PEP Episode 024 — Mastering the Financial Frontier with Viktoria Soltesz | Moving Money (How Banks Think)

Podcast Description:

Embark with us as we navigate the intricacies of the financial world alongside Viktoria Soltesz, lauded author and 2023 Businesswoman of the Year. Viktoria’s storied transition from a Cyprus accountant to a payment processing guru forms the crux of our enlightening dialogue, highlighting her seminal work, “Moving Money: How Banks Think.” Her expertise illuminates the inner workings of compliance, the challenges faced by high-risk clients, and the pivotal role of law, accounting, and technology in the dynamic payment industry.

From the trust-based pillars of modern currencies to the transformative space of cryptocurrency, Victoria masterfully demystifies the payment landscape. She escorts us through the realms of open banking in Europe, Africa’s innovative mobile money systems, and the captivating evolution from tangible to fiat money. Additionally, we grapple with the future’s uncertainties, such as the impending surge of digital currencies and the regulatory obstacles they precipitate. Our conversation is an invaluable resource for businesses and startups aiming to chart a course through the turbulent waters of financial planning and international banking.

Completing this comprehensive foray into finance, Viktoria imparts pragmatic advice for navigating the complex payment provider terrain, the necessity of robust financial planning, and the significance of building strong international business relationships. Together with Global Legal Law Firm and PSP Angels, we bring you a treasury of insights and strategies to thrive in the global marketplace. Tune in to this episode for a masterclass in finance, where we unlock the secrets to cultivating successful business endeavors across borders. Visit Viktoria Soltesz:

Now the complexity starts when we are talking about international transactions, because maybe for country A this transaction is completely legal, but for country B it’s not. For instance, gambling or casino or betting activities In Islamic countries, this is restricted from the get-go. So even if you have a payer which the gambling activities is legal in country A and even the casino maybe is maintained in a country B, when the gambling activities are still happening, if there is a correspondent account connecting all these transactions and that restricts these kinds of activities, that can also stop your transaction and you as a user might not see anything from the backend, because you see that I’m sending the money from a country which is legal, I’m accepting the money from another country which is also legal, why the transaction doesn’t go through. So for this you really need to understand how the banks are connected to each other and how the money flows internationally, because different banks have different rules and regulations and different risk appetite areas as well. For example, if you have a big bank and you are making millions, life is good, your shareholders are happy, you’re not going to risk the whole operation to onboard one new client, mainly if that client is I don’t know you, I don’t trust you, I’m going to risk my whole license and my whole operation or, god forbid even just get a penalty because you might do something wrong.

So first, how banks are maintaining their portfolio. So let’s say that you’re a financial institution. You worked hard and paid a lot of money in legal fees and staff costs to set up the financial license, so obviously your aim is to keep that. So what you need to do is to make sure that you are earning money enough to satisfy the shareholders, but you are not taking that much of a risk which is jeopardizing the whole license and the whole operation. So that’s why you have a risk guy A risk guy or a girl who’s walking in the office and tells you that okay, guys, I think if you are taking a certain vertical, I can see that on the market rate, we can sell our financial products and services on a certain amount of money, obviously minus our cost. That generates a profit, but it’s still within the risk appetite In case something goes wrong. I think we are still fine.

Now, how you set up what is the high risk, medium or low risk? It’s completely subjective. There are some recommendations. Of course, there is the benchmarking of the industry, but overall you as a financial institution need to understand what is your own risk appetite. Why? Because if you’re serving clients that no one else wants to serve, then you can pump up the prices, but there is a reason why no one wants to serve them because they are higher risk, because they can do something wrong. There might be an opportunity of tax avoidance, there might be an opportunity for illegal trade. Now you need to see that what is the balance between the risk and the price that you’re willing to take?

Podcast Transcription

Jeremy Stock (00:00:01):

Welcome to the Payments Experts Podcast, a podcast of Global Legal Law Firm. We hope you enjoy this episode.

Jeremy Stock (00:00:15):

Welcome to the Payments Experts Podcast, a podcast of Global Legal Law Firm. Today we are very excited to have in studio, we have joining us, Alicia Truva, who’s a senior associate, uh, transactional attorney with Global legal Law firm, as well as our special guest, the author of the book, moving Money, how Banks Think, if you can see that, if it’s not out of focus. Victoria Soltesz. Victoria, this is your second time on the Payments Experts Podcast. We’re very excited to have you. Welcome.

Viktoria Soltesz (00:00:50):

Thank you so much, <laugh>.

Olesya Trusova (00:00:52):

Well, Victoria, welcome again to Global Legal for your second podcast. And, um, since, uh, your first podcast, uh, with us, there have been some fascinating developments. You were eliminated as a businesswoman for the year 2023 by in, uh, inter by Acquisition International, and you published your book. So congratulations on this. Excellent, uh, achievements.

Viktoria Soltesz (00:01:21):

Thank you very much guys, and I’m super excited to be back on a show. Um, I’m always listening to the podcast and I’m super excited to be here today with you. Yeah.

Olesya Trusova (00:01:30):

Well, Victoria, I read your book with a great interest, and what I find, uh, very exciting about your book is that it simplifies pretty complex, uh, concepts like financial systems, banking principles, payment solutions, compliance limitations, and you speak about all these complex things in so simple terms so that everyone can understand it. So, let’s talk about your book. What inspired you to write this book? What is your main audience and who would benefit the most from reading it?

Viktoria Soltesz (00:02:13):

Well, let me go back a bit, uh, to, to explain how I started, because that puts, uh, everything in a bit more perspective. So my original, uh, profession is accountant. Uh, so I started up as an accountant in Cyprus in Europe, well over 20 years ago when there was no such a thing as compliance back in the day. Um, we helped clients to, uh, relocate to Europe. Cyprus was an obvious choice because Cyprus just joined the eu. There was a lot of tax benefits for foreign investments and foreign capitals. So I was, um, uh, working for, um, a big law firm, uh, fiduciary company, company corporation. And then I specialized into tax optimization and, and, uh, became a tax consultant. And later on when, you know, compliance became and more strict, and we did have challenging clients, obviously with offshore setups. And, uh, because of the tax, uh, benefits of Cyprus, it attracted a lot of, uh, investment and brokerage firms, uh, which are obviously high risk.

Viktoria Soltesz (00:03:11):

From payment perspective, I gathered, um, a lot of medium to high risk clients who were having serious problems with banking and payment. And who do you turn to if you don’t have the answer, obviously to your accountant? So I try to answer them as much as I knew, but obviously my accounting qualification did not cover a lot of things which are very specific to the payment and banking industry. For example, visa, MasterCard, a CH, transfers, you know, correspondent accounts. There are a lot of these nuance information. If you don’t know, you don’t know, right? So clients don’t even know what are the questions that they’re looking to, to, to have the answers for. And me being in the middle, obviously being an accountant bombarded with all these client client questions, I needed to do my own research. After a while, I realized that once you have basically one client, you have them all.

Viktoria Soltesz (00:04:07):

’cause everybody has the same issues, the same problems, and there is a very specific way how banks think. And that’s when I realized that, hmm, that could be something interesting here and focused more my time on the payments, because obviously I still did the accounting and audit and helped clients in a different way. But then when I realized that there’s a huge gap on the market in terms of understanding these very specific payments and banking phrases, expressions, way of thinking, um, and it seems like that no one really has the answers to all those questions. And that’s when I realized that there could be a good opportunity, um, not only just to write a book and, you know, just send over these to the clients instead of me explaining everything over and over again. Uh, but put everything in a written format, which raises also awareness of the existence of the payment industry, the payment and banking hurdles, the compliance, which in my opinion, it’s a complete separate industry now on its own.

Viktoria Soltesz (00:05:06):

It has a bit of compliance. So it is a bit of a low, it has a bit of accounting because majority of the payments are still executed by accountants. There’s reconciliation and there is payments on that, you know, calculations. It has a bit of technicality because you know, you need to integrate things. You still need to be on top of the new FinTech innovations and understand, you know, the technology technological jargons as well. But there is no summarized institute or academy or qualification that you can go to, and then you can say that, aha, now I understand. And then obviously help your company or your clients, or, it depends what the, what is your career pop. So that was the reason I, I wrote the book. And, um, since I launched in, in January, now it’s available on, uh, on every Amazon store. So it’s not only in amazon com, but in the European versions as well. Um, it, um, it, it became a really good success because as you say, um, I tried to focus on simplifying all those terms and all those expressions, uh, what could be very hard to understand for people who are not coming from the payment industry. So yeah, that was my goal.

Olesya Trusova (00:06:15):

Excellent. Thank you for this introduction and what a journey. Mm-Hmm, <affirmative>. Now let’s talk about the nitty gritty of how payments really work. So we all make purchases and it seems pretty easy. You just, uh, take your credit debit card or use a mobile wallet, and the boom money leaves your bank account instantaneously. However, behind this simple transaction, they exist a complex ecosystem and the millions make online per payments today. But not everyone really understands how payments actually work. Could you please explain who are the main players in this payment ecosystem and what steps the funds go through in order for online payments, uh, to be protested?

Viktoria Soltesz (00:07:11):

Well, I hope you have more than a year, because I think that’s the amount of time that I need to explain everything in detail. Um, what I know is that we’ve got, we’ve

Jeremy Stock (00:07:20):

Got about four hours slotted for this podcast,

Olesya Trusova (00:07:22):


Viktoria Soltesz (00:07:23):

Okay, so I’m getting in there, <laugh>, right? So yeah, the whole idea is that, um, a lot of people are talking about card payments because these are the most popular payment methods in the US as well as in Europe. However, now we see that there are a lot of emerging markets whereby people are going online and buying more and more services and products online, although they are not part of the banking system. This could be one of the areas like Africa. The other one could be Latin America, Asia. So those are different, um, consumer habits, which you as an online industry, uh, player with the online business need to cater for as well. So when you’re asking me who are the players who are, you know, involved in this payment ecosystem, it really depends on what type of payment the method we are talking about.

Viktoria Soltesz (00:08:14):

So if we are talking about cards, obviously we’ve got the card issuer, who could be the Visa and MasterCard, who is actually issuing the card, who is creating that kind of card for you in order to turn the 16 digit, uh, number into something valuable, which is the money. Obviously there is an issuing bank who is holding your funds, and with the card it releases to whoever takes the card. There’s an acquirer bank who’s acquiring the card, who is taking all the money, uh, on behalf of the merchant or the shop that you are paying to. There could be millions and different, uh, players in between in terms of technological, uh, providers. It could be a gateway, it could be a specialized payment service provider. It could be even Apple or Google, who is allowing you to use the wallet where the card is stored.

Viktoria Soltesz (00:09:05):

So there could be multiple players. I, however, would really like to highlight that card payments is just one way of paying. Um, there could be millions of other ways. Um, and now what we really see coming up mainly in Europe is the open banking, which is excluding the cards, which is, um, it has obviously benefits and downfalls as well, but it really tries to focus on direct, uh, payments between banks. It’s like a bank wire, but it’s much more simplified. So you don’t have to type in the long, uh, digits of the, of the recipient’s, uh, bank account details, but you can just actually use an application on your phone and the money is directly, uh, transferred. It’s good for cost because you are excluding a lot of players in between, which could be, you know, uh, slowing down the transaction or giving extra cost to the transaction in between.

Viktoria Soltesz (00:09:55):

But it could be a problematic one as well, because the more you exclude those, um, extra facilitators, uh, the less secure the payment gets. Obviously there are no opportunity for chargeback. So as with everything in life, there is, uh, benefit, there is a downfall, but this is just one way. Now, Africa, uh, for example, is very popular on mobile payments. That means that people simply just don’t have bank accounts because they are living far from the village, or the banking system is not that developed. So what they do, they sit on a bike, they go to the village, they buy, um, uh, a mobile provider’s services, which could be minutes, which could be any kind of volume, which is represented in a, in a, in a mobile payment form. And then they are using the mobile, uh, phone as, as, as, as a physical, um, device, um, as a form of like banking.

Viktoria Soltesz (00:10:46):

Mm-hmm, <affirmative> in this way. They can transfer to each other minutes, which represents the volume, or they can tell the mobile provider to deduct from my next mobile bill the payment that I’m spending on my YouTube utility bill, for example. And that also creates a very interesting ecosystem. Of course, in this case, the players are also the mobile, uh, payment, um, uh, provider, which is very interesting from a regulatory perspective because mobile payment providers are not financial institutions. So then also then it, uh, raises the question that how can something which is a mobile payment provider, a technology provider, act as a financial institution. So there are a lot of interesting areas around it. That’s what I said to you, that I can talk about it for years and years, but for now, I think it’s interesting to mention that there are different ways, different payment methods, different players, different benefit than obviously different shortcomings.

Olesya Trusova (00:11:40):

Yeah. Excellent. So now that we have got this snap snapshot of the, uh, various, uh, payment systems that would be good to explore important features that, uh, shape the payment system landscape. And in your book, you, uh, talk quite a bit about trust and how trust is important, uh, for the payment systems. You mentioned that the Fed system is, uh, completely trust-based. You also said that, uh, the bitcoin system depends a lot on the trust that the participants of the system, uh, has towards each other. So can you explain why trust is so important and, uh, why, uh, these different systems, uh, cannot exist without it?

Viktoria Soltesz (00:12:32):

For this, let’s go back a bit in time when people used to live in tribes and in case to ex exchange value, they had to have the, the, the actual thing that they wanted to exchange. So for example, I’ve got some chicken and I want bread, and in this case, we are just trading between each other. So the, the, the item itself became the value because I have a chicken which worth one value of a chicken, right? So that’s what we are trading between each other. But as, um, people became more and more civilized and trade got global, let alone mention of virtual online payment one, uh, we needed to find a common denominator which we can use as a, as a value representation as a sort of money. Now, back in the day before the first and um, um, yeah, before the second or the first, uh, world War people used to, um, connect these values, uh, to gold or different kind of commodities, these were the commodity based fiat systems.

Viktoria Soltesz (00:13:29):

Because even though it, it has a bit of a trust element, but the trust only goes as far as when I tell you that I trust you, that you have enough gold to exchange it for me to this piece of paper, to this IOU note when the need arises. So I have trust, but the trust was enough to trust you after the second world war, America became the major economy. And since everybody, uh, all the country’s economies were were absolutely falling apart, the America came, came, um, the leading economy, and America said that, guys, trust me enough that I will have the capability to pin the value of the dollar to gold in this way. You can use my currency, which is a dollar to, uh, trade between each other to use as a common denominator to co to to use as a base value for the international trade.

Viktoria Soltesz (00:14:26):

And whatever you need, I’m here. Trust me enough that I will be able to change it, the gold back to, uh, to to dollar when you need that. Now the problem happens 30 years later when, uh, the, the world was starting to run out of the, of the gold reserves and America had some economical issues as well. So back in 1971, Nixon said that he’s on pegging the volume exchange ability from the gold to dollar. So that means the dollar worth something because I said so. And by that time the system developed so much that there was no way back. So what could we do? We could just start over again and start to find a new financial system in a day involving all the economies in the world and try to come up with a solution. But obviously it was not really viable. So that’s why Nixon had actually the, the courage to, to, to make this very blunt move.

Viktoria Soltesz (00:15:25):

And that’s what led us today, which is a based, a trust-based financial system all over the world. So right now, the volume of the money is the word of the economy, which is behind at that currency. So for example, in dollar, the dollar worth something, why? Because I trust enough the US economy that this dollar will be redeemed at one point for all of the promises. What the, um, the government is promising me right now, it’s more or less running on credit, but obviously this is a whole different chapter on economy. But this is the case for all other countries, um, currencies and economies as well. So when you are going, for example, to a smaller, um, economy, let’s say Zimbabwe, in case that there is a political turbulence, there is a political unrest, people start to lose faith in the leading government, which is backing up that currency.

Viktoria Soltesz (00:16:22):

And that’s when we see hyperinflation of that very currency. So that’s why it’s very important to understand that the value of the currency is just as good as the economy behind it, who is backing it up? And all the trade internationally, obviously I’m just very best at diving it here, but all the trade internationally, which is taking place, is taking place because countries trust each other enough that when I tell you that take my currency, you trust me enough that indeed that there is volume behind, uh, my currency, and that’s what keeps the economic trade around. Now, obviously the system is far from perfect. This is what we could came up with over the years. It’s a whole different debate if you agree with it or not, or if it’s working or not. But this is what we have to deal with, right? You or me, we are not gonna change anything.

Viktoria Soltesz (00:17:11):

The only option we have is that play, play according to the rules, right? But we need to understand the game to, to figure out what are the next steps. So that’s why it’s very important to understand that economics, um, are there to safeguard this system for, for all the opportunities that they have. They need to make sure that this system is kept as it is, the trust is maintained, and there is no, um, debate or or question of the, of the economy, uh, which is backing up the currency. What I mean that in case that there is a bit of a crack on the system, for example, no, what happened back in 2008 when the financial system collapsed and banks got bailed out? This is the reason because ba bailing out banks is still cheaper and it’s easier than to restructure the whole global economic system system and put them in a whole different kind of structure.

Viktoria Soltesz (00:18:11):

It is not good, yes, but it’s still better than what’s the alternative? So this is the kind of system that we are living in. And um, um, back at the time when Soto came up with the idea of the blockchain based system, and, uh, when they tried to challenge the status quo, there was a whole idea that let’s create something which is there is no central uh, government, there is no central figure which is controlling everything here. The community controls itself, everybody has a say, and the value of the currency is simply based on, um, uh, on demand and supply. Now, unfortunately, we saw what happened with cryptocurrency. So obviously, although the idea is good, there are certain human elements that we didn’t really consider. If we are letting everything according to the free market, then obviously scam appear, market manipulations come up, and all of the traditional, you know, dumps dump schemes are coming up from the 1920s.

Viktoria Soltesz (00:19:12):

So that was not really successful, but that it shows that at least people have the need and the try to come up with something which is an alternative for the system. Until today, we haven’t really found anything which is good enough to change over, but sooner or later, um, we have to. So that’s why it’s very important to know that economic, um, uh, the, the government’s economic is always trying to safeguard the system and maintain the system no matter how much of it cost and who is executing all of these, uh, decisions, which is a fiscal and monetary politics of the, of the government or basically the banks and the financial institutions. So this is the basis of how banks think. And if we understand that banks need to play according to the rule to maintain the financial system, we see things and we see different, uh, decisions and mm-hmm, <affirmative> and, um, uh, compliance, um, rules and regulations, maybe with the different eyes and we can be a bit more understanding towards what is going on and why the banks are making certain decisions.

Olesya Trusova (00:20:18):

Thank you so much. It’s very interesting and thank you for explaining the history of financial systems. In so simple terms, I think I finally understood it, <laugh>, as businesses expand, uh, internationally, cross border payments become really essential. Um, how has globalization shaped, uh, the payment ecosystem?

Viktoria Soltesz (00:20:44):

Yes, globalization is the, is coming with a lot benefit, but obviously as we said, everything has, uh, what has benefit has, uh, some, uh, some setbacks as well. It is the same situation with the, with the global payments as well nowadays, uh, everybody can just open a website, start to sell services and products. However, the traditional system, which arose from thousands and thousands years ago is set to understand that, um, if there is a business or if there is a person, it is localized to a certain country, which means that the person lives in one country, they pay taxes in that country. And that’s what it is. So with a globalization, there’s a huge new challenge to pinpoint where the business is doing actual activity. Not needless to say, there were some creative people who took advantage of this situation. So what they said that, okay, I can see that in this country the tax rate is whatever, 35% on that country is 0%.

Viktoria Soltesz (00:21:42):

I’m online, I’m trading from the 0% tax haven who’s gonna stop me? And that’s the problem. Now, to summarize all of those rules and regulations, which are maintaining obviously this financial system to make sure that people are not scamming the system, not taking any advantage through this regulatory arbitrage. That’s, uh, how we call this when you’re trying to figure out what, uh, what gives you better parent than conditions. Um, and that means that, um, all of those countries now need to, um, play according to the global rules in order to be part of the, of the bigger financial system. Um, that’s why we have, for example, sanctions. So in case, um, someone doesn’t want to play by the rules of the whole global economic system, we just don’t want to deal with that country, that economy, that person, that business. And that’s when we can see that there are blacklists or gray lists or, or sanctions happen.

Viktoria Soltesz (00:22:42):

Um, but the whole idea for the globalization, the globalization is that we are coming up with a summarized common understanding that what is the best to defend this financial system. Now, obviously it’s hard, right? We’ve got millions of different countries, we’ve got different, uh, interests, we’ve got different, uh, con uh, companies and, and lobbies. So it is a very, very big challenge. All we can do is that we can create international rules and regulations, which are more or less now I can see they, they, they start to form now. So we do have a common understanding how financial transactions should be handled, how different kind of investment structures should have a license, what could be the reporting requirements when it comes to finances, I would say more or less it’s really happening on the global scale, but there are obviously still some differentiations where the creative people are finding the loophole in the system and taking advantage of it.

Viktoria Soltesz (00:23:40):

So that’s what we see now that the biggest challenge, uh, when it comes to globalization and the payments, is to find the way, which is good enough for the sender country, for the recipient country, and maybe a different country where I’m running my business as well. And this is, um, this is a very unique knowledge, needless to say. Obviously everything is changing all the time with the technology, with the advancements and the innovations. Um, and this became a complex maze to all of those, um, online companies who are trying to navigate that. So it is, it is a hard work, but unfortunately this is what you have to deal with. You just need to have the right experts next to you.

Jeremy Stock (00:24:21):

Exactly, exactly. Victoria, can I jump in with a quick question related to that? I, you talked about, you know, there’s gonna be certain players we know in the private sector who may be wanting to quote unquote take advantage of, you know, tax havens, et cetera. Is there an element also to this where maybe it’s not someone necessarily who’s trying to take advantage of the system, but rather is obviously looking to maximize profit, and it’s these governmental bodies that are in really imposing themselves and wanting to make their dollar, that, that that can be, um, kind of a, uh, oppressive in some ways, or at least at the very least, to kind of, uh, disincentivize this international, um, exchange. Do you see that happening? What are your thoughts on that?

Viktoria Soltesz (00:25:04):

Definitely, because if you think about it, let’s say that you are managing a small little island in the middle of the ocean. You don’t have agriculture, you don’t have industry. What do you have good weather and maybe lose regulations, of course you want for any investors to come to your country, hire your citizens, pay your rent, pay your taxes, but why would they come there for, right? What would be the benefit for them to come to your little island in the middle of the ocean? The only weapon, let’s say in your hand is maybe drop the taxes a bit, maybe look a bit more desirable for international trade. Now, obviously, if I’m America, if I’m Europe or in if, if, if I’m any other established, uh, well maintained high taxation jurisdiction, I’m not gonna like this, right? Because how come that all my citizens who should pay taxes to me are not having a sunbath on this little island whereby there are no taxes.

Viktoria Soltesz (00:26:02):

So of course, my interest is to stop all of these happening, and this is what we see. Um, that was the, the reason why anti money laundering, uh, policies came up back at the eighties. That was the reason why, um, these banking secrecy act now. It’s, um, um, it’s, it’s, it’s almost, uh, global everywhere because people did take advantage of that and it was not really a fair game that whoever could figure out what’s going on and obviously afford to pay, um, uh, the company in corporation and the high fees for the, for the offshore lawyers, they can just take the tax money elsewhere and they just not pay tax. It’s not really fair for society. So it had to be stopped. And that is the reason that now we see that banks, um, tier one banks or more established banks are having lower risk appetite, meaning that they don’t really like to work with any kind of structure which has an offshore set up with it, or any kind of offshore license, let’s say, financial institution or any other different licenses which are coming from a less regulated, perhaps looser environment when it comes to submissions or, um, um, or, or, or, or any other, uh, financial regulation, which is, which is maintaining how that the company is operating.

Viktoria Soltesz (00:27:16):

So that’s the only way that larger economic can actually defend themself to stop the payment going through the international banking system, which is arising from the trade on these quote unquote less ethical, although it might not be illegal, but definitely less ethical and questionable ethical, uh, background operations. So this is what we see here. And the anti-money lounging rules and regulations are also changing from country to country. So that obviously adds, uh, insult injury when it comes to complexity and, and, uh, it gives a really, really big headache of, uh, all the companies who are trading internationally.

Olesya Trusova (00:27:56):

Thank you. Um, the other feature of payment ecosystem is disruptive innovations. And in your book you said that many businesses are born out of frustration over a lack of better option. Yeah. So blockchain, cryptocurrencies, stable coins, uh, these are all new developments. Of course we have heard about them, uh, by now, but how do they really work and what is the disruptive power of these innovations,

Viktoria Soltesz (00:28:29):

Right? So blockchain came out of the frustration as I said, that people lost faith in the financial system for good or bad reasons. It’s a whole different conversation, but this is what happened. So there was a person who came up with the, the idea that what if we have a ledger which can be visible and completely transparent for everyone. That’s where we are recording all those financial transactions. So we take out the centralization from one group, which could be the government, which could be the tax office, or any other decision makers who are doing a good or bad job. That’s what we’re obviously can’t decide, but the whole idea is that everybody can see what’s going on. So that was the whole idea of the blockchain. So if you think about it, if we would use the blockchain for originally what it was intended for, everybody’s finances should be completely public.

Viktoria Soltesz (00:29:22):

Think about it. Let’s say that we are playing a poker game, right? And then we are sitting around the poker game and whoever is winning, we are all writing down the scores. So in case someone is making a mistake or, or leaving for a phone call and going back to the table, there is a common understanding that what is the score? Because everybody has the same ledger. That was the same idea for the blockchain as well. Now, to give volume for all these transactions, they had to come up with, with, with some kind of, um, volume representation, and that became the cryptocurrency. So the cryptocurrency is not something that we made in order to bypass the system and create some kind of new currency, not like we had enough, right? But the whole idea was that to create an a volume which is understood in this ecosystem, let’s go back to the poker table.

Viktoria Soltesz (00:30:12):

Let’s say that we are using, uh, beads or candies as like chips, and we agree that we are giving value to those items. Why? Because we all agree on the table that this is how much does it work, but outside of the table, it might be worthless. So there was a whole idea of creating the cryptocurrencies. Now, as we know, humans are creative and <laugh>, and, uh, there was a lot of creative people who saw the opportunity, how to bypass the system, how to go through all of these sanctions and, uh, regulations and the a f policy and the KYC policy. And they said that, great, now we have something which is, um, which is common enough, which is the blockchain. It does have a volume. Back at the day, it was a Bitcoin. So what if we are using this quasi cash quasi kind of value as a representation of the trade, instead of using dollar, which is the bank is giving me headache and I can’t do that, and I have to pay taxes on that.

Viktoria Soltesz (00:31:11):

You know what? Keep all of that. Let’s trade in cryptocurrencies. And that’s what we saw in the last couple of years. Now, obviously, it is not only just a huge threat to the financial system, as we said, that it is very dangerous, but also gives the opportunity for people to avoid tax, to support illegal activities. Back in the day, the Bitcoin, I think, I think there was a statistic that the, the first couple of years, the Bitcoins were used, I think some, some ridiculous 70, 80% just to support the, the illegal trade, you know, and the steel crow and all of those dark web transactions. Um, so, so, so that was the obvious bypass of the, of the system. Now, fast forward a couple of years later, and now we have stable coins, and someone can, can have a good, good question around it that why do we have stable coins?

Viktoria Soltesz (00:32:01):

We’ve got dollar and we’ve got euro. Yes, but the dollar is monitored and the euro is monitored, and it is has it, it has to play by the rule, meaning that they have to fulfill different, uh, rules and regulations. They have to be submitted. You can’t try cheat, cheat your taxes. They have your photo, uh, passport copy to open an account for you. And then there is something which is like a dollar, which had the volume like a euro, but no one is telling me to pay taxes on it. It’s not regulated. It’s, it’s widely accepted. Let bypass the system. Let’s cheat it. And the problem was that more and more people started to think about it. So obviously the regulator realized that guys, something is going wrong, right? I’m doing all this regulation and there is something which is a cryptocurrency. I don’t know where it’s coming from.

Viktoria Soltesz (00:32:51):

I don’t know who is, who is behind it. There are market manipulation happening. I can’t enforce my tax lows and, and rules and submission regulations. Guys, we need to stop this. So this is what we see today, that there is a power struggle between mm-hmm, <affirmative> the new innovation, which was intended to be good and intended to be innovative, but it just ended up really badly. The regulator who is trying to juggle and trying to maintain the financial system whereby there are millions of cracks and, and it’s, and it’s almost pulling apart. So yeah, this is what we see. And, um, I think the future is going towards more and more regulation, but then it raises a question then if we have something which is working like money stored, like money, you know, uh, you need to do submission after that, like money, you need to have a financial license to handle it.

Viktoria Soltesz (00:33:45):

Like money. It is basically just a different currency, right? So we came up with the revolution of the financial system, which is over time going through the same hurdles, meaning that it generates the same rules and regulations as the traditional fiat money, which is going to end up being just another currency. So this is how I see the future, obviously, this is my personal opinion, but, uh, but how it looks like that we are really going towards, uh, to that, the good thing however, is that the technology and the innovation, um, is valuable enough for all the governments to realize that. And that’s how they came up with the Cbdc Central Bank digital currency. It is digital. So it is something like a blockchain kind of kept like on the letter, but it’s still centralized because someone needs to maintain that no one is cheating taxes.

Viktoria Soltesz (00:34:38):

Someone needs to maintain that, you know, all the criminals are, are, are getting punished for what they should be. So it is centralized, but it’s issued by the central bank. And the good thing about the central bank digital currencies, there were actually a couple of pilot programs which are launched now just to tell the waters how people like it and how does it actually work in real life. Uh, there are self-executing codes that you can connect to the currency. So for example, if I’m giving you any kind of subsidy or, or, or supply or help, I know where you are gonna spend the money. So I can, um, I can block all of those transactions, which are not intended when I’m giving you this kind of benefit. So for example, there is a social benefit for a family, and maybe one family member is going and buying alcohol on it or, or, or using it for gambling purposes.

Viktoria Soltesz (00:35:29):

If there was essentially, um, uh, it, it, it, it, this money was the representation of a digital currency, which is organized and controlled centrally, that they could see that no, you can only spend it on, on the child clothing or food or all other, um, usage. What was intended for, or for example, right now how you are doing your taxes. You call your accountant, you pay a lot of money, your accountant is either doing a mistake or not, but he’s vouching that everything is gonna be fine. And submitting your taxes, do we trust it? Well, we don’t have anything better to do, right? If that was a central bank digital currency, which has a self execution code connected to that, which says that every time the money moves between people automatically, the GST or VAP or any kind of value added tax is deducted and sent to the tax office, we would not need to be relying on accountants.

Viktoria Soltesz (00:36:29):

What a great thing. Now, obviously this is far away because this is the idea, but by the time we implement something like that, by the time we create a system around it, by the mass adoption, uh, takes place, it’s gonna be a long time. But this is definitely somewhere where, um, I can see that the money as a volume unit is going to towards, and, and that’s how the, um, the central banks and the governments can still intervene and control the currency and execute all those monetary fiscal policies, as well as taking advantage of all those digital advancements that we really, we really, really see that, um, how the money is kept and spent on a, on a, on a, on a digi, uh, digital ledger. So this is, I think that’s where we’re gonna <laugh>.

Olesya Trusova (00:37:13):

No, that’s, uh, actually very encouraging to see how the governments start using the, uh, benefits, uh, of the digital currency. And you mentioned in your book that, uh, uh, in as of June, 2023, already 11 countries adopted digital currency and many more countries are actually investigating it. But I want to shift our discussion towards regulation. So regulations are lagging behind innovations. Uh, what happens is that when the regulation is enacted, it is designed to address the existing risk profile of a good on or services. And when the disruptive innovation emerges, it comes with totally different risk profile and, uh, uh, it requires really a different, uh, approach. Um, for example, when the motorized vehicle was introduced in the uk, the UK government adopted, so-called Red Act, red Flag Act. It was, uh, back in 1865. And this, uh, red Flag Act, uh, prescribed very slow speed limits, like four miles per hour for urban, for rural areas.

Olesya Trusova (00:38:33):

And, uh, it required a person to run ahead of a vehicle announcing its arrival. So when you think how government at that time decided to approach motorized vehicle as a disruptive innovation of that time, you see that it either applies the old mindset, the regulating disruptive innovations, or it tries to apply existing regulation, which is already outdated in terms of the risk, uh, profile. And the cryptocurrency is not an exception. In, uh, the US we see a lot of conover controversy around cryptocurrency. There are a number of regulatory agencies that are enforcing ex existing regulations, and, uh, uh, recently the Securities e Exchange Commission, um, filed, uh, uh, a suit against, uh, uh, crypto, uh, platforms, uh, and trying to enforce existing security regulation against cryptocurrency. And, uh, um, so instead of like choosing to regulate this new innovation, the US for now decided to enforce the existing rules and, uh, uh, what about Europe and other countries? Because it seems that their focus was more on sort of developing the right regulatory framework, uh, for these new products. If you can give us example, uh, of those, uh, regulatory frameworks, uh, that, uh, are emerging, uh, across the globe, that would be very interesting to hear.

Viktoria Soltesz (00:40:07):

Yes, we are, uh, heading towards an overall, um, summarized regulation, which is called Mika in Europe. And, uh, that is intended to regulate cryptocurrencies based by their, um, behavior and usage. So obviously, if you’re using a cryptocurrency as a, as a form of value to exchange volume as a money, then it has to be regulated by a money. If it’s an investment vehicle, meaning that I’m giving you a token for your PAI investment in my project, and when I’m generating profit, I’m giving you back, um, the dividend, then it has to be regulated under the shareholding and the, and the, and the share, uh, dividend, uh, taxation and, uh, and obviously the relevant regulation. However, if it uses like a utility coin, so for example, you are buying a ticket or, or, or somewhere you’re going to the, to the theme park, and with that ticket, you can use the ride.

Viktoria Soltesz (00:41:02):

It’s very similar for online platforms when, uh, you buy a coin and for that you can get different benefits and exchange the coin for those services. Then again, it can behave like, um, a voucher or, or any kind of like alternative volume within a closed community and a visit, it has different, uh, regulatory triggers. So it’s very interesting that, um, Europe is now trying to pinpoint everything. And you know, Europe being Europe is overregulating everything as as, as as usually happens. Now, it’s very interesting, however, what happens outside of Europe, uh, because there are still countries without any kind of regulation, and this is, um, which is, is posing threat, um, to all of those, um, areas, which is completely regulated because the source of funds could be from a country when crypto is not regulated, and then it just enters the banking and the financial system, and then it flows through and it has to be somehow stuck.

Viktoria Soltesz (00:42:05):

Now, the interesting thing is that, um, I had a client, um, who was doing development work back in the day, and he was rewarded by coins or different tokens, and he kept it on a cold wallet. He forgot about it. So 10 years fast forward, he realized that he’s got a lot of money, and now he wanted to cash up. Yes. However, who was giving the opportunity for those cold wallets who actually opened the hot wallet and gave the platform to top up his cold wallet with these coins, meaning that had his, uh, passport copy and utility bill and other K YC information was nowhere to be seen because, you know, it was just one crypto exchange, which disappeared over the years. So we had a serious problem to, to, to prove that the source of funds of these coins, which now have a significant amount of volume, that obviously wanted to put in the banking system and buy a house or a car, is actually coming from alleged sources.

Viktoria Soltesz (00:43:00):

And this is what we see here, that the regulation can only go back so far and only can do so much. Yeah. Um, so whoever wanted to take advantage of the system, it already, it already had. So the window of opportunity for the criminals are thankfully closing down, but, uh, it is still an absolute mess. And, and we don’t have to go far because crypto regulation is just one thing. But even if you’re looking at traditional fear regulation and traditional regulation around money handling or, or investments, it’s still a complete mayhem because there are still countries in this world whereby I can just go set up a company, pay a minimum amount of whatever, $10,000 and I became a brokerage, and I can invest whatever, however, whenever I want. So that is the problem. That regulation is going off the, um, the wrongdoers when the wrongdoing actually happened, and they have a actual case, what not to do and what to avoid.

Viktoria Soltesz (00:44:00):

And it’s very, very challenging to think ahead and think on the future of what could happen, because then we are just writing regulations on, on scenarios, which might never even even come alive. So it’s always like a cat and mouse game. There is, there’s a mouse which is running and a cat is running after it, and sometimes it catches it, sometimes a mouse gets away, but, uh, but that keeps a sense of pain, right? That’s why this pain, exactly, super interesting because everything is changing all the time. And if you’re adding the technical advancements to that, it’s a whole new can of worms. You know, the different payment methods, the different options, the different, uh, connections, the different algorithm. It just makes everything even more sweet. So yes, we are going to be busy for a while. I can see <laugh>,

Olesya Trusova (00:44:44):

I can imagine. I can imagine. So we have spoken about, uh, complexities, uh, of the payment ecosystem, features that shape today’s landscape. Let’s turn to banks, and let’s talk about how banks think. What are the bank’s key responsibilities and how, uh, fulfilling those responsibilities influence, uh, the merchants and businesses, uh, that have to, uh, do business?

Viktoria Soltesz (00:45:15):

I think the most important thing is to remember that banks have two main focus. Make sure that you pay your taxes, make sure that you’re not doing anything illegal. So if you think, uh, that banks trying to control the funds and freeze your account and giving you a headache, I wanna know everything about you is going back to these two things. As long as you can prove your case, which could be transfer of money, holding funds, source of funds, or anything, which is related of how you got the money, why you have the money, and how you’re intending to spend the money, as long as you satisfy these two criteria to prove you are, you are not trying to cheat taxes, everything is that it should be, and you are paying fair, fair amount of taxes, and you are not doing anything illegal, the bank is gonna be happy and satisfied.

Viktoria Soltesz (00:46:02):

So this is the main focus that you need to understand as an online business that you need to see everything from this perspective. Do I transfer money? Okay, what the bank wants to know, how did I get the money? Did I pay taxes on that? And is it legit? Whatever I’m spending my money on, it’s not a legitimate, uh, transaction. Everything as it should be given in the country, um, uh, of the bank. Now, the complexity starts when we are talking about international transactions, because maybe for country A, this transaction is completely legal, but for complete, uh, country B, it’s not, uh, for instance, gambling or casino or betting activities in, um, Islamic countries, this is restricted from the get-go. So even if you have, um, a payer, which the gambling activities is legal in country A and even the casino maybe is maintained in a country B, when the gambling activities are still happening, if there is a correspondent account conducting all these transactions, and that restricts these kind of activities that can also stop your transaction.

Viktoria Soltesz (00:47:10):

And you as a user might not see anything from the backend because you see that I’m sending the money from a country which is legal, I’m accepting the money from another country, which is also legal, why the transaction doesn’t go through. So for this, you really need to understand how the banks are connected to each other. Mm-hmm, <affirmative> and how the money flows internationally because different banks have rules and regulations and different risk appetite areas as well. For example, if you have a big bank and you are making millions, life is good, your shareholders are happy, you’re not gonna raise the whole operation to onboard one new client. Mainly if that client is, I don’t know you, I don’t trust you, I’m gonna risk my whole license and my whole operation, or God forbid even just get a penalty because you might do something wrong.

Viktoria Soltesz (00:47:57):

So I would rather reserve the status quo, and that’s what I’m giving a hard time for everyone who wants to have a new bank account or want to transfer any money anywhere, because don’t throw the boat. I’m happy as I am. I’m already thinking, you know, dancing on thin eyes because of the regulation, which is changing all the time. Don’t give me more headache. If you are not telling me crystal clearly that you are not cheating tax and you’re doing everything legally, I would rather reject it. I would rather create your account, stop being, uh, your bank, drop you as a customer and restrict those transactions. So those are the kind of, um, ideas that, um, that we need to understand really in order to plan the banking and payments effectively, mainly when it comes to international trade. So,

Olesya Trusova (00:48:44):

So now every bank, uh, conducts, uh, compliance, due diligence and compliance becomes like everyday activity, uh, for the bank. And, uh, rightly so, uh, because, uh, understandably banks needs to know the identity, uh, of, uh, its clients and, uh, um, identify, assess, uh, the client’s risk profile. Um, but, um, how do banks conduct, uh, those due diligence? What, uh, the nuances that, uh, the merchants, uh, should be aware of?

Viktoria Soltesz (00:49:22):

Now, that’s unfortunately, again, depends because different regulator regulates the same financial institution and the same activity maybe differently. And that’s the problem that banks don’t even trust each other. So let’s say I’m opening an account in Nigeria, and I’m going through the compliance according to the Nigerian rules and regulations. I make sure that I’m not cheating my taxes. Everything is legit. The Nigerian bank manager says, you are good. Put the money there. I still cannot transfer the money outside and be accepted in Europe many times. Why? Because the European banks looks at the Nigerian regulator and they say, not, not good enough for me. They might work with different rules, they might risk different things. They might see the risk profile in a completely different perspective than me. So as I said, I would rather not rock my boat. I would rather not, uh, rather not, uh, uh, risk anything.

Viktoria Soltesz (00:50:18):

So I would rather reject that transaction. And it also adds to the complexity, um, when we are talking about different financial licenses, because right now, bank could be meaning million things, right? The bank could be your mobile wallet, which is holding your money. Mm-hmm, <affirmative>, it could be your, uh, Walmart credit. It is basically a form of money. So it has to have some kind of regulation around that too, right? Then it could be top of cards, that it could be gift voucher, that it could be, as you mentioned in Africa, the, the mobile payment, that it could be a different form and different money, uh, transfer and money holding activities trigger different licenses in different jurisdiction. So when you’re dealing with crypto, it’s a different license in the crypto license, the virtual asset service provider VOS license, for example. Um, or if you are dealing with e-money, then in Europe we are regulating it under the electronic money institution EMI license.

Viktoria Soltesz (00:51:17):

But for example, when you are going to Canada, you can act as a bank, take money, hold money, execute transactions on behalf of third parties under an MSB money service business license as well. Now, the problem starts that you are an online merchant who to trust, who to avoid which license is good enough, which license wants what from me, what are the documents that I need to submit, how many times I can, uh, expect a check, because obviously this is also a very considerable amount of cost for the merchant as well, to submit all the passport copies and utility bills and contracts and wait for the bank and, uh, release the pros and cons. So it has to be planned accordingly, and it needs to be understood why different checks are happening, how much does it, uh, cost for you as an international, uh, online business, and what are the different banks that you’re working with, how much money you can actually send to them, where it, it’s, it’s within your risk appetite, because obviously, you know, moving funds is always cost and some kind of risk, and then plan your payments and, and, and banking accordingly.

Viktoria Soltesz (00:52:27):

And this is what I can see that it is a very, very complex, um, question. Many times it falls on the shoulders of the accountants. I mean, as I said, I’m an accountant. I know my limitations. We never learned about it at school. And that’s the, the important, um, uh, message that I would like to attract the attention of everyone from the industry, from the payment service providers and banks and the financial institutions from one end, but also from the users point of view as well. Because at the end of the day, you are there to run a business. So you need, um, <inaudible>, you know, to, to, to help, uh, to get the help from the bank, not to create enemies and, um, and have a problem with your banking because that, that could actually, uh, cause the end of your, your whole operation.

Viktoria Soltesz (00:53:12):

So these are the, uh, the interesting questions, which obviously I’m mentioning in my book as well, but that’s what I’m focusing on, um, on my consultancy as well. Um, how to channel the payments in a, in a safest and the most cost way. And what I can see is not that many people, unfortunately, still talking about it, there are still a lot of, um, um, concentration about the obvious costs, for example, sales and marketing and and whatnot, but somehow payments and banking is very, uh, abundant when it comes to proper planning. And, and that’s what I want to, uh, focus on the attention and, and, and bring back, um, to understanding that no, this is, this is a very valid problem. It can cost a lot, it can pose a significant amount of risk for your whole operation, and it does need planning with an expert.

Olesya Trusova (00:54:01):

Yeah. Uh, Victoria Banks do not like to take, uh, high risk businesses. Uh, can you elaborate how banks manage their risk portfolio and, uh, what to do? What would be your advice for a high risk business? I mean, what to do if banks, uh, consistently reject your applications?

Viktoria Soltesz (00:54:25):

Yes. Let’s, let’s put this, uh, this question in two different parts. So first, how banks are maintaining their portfolio. So let’s say that you’re a financial institution, you work hard and paid a lot of money and legal fees and, and staff costs to set up the financial license. So obviously your, your aim is to keep that. So what you need to do is to make sure that you are earning money enough to satisfy the shareholders, but you are not taking that much of a risk, which is jeopardizing the whole license and the whole operation. So that’s why you have a risk guy, a risk guy, or a girl who’s walking in the office and tells you that, okay guys, I think if you are taking a certain vertical, I can see that on the market rate, we can sell our financial products and services on a certain amount of money, obviously minus our cost that generates a profit, but it’s still within the risk appetite in case something goes wrong.

Viktoria Soltesz (00:55:22):

I think we are still fine. Now, how you set up what is the high risk, medium or low risk, it’s completely subjective. There are some recommendations. Of course, there is the benchmarking of the industry, but overall, you as a financial institution need to understand what is your own risk appetite. Why? Because if you are serving clients, then no one else wants to serve, then you can pump up the prices. But there is a reason why no one wants to serve them because they are higher risk, because they can do something wrong. There might be an opportunity of tax avoidance, there might be an opportunity for illegal trade. Now you need to see that what is the, what is the balance between the risk and the price that you’re willing to take? Now, if you are talking about independent banks, they are managing their own portfolio on their own level.

Viktoria Soltesz (00:56:14):

But to connect those independent banks, you need to connect them through an international system. Those banks who are the connectors who are working, for example, like highway in the international, um, highway system, and, uh, connecting different villages to each other. Let’s say the different villages are the bank branches. And to reach, uh, to each other, you have to go to the highway. And the highway has to provide you the road and the facilities and infrastructure to connect these. Now, those correspondent accounts, clients are the end banks. So those end banks have a certain summary of the risk profile of all their clients at the portfolio. So the correspondent account itself needs to balance all those banking different portfolios. So that means that if a correspondent account is losing one of the low risk profile, then altogether the portfolio is becoming a higher risk profile, which can lead to rejection for the highest, uh, portfolio handling and bank to lose the correspondent connections.

Viktoria Soltesz (00:57:22):

Now, obviously you don’t see anything at the backend, right? You’re just like trying to log into your bank and they say, I’m so sorry. Today we can’t process, uh, GBP, why? Maybe this is the reason, right? But there are a lot of, uh, decisions which are happening, um, on a backend, which if you don’t understand that you might actually blame the bank or you not even consider this as a risk. And that could lead to even good banks losing their correspondent connections, which restricts you on certain financial services, uh, lead to maybe increased fees because by the time they find someone else, it’s gonna be more expensive or overall, uh, shaping, um, the whole financial setup, uh, from the get-go. So that’s one, that’s one part of your question of like how the banks are, how managing their portfolio. And let’s say that you have an online business, which is for whatever reason it’s falling into the higher risk category.

Viktoria Soltesz (00:58:15):

I have a lot of clients who are ending up, uh, with my consultancy because they do have a lot of problems and a lot of complexity of planning their online payments, usually because they are part of the high risk vertical. It could be high risk for multiple reasons. It could be high risk because there is an opportunity for tax evasion versus is when we are looking at, for example, offshore companies or, uh, different tax haven. Um, then there could be an opportunity for illegal trade. So that means that your product or service is legally in one country, but could be illegal in another country. This could be adult entertainment, which is, uh, obviously illegal in certain, uh, Islamic countries. Gambling, as you mentioned, that could be illegal in certain cases. As well. Um, it could be CBD products. I know that, you know, in the states you’ve got serious problem that one state is legalizing thing and the other other state doesn’t.

Viktoria Soltesz (00:59:08):

So the bank who is having the federal regulation cannot actually serve that because it’s legal, but it’s not legal. But what we do. So that could be, uh, a very good example on that. But high risk could be because there could be a lot of opportunity for headache for the bank when it comes to administration and record keeping. So for example, when we are talking travel, it is high risk, not because someone wants to cheat tax or it’s something illegal, but maybe because people have a lot of saying, a lot of complaints to do. And me as the bank have to then investigate that who is right? Who has the right for the $20 booking fee on the plane? Is it the user? Is it the airline? It’s cost, it’s compliance, it’s manual work, so it increases the fee. So I am less likely to deal with these kind of guys because I know they are trouble, right?

Viktoria Soltesz (00:59:59):

I would rather avoid them. So that could be a different reason why you are high risk. So first you need to understand why are you high risk and tackle that problem? Mm-Hmm, <affirmative>. Because if you say, I am high risk because I have an offshore entity, don’t have it, boom. You’re no longer high risk. I am high risk because I am in adult entertainment. Okay, well, don’t sell these kind of services in certain countries. And immediately then, you know, your risk profile goes down. Um, so you need to tackle those problems. Why are you considered high risk? Of course, you can’t change the world, or the only thing you can change is yourself. So try to, uh, put out a profile which looks like you are taking every step and every effort to minimize the wrongdoing, the tax avoidance. You are making sure that everything in your, in your company is alleged.

Viktoria Soltesz (01:00:53):

It’s clean, it’s headache free, it’s optimal. You are the ideal client. And then try to find the different payment service providers because then they are looking at you and they say, okay, I understand that you might be high risk, but I think the risk with you, because I can see that you know what you’re doing. I can see that the possibility for the wrongdoing with you is lower than on the, on the industry average. And then you have, uh, better opportunities to find safer and more cost effective providers. And obviously rest of the planning of how to channel the funds on these, on these providers as well.

Olesya Trusova (01:01:30):

Well, thank you very much, uh, Victoria, thank you for giving tips, uh, what to do if you found yourself in a high risk market. Uh, so now we have explored how banks think, and we started talking about merchants and their life is not that easy, especially for startups, and sometimes merchants even without knowing it, can find themselves, uh, in, uh, being implicated in improper practices. Right. Um, can you give us examples of what could go wrong without merchant even knowing about it, and both merchants should do to prevent this from happening?

Viktoria Soltesz (01:02:11):

Yeah. Now the problem with startup that, uh, that they don’t always know what they’re doing and that there is no historical footprint of their activities. So if you are taking a startup, you are taking the risk that these guys might change their ideas one day to another. They might run out of funding and they don’t have volume. And I’m obvious, you know, getting my fees as well. Uh, they do something which is illegal, not intentionally, but maybe because they don’t know better, they might not have the relevant legal set up to advise them that don’t do that, and then could pose, uh, a certain risk on, on, on a financial institution. Because startups are new. They are trying, they are failing sometimes. They don’t really know what they are doing. They are trying to take advantage of the loopholes. They are broke, you know, so, so startups are interesting, and of course, economy needs startups and innovation, but from the financial perspective, it’s, uh, it’s a headache, right?

Viktoria Soltesz (01:03:11):

So that’s why startups are having, uh, a difficult time to find reasonable and reliable and the most cost effective, uh, payment means for themselves. Now, usually what I have, uh, recommend to these startups is that start, do whatever you do, prove yourself, get some kind of history which shows that guys, I know what I’m doing. Look at that. Look at my bank statement. I have no problem. I have no complaint, I have no headache. Everything is legal. I’m paying my taxes. Take me. And then you have the power of negotiations. And then even your current provider might say that, Hey, I already spent a lot of time and effort and energy to onboard you, serve you. You are already in my system. I would rather adopt the fees or give you better terms and conditions. Just don’t go away. I know you. Now, I know that you are not that much of a headache than replacing you.

Viktoria Soltesz (01:04:05):

I’m taking someone completely unknown. So you know what? Let’s re renegotiate. So that’s once, uh, one opportunity or with those kind of proven track record, then you can reach out to alternative payment providers and then show that you are not that much of a headache as a absolute startup. So this is the first step. And later on, when you are getting in the trade, you are getting more and more established. You’re not changing the direction. So you’re not starting as a, as a garage, and then you are ending up as a bakery, which is obviously from banking perspective, like what’s going on? Yeah, you know what? We tried, but it failed. So we tried something new. These are the triggers that financial institutions don’t want to see. Right? And this is just a good example because I have seen so many times, and uh, for example, there’s a marketplace, right?

Viktoria Soltesz (01:04:49):

And that was, um, uh, a couple of years ago, somehow every startup wanted to be a marketplace to just to replicate Amazon and, and Uber and Airbnb. So what they did is that they opened a, uh, a marketplace platform. They listed all the sellers, get all the buyers, but then they wanted to handle the payments, which is obviously subject to financial license. And then, then they realized that, oh, wow, so I can’t hold back funds on behalf of third party without a license to report it back. Then obviously, the marketplace as a whole get run out of, uh, of the payment provider option, get the payment provider so that, Hey guys, this is not what you were supposed to do. What is this new innovation? What is this new feature that you forgot to tell me about it? And the problem with these marketplaces especially is that let’s say I’m selling something to you and I’m not getting the money yet, but I’m submitting my tax re return and I forgot to declare all the money that it’s not with me, it’s with the marketplace, but it should be on my tax return.

Viktoria Soltesz (01:05:53):

But it’s not. So there is a perfect opportunity for tax avoidance. So that’s why every time when someone is handling funds, someone is holding payments on behalf of someone else, it might seriously trigger a financial license because, uh, as we said, it triggers the illegal activities or the tax avoidance, then the banks don’t really, uh, want to deal with that. So that was, uh, a very classic case of the, the marketplace’s startups, uh, a couple of years ago. And yeah, what are the, what are the tips? Um, as I said, try to look, uh, organized, try to look reliable, have a proper business plan. Oh my god, so many startups are starting that. The ideas are just in the heads. And yes, I understand that you might have the million dollar idea, but if you’re not writing it down in an order that multiple people can actually look at it, vouch for it and understand it, you’re not gonna get far when it comes to payments and banking.

Viktoria Soltesz (01:06:50):

So it has to be convincible and easy to understand enough that the compliance person who is making a decision of a certain new application per an hour looking at it, financials are good idea is good. I can see how it’s gonna make profit. I can see how I’m getting my banking fees out of that. I can see that it is legal. Not that many things can go wrong with that. Not it goes wrong, but the opportunity that it can go wrong. You are gonna pay your taxes. Okay, I’m gonna take you. So that’s the kind of idea that if you understand how banks think, then you can form your business form your payment plan, form your business ideas according to that, and that’s when you get enablers, which will take your business very, very far.

Olesya Trusova (01:07:40):

Uh, Victoria, despite its universal importance, the proper payment planning is often overlooked by businesses. Uh, can you elaborate, uh, what the risks, uh, uh, failure to properly plan entails for businesses and, uh, what are like a good, um, chapters that you have to incorporate in your payment plan?

Viktoria Soltesz (01:08:04):

Uh, usually every time when someone is asking me this question, I’m asking them that, um, have you ever actually calculated how much banking and payment fees that you, and if yes, have you ever considered to do something about it? Because majority of the time the answer is no. And let’s put things in perspective. Let’s make a very easy calculation. Let’s say that you are selling an item $400, right? You got that item on cost 80. So your profit is 20 easy. Now you’ve got a payment provider, let’s say Stripe, which is the most common one where I understand that certain areas, Stripe is charging 3% processing fees, 2, 9, 9 mm-hmm, <affirmative>. But let’s round up, right? So that means that you need to pay 3%, but what are you paying 3% on? Not the hundred, but the hundred plus the GST, right? So let’s say that the GST or VAT or whatever you add to that unit is increasing the price for 120, right?

Viktoria Soltesz (01:09:05):

20%. GST, let’s say more or less, is that, so that’s 3% is charged on 120 immediately. The street is no longer a street 3.6. However, if you are putting in perspective that the 3.6 compared to your 20 euro profit, I’m looking at 18%, you are paying 18% on a payment provider out of your profit, and they are not talking about it, and you don’t even consider looking at it. You don’t even consider planning according to this. So that’s why I want to attract attention to this problem, and I want people to talk about it. Yes, of course you’re not gonna go to Stripe and get cheaper fees. I mean, of course we are working towards that, and, but there are obviously limitations, but at least you need to consider that there is a considerable amount of cost, which is hitting your company. And there is a considerable amount of risk as well, because what we see now, different banks are going belly up.

Viktoria Soltesz (01:10:02):

You don’t know who to trust. There is an inflation, there are different currencies. And the complexity really opens up when we are talking about companies who are trading online, because then you need to understand who to trust, uh, abroad, how to set up maybe an offshore structure, even though that your lawyer says offshore is good. If you can’t find banking for that, it is just as good as you can take advantage of it. So that could be something that might pose higher risks on you other than not incorporating an nostri company I’m not against or, um, or, or, or for it. I’m just telling you that you need to make an informative decision when you’re planning your company structure, when you’re planning your payment. That was a very interesting, uh, case. One of my clients wanted to go to Latin America and discover new areas for trade.

Viktoria Soltesz (01:10:51):

They were really successful in Europe. And you know, people in Europe are usually using cars. So they had a hard provider for years and years. They trusted each other, they have really good relationship with, and they decided that let’s discover new areas. So let’s go to Latin America. And they actually wanted to spend a lot of marketing budget on a certain country to pilot out that what is going to be the success for their services there. Now, little they knew that what they picked was Peru. And in Peru, 7% of the population is using cards. So even if you are spending money like crazy on marketing and acquiring new clients, and you get all the visitors on your website and they are clicking and they want to buy your services, but they don’t have cards, you spend all this money for nothing. So what we did, we actually reached out to local payment service providers understanding how people like to pay in pet, and how much does it cost for you as a business comparing to your cushty pro profit in Europe, which is, you know, the card provider versus the profit, it was, it was bearable.

Viktoria Soltesz (01:11:58):

Turns out that the fees was so ridiculously high, and the way that how you are actually getting your money out of Peru and putting it back to Europe was overall more expensive than they estimated. So thank God they didn’t spend any kind of marketing budget on that country, because even though the marketing is doing a good job and acquiring visitors and getting traffic on the website, they would have failed. Now, what I see is that not that many companies are approaching expansion from this perspective. Mm-hmm, <affirmative>, not that many companies are actually talking to the payment person first. That, Hey, we’re thinking about going to expansion. Can we go there? Do we have relevant, uh, payment providers? Do we have the relevant PSP and banks that we can trust and it’s cost effective enough to, uh, integrate it to the bigger picture or not? Now, there was a, there was another interesting case, um, when, uh, when we found a perfect payment provider for a, for a client, but he was really running low on the development, uh, headcount, so they could not integrate that payment service provider for half a year.

Viktoria Soltesz (01:13:05):

Now, the problem was that that payment service provider changed the underlying correspondent account, and they needed to do the whole onboarding from scratch. So they wasted a lot of time, lot of effort, lot of documentation, because they did not consider that. That’s one thing that the bank accepts you. But how are you gonna connect with your CRM system? How are you going to make sure that the whole company as a whole is understanding what payment is coming, who does it belong to and, and how to handle everything? So those are also, uh, the questions that the payment person knows. But this is nothing to do with compliance. This is nothing to do with onboarding. This is simply technical. So are you really going to your, your, um, product manager and asking them that, Hey, we are planning to, uh, enter a new market, is the first question, is that, do we have the relevant payment service providers and send me over the APIs to look at it before we are actually making any decision?

Viktoria Soltesz (01:14:02):

Unfortunately not. And these could be serious obstacles to consider when we are, uh, planning payments. So that’s when, um, I realized that there is a lack of understanding in the market when it comes to banking and payment. And in my book, I, uh, actually dedicate a whole chapter to that, how to set up a proper payment plan. So when we are talking about large group of companies, those companies are connecting to each other somehow. So that means you have maybe a company in Germany, you have one company in the states, you have one company in, I don’t know, in Nigeria, and you’ve got one company in Hong Kong. How these companies are connected to each other. Do we have the common shareholder? Who are the different directors? What is the relevant regulation or license that they are working under it? So just to see everything in a big picture, then you need to understand who are the payment providers and banks who are serving the different companies.

Viktoria Soltesz (01:14:59):

Then we need to put there, it has four bank accounts, this has two payment providers, whatnot. Then you add the fee and immediately see, okay, what am I being charged 6% here? When it’s 1% there. Immediately it starts the conversation and raises questions because you see the big picture, you see the bird’s view, and you really understand that, okay, those are the providers that I’m dealing with on a group level. Maybe one provider is willing to take the whole group because they already work with you, they already know you. So adding a new company, uh, to the existing, uh, profile might be much quicker, easier, and cheaper for them to acquire a brand new client. So maybe that could be a good opportunity to negotiate and acquire a new provider on that. Now, when we see that, okay, pricing is good, then we need to see how the payment is flowing through the group, where the money comes from, how much, how often, what currency, who is doing the, uh, exchange, um, uh, exchange for you.

Viktoria Soltesz (01:15:58):

Is it the high street bank? Because that’s usually the most expensive one, right? Or there is an opportunity immediately to create some, um, some, uh, cost effectiveness and cost costs on that, and engage a specific exchange provider who’s dedicating on that. Do you do any hedging? If not, there could be a financial risk, right? Then you see that how the money is flowing through, then you really need to understand where the bank is handling money, how many times the money is changing place, because every time money moves, it costs you, and that triggers a risk as well. Who are those banks? Are these banks good enough to trust them with millions on it? Why do I stand 10 million on one bank account when I know that the Fed is only taking guarantee up to 250,000? Is there an unnecessary risk that I’m taking here? Or is there something whereby I can optimize my risk?

Viktoria Soltesz (01:16:53):

Maybe I need to open multiple accounts, maybe I can see a bottleneck. There is one bank which is handling all my transaction at one point immediately. You can take corrective actions, and then you need to see how the payment flows out of that, um, of that group. Where are the supplier, what currency they need to be paid at? Maybe you are paying them well within payment terms, so maybe you can delay that payment and use the money for something else. Obviously, these are treasury functions in this case, but that if you put everything together in a payment plan, then it can give you a good understanding that do you use the relevant providers? Do you use the latest technology, the best cost on the safest way? And then it actually, um, can give you a lot of opportunity for cost optimization as well at risk.

Viktoria Soltesz (01:17:40):

And the best thing is that if you settle this payment plan on Monday, it might not be the same one in Tuesday, right? Mm-Hmm, <affirmative>, mm-Hmm, <affirmative>. So you always need to go back and check and amend and modify. So as your company changing, the payment providers are changing as well. So many times we see that you open a new relationship with a payment provider or bank one year later, there’s a good opportunity to go back and renegotiate those terms and get more favorable terms and conditions or even more favorable fees. So those could be, again, good opportunities to, uh, to amend the payment plan and then make sure that whatever you do is the most cost effective and obviously the, the least, least risk, uh, as possible.

Olesya Trusova (01:18:26):

Victoria, thank you so much for this interesting discussion. You raised so many important points, and they’re absolutely valuable, uh, for everyone who is thinking about expanding its business worldwide. To those who are listening to this podcast, Victoria’s book is about the power of knowledge. When you understand all ins and out, you can make smarter decision, you can manage your risks better, and you can keep your business on track. Whether you are starting this or you have been in this game for a while, Victoria’s book will give you the edge to conquer challenges of the payment world and achieve your goals hassle free. Thank you so much, Victoria.

Viktoria Soltesz (01:19:22):

Thank you so much. And, uh, it was an absolute pleasure to be with you here, guys. Uh, thank you. If you want to find me, um, you can reach me, uh, through my consultancy, PSP Uh, but you will find the book in any Amazon store. Uh, we are help, uh, we are happy to reply to any questions or any issues. And, uh, thank you again, uh, for the opportunity and, uh, a really valuable, uh, volume of partnership with you guys. So thank you very much for, uh, this podcast opportunity as well as working together,

Jeremy Stock (01:19:53):

Victoria, like last time. Absolute pleasure. Thank you so much for taking the time. Thank you. And those of you listening right now, please, uh, do yourself a favor. Go check out, um, Victoria’s book, moving, sorry, trying to get this to focus here, moving Money, how banks Think, um, by Victoria Soltes. And I’m very proud of myself for having pronounced your name correctly, uh, <laugh> from the beginning, <laugh>, uh, Victoria, when, when our paths crossed, um, uh, a year ago or so. Uh, it, it was very fortunate, and it’s been wonderful, uh, continuing our relationship. And I’m, I’m very, uh, just excited to know you and proud of you, uh, for all the great work that you do. And as you know, even just yesterday, we send you, uh, people, uh, you know, fairly frequently of people who are interested in, in expanding their businesses internationally, and you’re our number one contact for that. So we really appreciate you helping, um, our clients and our potential clients as well. So, um, those of you listening right now, this has been the Payments Experts podcast. We thank you for listening to the end of this episode. We have had in studio today, Alicia Truva, senior Associate Attorney here in our transactional department at Global Legal Law Firm, and that’s of course our special guest, Victoria Soltes of PSP Angels. Thank you.

Jeremy Stock (01:21:14):

Thank you for listening to this episode of the Payments Experts Podcast, a podcast of global legal law firm. Visit us online today at

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