Much of the talk of challenger banks, including that on this page, has focused on personal banking current accounts, payments and loans. But most of the money to be made from "traditional" banking comes from business customers. Unlike individual accounts, business ones are rarely free. Competition is fierce, and the big banks are often on the receiving end of customer-service horror stories in the press. If personal banking can be disrupted, then so too can business banking.
The new breed of bank
There are a few providers already in business. CountingUp is a new service that integrates a business account with automated bookkeeping. Income and expenses are automatically categorised, and it can produce profit-and-loss accounts, raise invoices and file taxes. Sole traders will pay £9.95 a month; limited companies £19.95. Cash can be deposited via the Post Office for a £1 fee or via Paypoint for a 2.5% commission. Cash withdrawals cost £1.
Also in the works is CivilisedBank, which gained its banking licence in May last year, but released it earlier this month to give itself more time to develop its technology platform. CivilisedBank proposes a branch-free service for more established companies, and will focus on customer service by employing up to 80 "local bankers" for businesses with a turnover of more than £1m. It hopes to provide savings, loans, current accounts with overdrafts, and foreign exchange. It will also offer savings products to non-business customers.
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A third new venture, Tide, is backed by early-stage venture-capital firm Passion Capital, which is also invested in Monzo, perhaps the most PR-friendly of the challenger banks. Passion's Eileen Burbidge acts as chair of Tide. Banking services are actually provided by PrePay Solutions, which is regulated by the Financial Conduct Authority, the City regulator. The features are very similar to many of the challenger banks' personal accounts. You get a UK account number and sort code; expenditure and income is automatically categorised; and account holders can temporarily freeze and unfreeze cards. Tide creates and pays invoices from within the app, and the account can be synced with the popular FreeAgent accounting software package. Tide's only charges are 20p per transfer to or from non-Tide accounts, and £1 per cash withdrawal.
Slightly more familiar names
More familiar app-only names are also offering accounts to business customers.Starling Bank offers a free current account to businesses with fewer than ten employees and less than £1.7m in annual turnover, but as yet does not offer overdrafts. Fees for larger companies have not yet been set. Revolut, which has applied for, but not yet received, a European banking licence, offers business banking of particular use for companies that make a lot of foreign payments, with multi-currency accounts. Accounts start at £25 a month for firms that receive funds of under £100,000 a month, rising to £1,000 a month for larger businesses.
Although the lack of a branch structure isn't a problem for personal customers, it can be for businesses, if only so you can deposit cash. That's something that Metro Bank has made central to its success, building a branch network with seven-day-a-week opening and business-friendly hours. It also offers integration with Xero accounting software.
Goldman expands its fintech division
Goldman Sachs has acquired the financial app Clarity Money, which aggregates users' financial accounts to give them an overview of their financial lives, says Ben McLannahan in the Financial Times. It is the latest deal the investment bank has done under its digital-banking brand Marcus (named after Goldman Sachs founder Marcus Goldman), which it launched 18 months ago after buying retail deposits from GE Capital. Marcus offers consumer loans and online savings products, and, notes McLannahan, has so far amassed $20bn in deposits and made $3bn of unsecured loans. Clarity Money is headed by Adam Dell the younger brother of Michael Dell, founderof computer maker Dell Technologies who joins Goldman as a partner. Earlier this year, Goldman bought credit-card startup Final; it has also acquired retirement startup Honest Dollar.
New York's attorney general, Eric Schneiderman, has launched the "Virtual Markets Integrity Initiative" a "fact-finding enquiry" into cryptocurrency exchanges. The attorney general's office sent letters to 13 major trading platforms including Coinbase, Bitstamp, Gemini and Binance, requesting information on their operations, internal controls and the procedures in place to protect consumer assets. These exchanges are a "key point of entry into the virtual currency market", said Schneiderman (pictured) in a statement. But they often "lack the basic market protections of traditional investing platforms". As a result, consumers "don't have the basic facts they need" to assess exchanges' "fairness, integrity, and security".
Peer-to-peer lending platform Downing Crowd has launched a bond which lends money to reserve power plants, says FT Adviser. The money raised will be invested insmall gas-fired power stations that can be quickly fired up to provide power when demand peaks or when supply from renewable energy falls. The bond can be held in an innovative-finance Isa, carries an initial yield of 7.6% and has a duration of 33 months. The higher yield represents "the higher level of risk associated with funding projects before they are operational and where there is a high degree of variability in potential revenue streams", says Downing.
Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.
Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.
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