The Green Sheet Online Edition
December 8, 2025 • 25:12:01
Why startups risk account freezes, and how to prevent it
Modern fintechs and banks promise security and convenience, but the very same systems that guard the global economy can also disrupt cash flow within hours. We have all seen what damage it can cause when banks block a transaction, demand more documents, or even freeze accounts completely, but these issues are often predictable with proper planning.
Cash flow headaches stay away when we maintain a clear and open relationship with our banks and financial institutions, presenting the purpose and background of each transaction in a straightforward way. Banks need data about our business. But what can we do if our business has no information yet, because it is a startup?
Onboarding without data
When a bank, financial institution or even ISO starts a new business relationship with a client, they all want to know what they are dealing with: what the opportunity is for wrongdoing, fraud or tax evasion. These providers calculate risks not based on already happened facts, but on the assumption of what could go wrong, and measure the results in a so-called customer risk profile.
The higher the opportunity of something bad happening, the higher the risk of that new customer is. The higher the risk, the higher the fee, and obviously, the worse the terms and conditions are. Certain high-risk clients are unable to access certain financial services simply because they are deemed not worth the risk for the providers, at all.
Information collection
To evaluate the risk accurately, all banks and financial institutions need to collect data about their potential client's operations as well as on their money flows to understand clearly what will go through the account and what the new client will be using the services for. They check the industry, the potential incoming and outgoing amounts, how regularly they receive payments or pay out suppliers, where these transactions originate from, or are going to, in what currency, and who the potential counterparties are. These all represent important information which can affect the risk profile.
But if the potential customer is a simple startup and has no actual data about its clients, jurisdictions, turnover or transaction volumes, it can only send projections and business plans, which are usually either very optimistic or too reserved. Of course, no one can see the future, but when it comes to financial planning, it is almost impossible to determine how well the operation will take off in certain jurisdictions, like Europe, in the States or in Asia, or whether it will take off at all.
Prediction versus facts
Once the providers collect all the relevant data about their potential clients, they input them in their special risk software. This system continuously compares the real transactions against the information entered at the start, judging every deviation as potential risk, which triggers automated alerts. Even small differences, like receiving funds from new clients or in unexpected currencies, can trigger a review or account or even a complete freeze.
When growth looks suspicious
Banking algorithms operate by prediction, not logic. Once the initial profile is saved, the system expects the business to stay within that framework forever, or at least close to it. But when the company grows, enters new markets or starts processing higher volumes, the algorithm can trigger a review: the bigger the difference between what was predicted and what happens in practice, the higher the risk of a check.
Of course, compliance officers have the option to review everything and switch the account back to normal, but they usually ask for an explanation of why the predicted figures are so far off from the actual ones.
Industry studies (for example, Dow Jones 2022; LexisNexis 2019) suggest that around 10 to 15 percent of flagged transactions require human review, during which funds may remain temporarily blocked, and even though the funds are usually, eventually released, this causes several days of delays. Firefighting operational panic and adding the lost opportunity costs, this can be very damaging, and sometimes even lethal for bootstrapped teams.
Whose fault is it?
Fraud escalation often has nothing to do with actual misconduct. Banking and financial institutions are using very sophisticated fraud alert systems, where these software often see growth and criminal activity through the same lens because both appear as unplanned changes.
Banks build these systems to protect themselves from penalties, so they prefer to stop an account too early rather than too late, but this often leaves honest businesses locked out of their own funds. In practice the situation becomes even more problematic when the startup submits its initial onboarding forms incorrectly. This happens a lot, as most young founders do not know "how banks think" and simply guess the numbers, activity and risk. Also, providers are motivated to open the account as quickly as possible, often via automated forms, without actual checks of the viability or reality of the operation.
But once the real transactions arrive and the fraud alert system realizes that the figures or the actual activity are far from the original description, the account gets reviewed and often closed within a few weeks of launch.
This happens frequently with large global processors, where startups begin trading, spend marketing budgets, take payments from real users and then face sudden account blocks because the actual activity does not match the information provided at signup.
The lack of a proper payment and banking strategy before going live can cause significant damages: both reputational (angry customers) and monetary (as the company already paid for the ads).
The real damage
Risk scoring does not only affect access to accounts or the smoothness of operations; it also directly defines the cost of doing business. Every bank and financial institution builds its fee structure, terms and available services around the individual customer's risk profile. Clients marked as lower risk usually receive faster settlements, fewer security deposits and lower fees. Higher-risk ones face restrictions and premium pricing for the very same service.
Once this initial profile is set, it determines the full planning and cash flow for the operation.
However, when the profile later changes because the company grows or its activities shift, the entire structure recalibrates. Even a small change in the risk category can significantly affect both margins and risks.
To put this in perspective, a typical company operating on a 10 percent profit margin can lose approximately 15 to 18 percent of its profit from a 1 percent increase in card processing fees, depending on VAT and margin (as these fees are calculated on taxed, gross revenues). This can be a very steep challenge for a startup.
Keeping the bank informed
Regular communication with the bank and the payment providers is the only effective way to prevent this. Every time the company expands, changes activities (even introducing slightly new products or services), or starts to serve new clients, the relationship manager needs to be informed in advance. This allows the financial institutions not only to update their internal systems but also to set a new risk profile that matches the new circumstances. This transparency builds trust and keeps the account safe from automated flags. I have seen a successful ecommerce company lose their account simply because they introduced a new product (a fungal cream) to their beauty product line without knowing this would be considered a pharmaceutical product, which was not accepted by the provider. From one day to the next, this small hiccup resulted in the loss of payment processing for a whole month for a $300,000-per-month operation.
The importance of a solid payments and banking strategy
A responsible business manages its banking relationship like a legal or tax obligation. Each change in clients, geography or transaction structure should come with supporting documents ready for submission. The more structured the updates, the easier it becomes for the bank to defend the account internally. Payment and banking today impact customer experience, risk management, technology, product development, data security, compliance, finance and more. It should be considered a standalone function, an essential element of the business strategy, not just a part of finance's side function.
The future
Building and maintaining an overall payment and banking strategy is of utmost importance for any business that wants to survive in today's changing environment. As startups grow, enter new markets and target new customers, dealing in new currencies and increasing their transaction volumes, the fintech industry also continues to change with new regulations, technologies and requirements challenging businesses daily.
Business owners, finance managers, directors and, really, everyone handing money in any way must understand how banks think and how money moves internationally to make informed decisions about their own fund movements and build mutual trust with their banks and financial institutions.
If it seems increasingly difficult to manage, that's because it is. But sometimes, the difference between stability and collapse often lies in a single conversation with the bank. Perhaps, a bit of seeing the future, too. 
Viktoria Soltesz is the CEO and founder of PSP Angels and The Soltesz Institute. She is a leading advocate for strategy-led financial operations, ethical industry practices, and structured education in an area too often overlooked in traditional business training. PSP Angels is a globally awarded, independent payment and banking consultancy that has supported over 1,000 companies in building scalable, secure financial infrastructures. The Soltesz Institute is the first and only independent online organization offering EU-accredited training and certifications focused exclusively on payments and banking. To contact Viktoria, please email viktoria@pspangels.com.
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