Westpac said it has either declined or stopped offering banking services to eight fintechs over the past year, deeming them too high risk to deal with.
The bank disclosed the number in a submission [pdf] to an ongoing senate inquiry into Australia's role as a technology and financial centre.
In May, the committee behind the inquiry released its third issues paper stating that Australia "is well placed for growth in the financial and technology sectors, and to attract investment and create jobs.”
However, it raised "debanking" as a “significant obstacle” to Australia’s fintech sector, and pledged to investigate the practice.
Debanking occurs when a bank chooses to no longer offer banking services to a customer or business.
Westpac said “there are a range of reasons” of why banking services are withheld from “a particular customer or class of customers.”
“These can include management of financial crime-related risks, dealing with companies which become deregistered, fraud and certain convictions, among others,” the bank said.
“Given the committee is focused on the “domestic development of the fintech sector” in Australia, it is important to note that Westpac does not consider fintech to be higher risk or out of appetite per se.
“However, there could be segments of the fintech sector that operate in higher risk areas or have higher risk aspects and these may result in a decision to decline or cease to offer banking services.
“Based on a review of our decisions in the 12 months to May 31 2021, we believe we have exited eight fintech businesses over that period.”
Westpac noted anti-money laundering and counter terrorism (AML/CTF) laws are used by the bank determine which fintechs, organisations or individuals are refused financial services.
The bank added its own financial crime risk nanagement framework, which sets out banking services that fall outside of its determined risk appetite, is also used to determine eligibility.
Fellow 'Big 4' bank NAB listed similar rationales behind its decision to debank selected fintechs. [pdf]
However, NAB chose not to disclose how many fintechs it no longer provides financial services to.
“Decisions to exit the banking relationship with a fintech are informed by NAB's risk appetite to provide business transaction banking services to fintechs,” said NAB .
"For privacy reasons, NAB is not able to discuss the details of individual customers that NAB has chosen to no longer provide banking services," it said.