RBS shuts down startup accounts (Smarkets and others)

http://www.kernelmag.com/features/report/1360/rbs-continues-its-war-on-start-ups/

by swombat • 14 years ago

42 23 14 years ago

DrJokepu2• 14 years ago

It seems to me that RBS was very clear about the issue, they simply don't want to deal with gambling. It's a valid debate whether this is a reasonable or acceptable thing to do but it's massively misleading to conclude that this has anything to do with the company being a startup.

Personally, I think it should be obvious to everyone that gambling is a rather low profile business and anyone who decides to do business in such an area should be prepared for obstacles like this; I don't see how running to the press would help at all when the public opinion about your industry is not exactly very high.

ocirion2• 14 years ago

I imagine you are talking from a US perspective. I don't believe there is a negative perception of gambling startups in the UK / Europe, especially if you consider success stories such as Betfair.

What makes gambling low profile ? Its a business, that has a unique model that turns a good profit. Why should it be treated differently from any other startup?

wladimir2• 14 years ago

Why should it be treated differently from any other startup?

A lot of people have the opinion that gambling does not produce "value", and that it makes people addicted to it, while running them into the ground financially.

I'm not sure about the rest of Europe, but here in The Netherlands it's not even allowed to start a gambling site, as the state has an absolute monopoly on it (Holland Casinos).

driverdan• 14 years ago

It doesn't matter who their target customer is, gambling sites are higher risk than traditional ecommerce sites. They have higher chargeback rates and the industry has a lot of bad actors. Is it shortsighted to blindly drop a startup just because it's gambling? Perhaps, but if you just go on industry averages there is higher risk there.

DrJokepu2• 14 years ago

For the record, I'm in the UK. Personally, I don't think there's anything wrong with gambling in moderation, it's a lot of fun after all, however, I'd be very surprised if the public opinion about the gambling industry wasn't within the league of those of the tobacco and arms industries.

intranation2• 14 years ago

Disclaimer: I'm a Smarkets employee.

Well it's not entirely clear that it's just related to gambling - Betfair, the UK's largest betting exchange, do all their merchant transactions (customer deposits and withdrawals) through RBS as well - given they're directly linked to credit cards the risk of chargebacks etc. is clearly higher than a day-to-day business account that is mostly used to pay employee salaries (as presented in the article, Smarkets client funds are ring-fenced in a Maltese bank). The obvious difference to me is that Betfair is a multi-million pound company and Smarkets isn't.

saurik• 14 years ago

Just because that's the "obvious" difference doesn't mean it is the correct one; in fact, it doesn't even mean there /is/ a difference. I am constantly involved in situations where people online are claiming something I know a lot of internal details about (whether it be my own company or some larger outfit where I happen to know people) "is unfair because Y does the same thing we do and isn't getting flak" when in fact Y actually is getting flak (but isn't complaining about it in public) or is really not doing quite the same thing.

Honestly, this is sufficiently and irritatingly common that unless you've talked to the people at Betfair and gotten them to agree with your story, I not only am going to have a hard time believing your take, I'm going to have a hard time not negatively judging your company for telling it like that. :(

arethuza• 14 years ago

That picture is of ex-Sir Fred Goodwin (AKA "Fred the Shred"), who hasn't been RBS CEO since 2008.

getsat• 14 years ago

And is losing his knighthood for being a toolbag.

retube• 14 years ago

s/toolbag/scapegoat

Mvandenbergh• 14 years ago

RBS has significant operations in the United States and the US has a history of playing a little fast and loose with jurisdictions when it comes to going after online gambling and anything that looks like it.

sjtgraham• 14 years ago

I previously worked as a developer for a startup regulated by the Gambling Commission (which coincidentally was formerly situated in the same building and adjacent to the Smarkets team, both having raised money from Passion Capital), and we experienced the same problem with Barclays, i.e. a letter informing us our custom was no longer welcome.

It's not a question of Smarkets being a startup that their account has been closed, as the title suggests. I believe that the current British banking climate is overtly hostile to companies of a gambling nature, unless they are very large and well established. My previous employer found it extremely difficult to obtain even basic banking services after being shut out by Barclays. I'm ignorant of the process which lead the bank to deem Smarkets inordinately risky, but it's somewhat unconscionable that a nationalised bank should treat them in this way. RBS should be stimulating economic growth, facilitating job creation, and ultimately creating value for the economy; shutting the door on Smarkets, a viable business is incompatible with that notion.

As I say, I do not have a full appreciation of the bank's logic for this decision, nor do I know Smarkets' position, exposure, etc. However, I have known Smarkets for some two years and seen them grow steadily and reliably over that period, without a blip. I certainly find the bank's decision surprising.

Isofarro2• 14 years ago

I just find it laughable that RBS is effectively admitting their understanding of risk management is very low indeed. That their organisation didn't mitigate against the risk of subprime mortgage defaults that would turn one of their main assets into a valueless piece of paper; and yet close down accounts of Smarkets without much of an assessment.

I'm not a risk taker by nature, and Smarket's approach to mitigating exposure/risks is an interesting, yet soundly logical. Bailed out banks like RBS/Natwest can learn a thing or two from Smarkets of how to resposibly manage risk.

mseebach2• 14 years ago

> RBS’s actions are all the more unforgivable given that the bank is now mostly owned by taxpayers

Taxpayers didn't bail out RBS because of a deeply felt desire to help British businesses with banking facilities, but because it was deemed at the time that allowing it to crash would hurt the taxpayer more than the cost of the bailout.

The only priority for the government in RBS is to shed any and all unnecessary risk from its balance sheet and sell its shares as soon as possible.

I don't envy Smarkets' situation, but insisting that RBS behaves in a certain way different from this is effectively throwing good money after bad.

Isofarro2• 14 years ago

RBS failed because it contained a portfolio of financial assets that overnight became valueless. That value just disappeared.

I don't see how that situation is related to a company whose revenue stream is a commission on bets placed. If the number of bets placed is zero, Smarkets doesn't end up with an asset that goes from billions of dollars of value to zero, and creating a massive black hole in a Balance Sheet.

mseebach2• 14 years ago

I wasn't reacting to NatWest's treatment of Smarkets, but to the assertion that being taxpayer owned somehow obliges RBS/NW to treat them in a different manner.

ctz• 14 years ago

This article describes a single affected start-up, but begins with "Why are so many start-ups being hit with account closures from banks in the RBS group?"

That seems a little intellectually dishonest.

RBS shuts down startup accounts (Smarkets and others)

Related Stories