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There is a reason requirements to start a bank are so high. Banking is a really hard business and you margins are not that great. There is so much regulation that your licensing fee will look like small potatoes. Instead you should ask if there is cheaper way to get to where you want to be. You could start by researching how the PayTM guys did it.
I know a bunch of people here have said "partner with a bank" or get a license. That seems like a good option, but obviously you wonder how can a small startup or even a founder or two do that? I have learned a couple things about being the little guy trying to partner with bigger folks: - Josh Elman (from Greylock) suggested that when (I think) when LinkedIn (or Twitter, I forget) was small, they didn't go out to lo…
Coming up with an "offer you cannot refuse" feels a little tough given its just the too of us wanting to do this after working for one year after University.
Start smaller. Most of the disrupter banks started as something else with the view to eventually obtaining a banking license. That way you can actually prove that you have a product worth investing in. Usually banking startups start with a Stored Value Facility license (or the local equivalent) and work up from there.
Seconded. Start smaller. The simple concept to remember is: if you need $13M to start this business, it's a business you can't start right now; it's instead an opportunity for larger businesses. We had a similar problem: we started with "let's build the city of the future", which would have probably required a large capital (of course, we wouldn't have done it alone, but still...), and ended up focusing on creating i…
True. I should look at the smallest thing that I can do that can provide value and that can somehow pivot into a bank.
Good luck with your startup :)
we are a lending startup in India - also a YC alumni (RedCarpetUp YC S15). We are (now) a regulated entity with specific licenses that took us a crazy amount of time from the Reserve Bank of India. Two things - first, the business models of payment banks is kind of unproven. Those of us who are in the fintech space in India kind of agree that the regulators kind of screwed up here. I'm hoping you have answers to that…
I have read the news about the YES Bank CEO. I was hoping that they would be more relaxed with payment banks.
I'll drop in a mail over the weekend. I saw you guys when I was in my third-fourth year of University. I think the other startup that was doing something similar was Finomena but I see that your target market is different.
Have you considered starting a payments bank in another country where you can prove your idea with less capital? Then you can use the capital from that to get started in India or if there's not enough, you can use the experience to inspire investments to get the capital. Also, I hope you're ready for an immense amount of red tape.
Lots of crazy answers here. As an industry insider, what you do is buy a bond from a company that specializes in these sorts of licensing bonds. It should only cost you a small fraction of the capitalization requirement each year to maintain.
we are a lending startup in India - also a YC alumni (RedCarpetUp YC S15). We are (now) a regulated entity with specific licenses that took us a crazy amount of time from the Reserve Bank of India. Two things - first, the business models of payment banks is kind of unproven. Those of us who are in the fintech space in India kind of agree that the regulators kind of screwed up here. I'm hoping you have answers to that…
Thanks for the response :) I have read the news about the YES Bank CEO. I was hoping that they would be more relaxed with payment banks. I'll drop in a mail over the weekend. I saw you guys when I was in my third-fourth year of University. I think the other startup that was doing something similar was Finomena but I see that your target market is different.
Earlier quoted context omitted.
Can you expand on this? Never heard of this but I'm not super involved in fintech/banking. Something like Solarisbank?
Not OP, but here's generally how you would do it [0]. However, in the EU there are a few other banks to try [1], [2]. In the US, you could try [3]. There's also companies which partner with multiple banking services to provide a cohesive offering [4], [5]. For anyone wanting to do this, here's two issues that I have found. 1) If you don't have banking licenses, the conversation will stop abruptly. Even if they advert…
Lots of crazy answers here. As an industry insider, what you do is buy a bond from a company that specializes in these sorts of licensing bonds. It should only cost you a small fraction of the capitalization requirement each year to maintain.
Another unique suggestion that I couldn't possibly think of. I'm really overwhelmed by the response I got to this thread. I'll look into this.
The bank offers to cover your fines (with your entire business as collateral), for a fee. You can think of hat fee as the interest rate on a loan, which it basically is because the money is put into an escrow account with the government.
In my own market it was $10M usd required to become a payment services provider (e.g. Venmo). But you could get someone to offer the bond for a few hundred thousand dollars a year, the price depending on how comfortable they were with you and your business. That’s within the realm of doable for a startup.
There are two ways to answer this question, two new questions basically. One is "raise over $13m." How? This is not impossible. There is more investor money looking for home today than ever, I reckon. However, this is not a level playing field. Who you are and who you know and how well will make a big difference. This is probably the wrong place for advice about this strategy. The second possibility is "what is an ea…