Challenges of a Refugee Bank


In this particular post, we will focus on finding the main obstacles a startup bank has to overcome before it is able to serve newcomers. This question was “first” raised among top banks in 2016`s SIBOS conference (one of the largest Banking conference), and is important to consider in depth if the refugee bank project is to get off the ground.

Regulatory background

The ECB (European Central Bank) has an overall general financial regulation for the entire EU, however the interpretation and application of these regulations differs in each member state. This is an important consideration to keep in mind because the target market of refugees is by its nature a group on the move, traveling between these regulatory zones in search of opportunity.

The ECB currently operates with a KYC (Know-your-customer) policy, introduced over a decade ago following the 9/11 terrorist attacks, which places a focus on serving BIG established banks. This strict regulatory system includes IDV (Identity Verification) for confirming a person’s official identity documents (Government issued photo ID). As the FinTech sector has grown in recent years, these regulations have become a barrier, causing new, innovative banking solutions to adopt business models that are structured more like the traditional “big” banks. Yet, in spite of regulatory challenges, the environment for companies that are emerging today is continuously changing due to technological developments.

When it comes to a banking solution targeted toward refugees, it is important to note that currently there are only a few banks that offer seamlessly accessible services for non-local citizens. Therefore, a solution that could serve the customers regardless of their residency would have a clear competitive advantage.

The first steps to consider

Understanding and identifying newcomers is complicated due to the KYC – AML (Anti Money Laundering) regulations in order. Anyone who wants to consider serving refugees first must create a compliant identification framework that is legislated by a government as an acceptable KYC solution. Creating an acceptable KYC solution is a very difficult task, due to the strong AML fears the EU has been facing in recent years, which are related in part to the wave of unidentified refugees spreading all across Europe without close oversight of any governmental body. However, social media has helped bring attention to this problem of identification, and the extra attention it brings might provide a chance to reduce the regulatory burden, thus allowing startup banks and other institutions to offer more creative solutions, provided that they can be created validated and legislated before the bank starts its operations

Banking and licenses

When the proposed modified KYC system is legislated, the bank must consider how to avoid AML under the new KYC policy, since it might cause a vulnerability in the current AML regulations for banks that have been operating.

Also, in terms of fulfilling the regulations, an institution must hold a full banking license in order to take in deposits and funds from the refugees. This can cause the above-mentioned “vulnerability” for the licensed institution and is something that must be addressed when working with regulators.

Building new trust

Banks are built on trust - trust from their customers. However, since we are focusing on a target market of refugees who come from a different background than the typical European banking customer, special consideration is necessary to develop a successful trust-building strategy. The ongoing violence that has forced refugees to leave their homes and the immense struggle they have already overcome by the time they have even arrived to the EU can often times cause an overall distrust of the system. Reaching out and convincing them to then sign up for a fully trust-based service is the first part of the issue.

Adding further to the challenge is that the normal marketing channels including advertising via social media can have only a limited effect as the new arrivals are not (yet) fluent in the local languages. It is not possible simply to market in their native language either, because they are coming in from different areas and do not always have one distinct language. Therefore, the bank shall apply some kind of so-called growth hacking strategy that can mobilize refugees to use the bank and start signing up for the initial offering.

Mobile Penetration

How is it that refugees have access to smartphones and internet? Why should a society provide extra support to people who have such amenities?  These are amongst the various complaints voiced within the EU regarding the influx of refugees. The real reason is that this provides them with the necessary information to stay safe and be connected to others. They are using many applications and forums to learn about the possibilities both for making the journey and for what to do after arriving to a country. After food and shelter, their mobile phones are their most precious and necessary possessions given their current situation, so they often invest a significant portion of their available resources in order to have a mobile available. Understanding this fact gives us the insight to plan a banking solution that runs purely on mobile and does not require branch-based banking.


These new arrivals have a vivid faith background that makes them very critical. Any solution that will reach them really has to be designed for them and cannot simply be “good enough”. Solving the financial situation of refugees is an issue that Europe must tackle, for its own sake. If we want them to have the chance to integrate, we need to find a solution to overcome the obstacles and serve them the best possible way.


- Balázs Némethi - 

Balazs Nemethi