Why Most Banks Still Say No to Fintechs — and What Magnetiq Bank Is Doing Differently
Fintech companies — electronic money institutions (EMIs), payment institutions, crowdfunding platforms, forex brokerages — are building some of the most sophisticated financial infrastructure in Europe. Yet for years, the answer they heard most often when approaching a traditional bank was simply: no.
Not because they were risky. Not because they were non-compliant. But because most banks lacked the knowledge, the appetite, and the infrastructure to understand how these businesses actually work.
Magnetiq Bank was built to change that. Jelena Jurane, Head of Sales at Magnetiq Bank, explains the thinking, the markets, and what it actually takes to serve the fintech sector properly.
TL;DR / Quick Answer
– Traditional banks consistently turn away EMIs, payment institutions, and licensed fintech companies — not due to compliance failures, but due to a lack of internal expertise and risk appetite
– Magnetiq Bank fills this gap by combining European banking compliance standards with API-first infrastructure and deep fintech knowledge
– Latvia is currently experiencing a surge in new MICA and EMI license applications, making it one of the most active fintech banking markets in Europe right now
– Lending-as-a-Service (LaaS) is Magnetiq Bank’s newest product, enabling fintech partners to offer consumer lending under their own brand without holding a banking license
What gap does Magnetiq Bank actually fill?
The problem is not that fintechs are unbanked by accident. It is structural. Most traditional banks do not have the internal frameworks to assess the risk profile of an EMI or a payment institution. They cannot evaluate how a licensed fintech operates, what its end-customer flows look like, or how its compliance controls are structured. So instead of investing in that understanding, they decline the relationship.
The result is a large, internationally active segment of financial companies — many of them well-capitalised, fully licensed, and operating across multiple European jurisdictions — that cannot access basic banking infrastructure.
Magnetiq Bank identified this as the defining gap in the market. The client base is not enormous in absolute numbers, but it is highly international, highly sophisticated, and deeply underserved. A typical Magnetiq Bank client might be a company founded in Germany, licensed in Malta, holding a second licence in Cyprus, and banking in Latvia. That cross-border structure is not unusual — it is the norm.
What does Magnetiq Bank’s onboarding actually look like?
This is where the process differs significantly from a standard corporate banking relationship. Regulators do not treat Magnetiq Bank as a specialist fintech bank — they treat it as a bank. That means the compliance bar is not lower. In practice, it is higher.
When Magnetiq Bank onboards a payment institution, it does not only conduct due diligence on that institution. It also reviews the institution’s own KYC and AML controls for its end customers. The bank is effectively doing due diligence on the compliance systems of its clients. That makes the onboarding process extensive — but it is also what makes the relationship credible.
Most fintech clients understand this. They are digital-native, they know what a thorough onboarding looks like, and they expect it. What they do not expect — and what traditional banks rarely offer — is a fully digital journey with e-signatures, API-based document submission, and a team that actually understands what they are submitting.
What do traditional banks get wrong when serving fintechs?
Two things stand out.
The first is APIs. Fintech companies do not want to log into an internet banking portal. They need their banking infrastructure to talk directly to their own systems — in real time, at scale. Without API connectivity, the relationship simply does not work operationally.
The second is risk appetite. Many fintech companies — including Latvia-registered startups applying for their first licence — are told by traditional banks that they fall outside the accepted client profile. Magnetiq Bank has become a recommended destination for exactly these companies. When the Bank of Latvia directs licence applicants toward Magnetiq Bank as their banking partner, that is not a marketing claim. It is a signal that the model is working.
Where are the active fintech banking markets right now?
The established centres — Malta, Cyprus, and the United Kingdom — remain relevant, particularly for mature EMIs managing safeguarding obligations. But the most visible growth at this moment is in Latvia.
The volume of companies applying for MICA (Markets in Crypto-Assets) and EMI licences in Latvia has increased sharply. These are companies at the start of their licensing journey — they need a bank account before the licence is issued, and they need a banking partner who understands the regulatory environment they are entering. Magnetiq Bank is seeing that demand directly. Lithuania is also active, though Latvia is currently leading among early-stage applicants.
Who else does Magnetiq Bank serve beyond EMIs and payment institutions?
The fintech label covers a wide range of regulated entities. Alongside EMIs and payment institutions, Magnetiq Bank works with:
– Crowdfunding platforms
– Licensed forex brokerages
– Crypto-asset service providers (CASPs) operating under MiCA
– Online consumer lenders
This last category connects directly to the bank’s newest product offering.
What is Lending-as-a-Service and how does it work?
Lending-as-a-Service (LaaS) is Magnetiq Bank’s embedded finance product for partners who want to offer consumer lending under their own brand without holding a banking licence.
The structure works like this: a fintech partner handles marketing, client acquisition, and onboarding. It passes the application data to Magnetiq Bank via API. Magnetiq Bank performs the credit scoring and issues the loan. The loan sits on Magnetiq Bank’s balance sheet. The partner’s customers experience a fully branded lending product. The partner does not need to build banking infrastructure or carry a banking licence.
A live example: a fintech operating in Germany wanted to offer consumer loans to its customers. German consumer lending requires a banking licence — which the partner did not hold. Magnetiq Bank structured the LaaS arrangement, enabling the partner to launch a consumer lending product in Germany without Magnetiq Bank needing a physical presence or direct sales operation in the country.
This is embedded finance in practice — banking infrastructure delivered at the point where the client actually needs it.
How does Magnetiq Bank manage its capital position?
Magnetiq Bank’s revenue model is primarily fee-based rather than interest-based — the inverse of a traditional bank. Most of the income comes from transaction fees, payment processing, and service charges rather than from interest on a large loan book. The bank currently holds a capital adequacy ratio of 46%, well above regulatory requirements, and is in the process of deploying that capital more actively through products like LaaS.
The bank is part of the Signet Bank Group, which brings significant capital market experience to questions of balance sheet optimisation and deployment strategy.
FAQ
Why do traditional banks refuse fintech clients?
Most traditional banks lack the internal expertise to assess the risk profile of an EMI or payment institution. Evaluating a fintech client requires understanding how its compliance controls work, what its end-customer flows look like, and how it operates across multiple jurisdictions. Without that knowledge, most banks default to declining the relationship rather than investing in building the capability.
Is the onboarding process at Magnetiq Bank faster than at a traditional bank?
It is more thorough, not necessarily faster. Magnetiq Bank conducts due diligence on both the client institution and the client’s own compliance systems for end customers. The process is fully digital — e-signatures, API-based document submission, no branch visits — but it is extensive by design. Fintech clients with prior banking experience understand this and come prepared.
What licences does Magnetiq Bank hold?
Magnetiq Bank holds a full banking licence in Latvia, operating within the European Economic Area. It also holds MasterCard and Visa acquiring licences for Europe. It is MiCA-compliant, enabling it to serve crypto-asset service providers operating under the EU’s crypto regulatory framework.
What makes Latvia a relevant fintech banking jurisdiction?
Latvia is currently experiencing strong growth in EMI and MICA licence applications. It offers a recognised European regulatory framework, and Magnetiq Bank’s presence there means clients get access to SEPA, SEPA Instant, SWIFT, and Visa B2B Connect — all within the EU regulatory perimeter. UK-licensed companies can also bank with Magnetiq Bank and remain aligned with European AML and sanctions standards.
How does Lending-as-a-Service differ from a standard loan referral arrangement?
In a LaaS arrangement, Magnetiq Bank is the licensed lender. The loan is issued by Magnetiq Bank and sits on its balance sheet. The fintech partner manages the customer relationship and uses Magnetiq Bank’s infrastructure — credit scoring, compliance, funding — via API. The partner’s customers interact with a branded product. It is infrastructure-level collaboration, not a referral.
Banking Built for Fintechs: Inside Magnetiq Bank
