, NAB's Foreign Currency account is still single currency. You
need 10 accounts if you need 10 currencies, with $40/month fee if balance is
lower than $20k. The benefit is with their _Merchant Account_ , which can
offer settlement to foreign currency accounts with a single interface.

I've never seen any other major bank in Australia publishing any foreign
currency offering for credit card processing.

Braintree is not a small player, so it's highly likely that they are able to
get customized proposals from different banks and the choice of NAB should be
a lot more than just the existence of a published product.

~~~
jacques_chester
Sounds like I misunderstood the structure. Thanks.

------
zhoutong
For those interested, there's a discussion on Reddit (posted by my co-founder)
as well:
[http://www.reddit.com/r/Bitcoin/comments/1ke0ro/commonwealth...](http://www.reddit.com/r/Bitcoin/comments/1ke0ro/commonwealth_bank_of_australia_closes_personal/)

~~~
phyalow
FYI I heard something a couple of weeks ago about ASB (NZ's CommBank
subsidary) refusing to transact a fx transfer to a foreign based btc exchange.

------
benoi00io
Hi All,

If you wanted the contact at NAB, my email: Ben.harberts@nab.com.au and phone
number is 0400 953 898. Cheers PS. Pan69 - years of pdf statements are
available on both personal accounts (3) and business accounts (7) from
electronic channels. Pps. There are bozos everywhere, grumpy!

~~~
benoi00io
btw - not calling you a bozo.

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robbiep
Thanks for the information on Commonwealth. As soon as I stop being a student
(another 3 months) I am ready to bail from them, just because I had a
dollarmite account with them 22 years ago doesn't mean I should be a customer
for life.

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digitalengineer
I have never seen an industry that so dispises it's own clients/puppets. I
mean, they don't even inform you when they close your business-account. And
when you try to call (like any sane person would when her company can't
process payments) there is no clear message.

Also; the Obama adminsitration has already used the banks to reach their own
goals (WikiLeaks and Credit Card companies anyone?). Apart from that, they
have used the threat to remove countries from the SWIFT system, denying all of
a nation's companies and citizens access to any payment-system...

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kintamanimatt
There's a moral to this story that runs deeper than not banking with shitty
banks, and that's to always have a backup. Backups aren't only for data, but
for key infrastructure (hosting providers, merchant providers, banks, phones,
etc) too, in which a failure of one would means a serious hiccup. Having a
backup can make for a faster recovery.

Even when it comes to things like a personal bank account, always have another
live account with some other bank that's not within the same banking group!
Debit get lost, accounts get phished, egregious meltdowns happen[0], or some
retailer swipes your card so many times to get an auth on a laptop you're
buying that you end up with no available funds!

[0] [http://www.theguardian.com/money/2012/jun/29/natwest-
fiasco-...](http://www.theguardian.com/money/2012/jun/29/natwest-fiasco-what-
happens-now)

------
contingencies
I quit Commonwealth for other reasons years back. Australian banks are in
general pretty terrible, with high fees. They also refuse to adopt the IBAN as
they don't want the ultra sophisticated service of cross-border financial
transfers to become commodified (thus, impossible to leverage unrealistic fees
and delays against). They also refuse to answer queries along this line
(source: high value payments clearing committee, 1+ years of email queries
with some responses, but no answer)

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pan69
Just wait until you find yourself having no longer access to your statements.
NAB can't even run a simple query that looks further back in time than 3
months. Oh, you can get a printed statement for which you will have to pay.

NAB is a freaking disaster and I strongly recommend anyone to stay from these
bozos.

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beedogs
Wonder at whose behest they did this.

