Citi freezes accounts on Spot platform

George Lekakis

Citibank has frozen the accounts of subscribers to its Spot buy now pay later service after the bank introduced new measures to verify information received from customers.

Details of the troubled Spot roll out were published on the bank’s website this week, with Citi also revealing that it had been forced to temporarily stop taking new applications while it works through verifying information it holds on existing users.

In a disclosure on its website the bank doused concerns that the Spot platform had suffered a security breach, but it also notified accountholders it was in the process of “elevating security measures” for the BNPL service.

Spot, a wallet-based BNPL product backed by Mastercard, began taking account pre-registrations in August last year but the bank’s move to verify subscriber details indicates there might have been a weakness in its previous method of confirming customer information.

Customers with frozen accounts are presently unable to transact through Spot until they verify information they previously disclosed.

In June 2019 Australia’s financial crimes enforcement agency – AUSTRAC - put the buy now pay later sector on notice about its Know Your Customer (KYC) obligations when it ordered an independent audit of Afterpay’s compliance with anti-money laundering laws.

The audit, which subsequently cleared Afterpay of any compliance breaches, was prompted in part by AUSTRAC’s concerns that providers of alternative lending products, such as BNPL might be ripe targets for financial criminals.

In response to written questions submitted by Banking Day on Wednesday, Citi’s head of consumer banking in Australia, Alan Machet, declined to furnish more details on why the bank had frozen customer accounts.

Machet also did not directly address whether the new verification measure was a remedial step to fix a weakness the bank might have identified in its KYC processes.

“We are committed to providing our customers with the most secure and seamless payments solutions and technologies,” Machet said.

“With this in mind, we have completed additional customer verifications and are in the process of enhancing our digital capabilities. 

“While we complete this process, we have chosen to pause on accepting any new applications to our Spot. Buy Now, Pay Later platform to ensure we provide the best solution for our customers.”

Disclosures on Spot website’s “Frequently Asked Questions” section indicate that the process for improving customer verification has become a painstaking exercise for the company and customers.

Here’s what Citi was telling customers yesterday about their blocked Spot accounts:

“We are in the process of elevating security measures and verifying customer details. To do this our team is contacting customers via calls to collect additional information.”

In response to customer queries on how long they will have to wait before they can begin using their Spot account for new purchases, Citi said the following:

“We’re keen to help you start shopping again as soon as possible, but the process is slightly different for every person. If you have not yet completed the verification process, the best next step is to give us a call…We’re doing our very best to resolve the issue as soon as possible and we will share further updates as soon as we can.”

The decision to block accounts appears to have triggered concern among some customers that Citi might be moving to close Spot.

“No. Despite some teething issues, we are here to stay and look forward to helping our customers get shopping again and to welcoming new customers when we can.”

On Wednesday the bank was unable to say when it would re-open the platform to new customers.

“We are committed to providing our customers with the most secure and seamless payment solutions. With this in mind, we have chosen to pause on new applications to Spot Buy Now Pay Later platform to ensure we provide the best solution for our customers.”

Citibank last year sold Spot and its local retail operations to the National Australia Bank.