Mercury Bank Cuts Ties with Startups in 37 Countries, Sparking Uproar
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- July 25, 2024
American digital bank Mercury Bank has sent shockwaves through the global startup ecosystem by announcing the closure of all business accounts in 37 countries, effective August 22nd, 2024. This move has left many entrepreneurs scrambling for alternative banking solutions.
African Startups Hit Hard
The decision particularly impacts African startups, heavily reliant on Mercury for managing US-sourced funding. Countries like Nigeria, Sudan, South Africa, and Cameroon are among the affected nations. Tech founders have expressed frustration on social media, calling the move discriminatory and forcing them to find new banking partners.
Scrutiny and Policy Changes
Mercury came under federal scrutiny earlier this year for allowing foreign companies to open accounts through partner bank Choice Bank. Allegations included opening accounts in “legally risky countries” and using questionable methods to verify US presence.
In response, Mercury revamped its eligibility requirements, citing a “commitment to compliance.” This resulted in account closures for customers in certain countries, including Ukraine, despite its previously thriving startup scene. Mercury claims the policy change only affects founders residing in Ukraine, not Ukrainian passport holders in the US.
Ukraine Caught in the Crossfire
Founder Alyona Mysko of Fuelfinance, a Ukrainian company, disputed this, stating their account was closed solely due to her Ukrainian passport. Mercury clarified that while they support Ukrainian founders in the US, the ongoing sanctions against certain regions within Ukraine make it “too complex” to operate in the entire country. They promised to “revisit” the policy in the future.
Similar Plights for Other Countries
The impact extends beyond Ukraine. Nigerian founders in the US with US-domiciled startups also received account closure notices. This is not the first instance of trouble for African startups with Mercury. In 2022, the bank restricted accounts linked to African tech startups, many of whom participated in reputable US accelerators.
New Opportunities
Experts suggest that Mercury’s actions stem from insufficient compliance infrastructure, leading them to adopt a more conservative approach to customer onboarding. This creates an opportunity for African fintech companies like Raenest and Verto to capture affected customers by offering US bank accounts specifically tailored for African businesses.
Looking Ahead
Investment firms like Geek Ventures are advising founders to diversify their banking options and consider Mercury unreliable. Meanwhile, competitor Brex has stepped in to offer incentives to Ukrainian founders impacted by Mercury’s decision.
The situation highlights the challenges faced by startups navigating the complexities of international finance and compliance. As Mercury adjusts its policies, the global startup ecosystem awaits further developments and reevaluates their banking partnerships.
