FinTech banking’s nightmare frozen customer money problem
There’s a lot to like about modern mobile-first FinTech banks, but being locked out of your account isn’t one of them. Minimal customer service, opaque information flows and vague timelines create serious client stress levels.
Thinking of opening a modern, mobile-first 'fin-tech' bank account and routing your personal and/or business funds through it? Despite the no/low fees and convenience, don't put all your eggs in one basket. The space is currently a support mess, with bank accounts suddenly 'frozen' for obscure reasons, no provider feedback on why - or when you might be able to access your money again in the future.
The UK is leading the way with modern digital banking, with well funded startups such as Revolut offering sophisticated mobile phone and card based banking that enables withdrawals in over a hundred currencies internationally and transfers between dozens of currencies. This is in large part due to the favorable regulatory climate in the UK. Revolut are expanding rapidly and have obtained licenses to operate in Singapore, Japan and North America.
There's a lot to like about these UK 'fair and frictionless platforms to use and manage money around the world' to quote Revolut, especially for people who travel widely - or more importantly who need to make multiple transactions internationally. This is the future of money, and old localized banking models are being challenged at their core by these lower cost, more flexible and agile services that are also set up to embrace and add value to the rapidly maturing practical use models for cryptocurrencies.
The problem for us as users of these services is the virtually non existent customer service. If you are old enough, you may remember the early Web 2.0 era that was at its heights ten years ago, when the old static web 1.0 gave way to the 'read/write' web, broadband had become widespread and the iPhone launched. Google had 'beta' badges on their 'products' and if you lost your document draft in their new Google Docs' SaaS offering, tough luck. Fast forward to today's giant tech platform dominated world and caveat emptor (let the buyer beware) if you are using these modern banking services - they may suddenly freeze your assets, the opposite of 'frictionless', and a far more challenging life event than losing your last document.
I wrote Caveat Emptor in the previous paragraph, but as with so many tech platform products it's not clear if you are a client or the product, since presumably banks like Revolut can invest your funds they hold for profit. The no/low fees model has to make sense commercially somewhere, so it seem likely you are essentially the product.
'Traditional' fiat banking typically has bricks and mortar benches and telephone support, so if there are anti money laundering triggers, or other allegations of something perceived as not right with your financial affairs, there has historically been reasonably rapid communication, resolution and resumption of your banking activities assuming there are no irregularities. The modern FinTechs run very lean and currently appear to be a lot more interested in adding millions of new customers than they are in actually providing good customer service for them or looking after their money.
Being locked out of your frozen bank account for months while obscure irregularities are being explored, with no communication on when or if you might be reunited with your funds has been a very stressful experience for large numbers of people. A quick search online shows hundreds of these cases, with outraged customers venting in forums, including vendors help pages.
I found the video above by user seaweedjam on Reddit this weekend, as a very recent example. I know nothing of seaweedjam's case but last year I did have first hand experiences of people in the UK who have had major problems with Revolut freezing their accounts, and formally wrote three times to Revolut asking for comments on what is a very serious issue before i wrote this post. They didn't respond, so I found various Revolut employees through Linkedin and wrote to them. No response there either. There are the usual 'humblebrag' corporate pr blog posts self congratulating on new business successes, excited chatter about unicorn status. Revolut and others use email heavily to market their services to potential and existing customers.
Paypal have historically lead the charge (to coin a phrase) on infuriating their customers, with similar behavior of locking accounts for dubious reasons and destroying people's online businesses. Now that PayPal's relationship with eBay is drawing to a close in 2020 (Adyen is the new back end processing best friend of eBay) it is very unclear if they will be able to survive, in no small part due to their poor brand image and customer satisfaction levels - Paypal, like the newer fintechs, have plenty of vocally unhappy customers online. Because most of these firms are so opaque and non responsive when you contact them, rumors are running wild on the street - some say the old guard banks are pushing local regulators to follow the letter of the law with fintech financial services firms, thus disrupting their ability to scale up and satisfy customers. Others claim the FinTechs are making a fortune out of the 'frozen' money while it is being 'investigated' and are in no hurry to return it to the rightful owners.
Whatever the truth of the matter is - and perhaps this post will prompt Revolut and others to finally comment on what is a very serious problem - the pattern of Software as a Service vendors not providing adequate support and processes is now reaching the heart of people's livelihoods, their ability to keep a roof over their heads as a result of encroaching on control of their financial affairs.
To avoid the nightmare scenario demonstrated in seaweedjam's short video and easily found in online discussions it is therefore clearly a good idea to have other bank accounts in order to limit to your exposure if services such as Revolut decide to cut off access to your funds.