{"id":40198,"date":"2020-01-15T11:33:57","date_gmt":"2020-01-15T11:33:57","guid":{"rendered":"http:\/\/icloud.pe\/blog\/?guid=f77a84bcd6e02baf3aa86ecbfd33fada"},"modified":"2020-01-15T11:33:57","modified_gmt":"2020-01-15T11:33:57","slug":"the-future-of-business-banking-now","status":"publish","type":"post","link":"https:\/\/icloud.pe\/blog\/the-future-of-business-banking-now\/","title":{"rendered":"The future of business banking now"},"content":{"rendered":"


\n Nicole Kobie<\/span>
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15 Jan, 2020<\/span><\/div>\n<\/p><\/div>\n<\/div>\n

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Forget walking down the high street to queue at your bank branch to set up an account, make a deposit or do any other basics of business banking. Thanks to\u00a0<\/span>the rise of mobile and online banking<\/a>, such tasks can be done with a few taps on a smartphone between meetings. But the future of business banking isn\u2019t just digital \u2013 it\u2019s about integrated services and linking up with third-party software to make your finances as streamlined as possible.\u00a0<\/span><\/p>\n

That\u2019s the idea behind\u00a0<\/span>open banking<\/a>, which is a set of regulations that lets your financial data be shared, opening up the way for new services and apps. Indeed, it\u2019s helped spark the rise of so-called \u201cchallenger\u201d banks, which are normally digital only, each with intuitive apps, near-instant account setup and handy features such as instant notifications and automated roundups for saving pots. But as compelling as they are, the likes of Monzo, Revolut and N26 started their push into the world of finance via consumer accounts for individuals, leaving small businesses behind.<\/span><\/p>\n

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That\u2019s no longer the case. Starling has signed 60,000 businesses (and is approaching a million consumer users), Tide passed the 100,000 mark last summer and Monzo\u2019s business accounts are set to arrive any day now. However, traditional banks have also caught on and don\u2019t want to lose their lucrative business clients to newcomers, unveiling their own take on the challenger bank idea with the like of\u00a0<\/span>B\u00f3 from RBS<\/a>\u00a0\u2013 think big brewers releasing their take on a craft beer. Whichever you choose, it means same-day account setup, easy-to-use apps, and integrated accounting and other software tools.\u00a0<\/span><\/p>\n

SMBs long ignored<\/h3>\n

It\u2019s high time banks paid better attention to SMBs.\u00a0<\/span>According to analyst firm EY<\/a>, SMBs account for \u00a31.9 trillion in turnover annually and make up 99% of private companies in the UK. But a survey from Adaptive Lab suggested SMBs feel\u00a0<\/span>undervalued by larger banks, with too high costs for not enough specialised services<\/a>. No wonder then that British\u00a0<\/span>startup<\/a>\u00a0Starling decided early on to target SMBs. \u201cWe recognised it was an underserved segment of the market, where the incumbent banks dominate and where there hadn\u2019t been much innovation,\u201d says Alex Frean, head of corporate affairs at Starling. \u201cWe thought there was a real customer need out there.\u201d<\/span><\/p>\n

Oliver Prill, CEO of business challenger bank Tide, adds that his\u00a0<\/span><\/span><\/span><\/span><\/span><\/span>fintech<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a>\u00a0startup started because the co-founders had previously gone through the difficulty of setting up a business bank account themselves. \u201cIt didn\u2019t work smoothly,\u201d he says. \u201cThe biggest motivation for switchers at the moment is the huge annoyance they have had with the big five banks\u2026 they\u2019ve really had it with their bank.\u201d<\/span><\/span><\/span><\/span><\/span><\/span>
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Why have incumbent banks failed to offer such services? \u201cWe come from a history of monolithic universal banks, where small business is one segment among many others without much mindset to look at it any differently,\u201d Prill says. \u201cWe fundamentally believe that these are very different industries,\u201d he continues, suggesting that one bank may not be able to serve consumers, corporations, sole traders and SMBs very well, let alone those operating across different industries.\u00a0<\/span><\/p>\n

All this means that business banking is ripe for disruption \u2013 and the disruptors are at the gate. They\u2019re helped by the rise of digital in SMBs and API-led fintechs, open banking regulations prising data out of incumbents, and also the Alternative Remedies Package, which means there\u2019s money sloshing around to help\u00a0<\/span>boost fintech startups<\/a>. And, so far at least, it appears to be working.\u00a0<\/span><\/p>\n

Making the move<\/h3>\n

That said, despite the increasing options,<\/span>\u00a0a June 2019 survey from Accenture<\/a>\u00a0suggests a mere 15% of SMB customers intend to\u00a0<\/span>switch their bank in the next year<\/a>, with only 25% saying they would be willing to move to a digital-only service.\u00a0<\/span><\/p>\n

There are two types of customer that challenger banks need to convince: those starting new businesses and those switching from an existing company to a different financial provider. For Tide, about 70% of its customers are new-to-market, and 30% are switching. To win over the first tranche, challenger banks need better awareness, admits Prill. He says Tide opens 12% of all new business current accounts, but its own in-house research suggests there\u2019s only brand awareness among 17% of new companies \u2013 that\u2019s why Tide ads are plastered all over London at the moment. \u201cFor the new-to market, a bank has to be fast\u2026 and have a good reputation,\u201d he says. \u201cBut you need to be aware of the bank in the first place.\u201d Frean agrees, noting that the lack of high street banks means creating awareness is a challenge. \u201cWe have to go and find customers and make them aware of us,\u201d she says.<\/span><\/p>\n

And then there are switchers, those annoyed at their current banks. It\u2019s not easy to switch, but\u00a0<\/span>open banking<\/a>\u00a0is making it easier. For consumers, trying out Monzo or Starling is easy: sign up for an account, order a card, install the app, and you can see if it\u2019s a system you like without having your salary paid in or transferring over all your direct debits. It\u2019s more difficult for businesses to try out a new bank fully, as switching everything over takes time and, therefore, money; you would have to be sure of a new service before taking the plunge.<\/span><\/p>\n

To help, Tide wants to set up a system for trial switching, in which all your figures, transactions and so on are pulled into the Tide account as a data feed, with your existing account staying the same. That lets companies try a bank effortlessly without much risk. \u201cThe trial switching overcomes friction, but you need to have a real reason to switch,\u201d Prill says.\u00a0<\/span><\/p>\n

Worth the switch?<\/h3>\n

Alongside attractive apps with whizzy features, challenger banks are trying to convince SMBs to make the switch by helping with or even taking over admin such as\u00a0<\/span>payroll<\/a>\u00a0and\u00a0<\/span>accounting<\/a>, either offering such services or software themselves or via a third-party provider. \u201cIt\u2019s really around saving small businesses time,\u201d explains Prill. \u201cWe look at the space not as business banking, but as everything a business owner would consider admin and finance.\u201d Indeed, Tide sees itself not as a bank, but instead as a platform, letting others build products that SMBs can embed into their banking processes. \u201cWe want to be the operating system for an SMB, but not the application layer,\u201d Prill says.\u00a0<\/span><\/p>\n

And that\u2019s where\u00a0<\/span>open banking<\/a>\u00a0and third-party partnerships come in. Rather than export transactions and then import them into your software of choice, tools such as\u00a0<\/span>Xero<\/a>\u00a0and\u00a0<\/span>FreeAgent<\/a>\u00a0are integrated into the app. When the right tool isn\u2019t available, Tide builds one; so far, it\u2019s created built-in systems for invoices as well as credit. Take invoicing, for example: an SMB needs to create, send and chase that invoice, noting when it\u2019s paid and pushing the relevant information into an accounting system. \u201cAcross these different product sets \u2013 invoicing, credit, payments, accounting \u2013 is a connectivity chain that we orchestrate, we make it highly usable,\u201d says Prill.\u00a0<\/span><\/p>\n

Starling\u2019s equivalent is the Marketplace. This is the epitome of the open banking idea, a digital library of services and tools that Starling customers can easily integrate with their account, from receipt tracking to lines of credit, as well as leading accountancy software Xero and FreeAgent. \u201cThey can immediately pull your files from your Starling account and populate your accountancy files,\u201d Frean says. \u201cWe\u2019re adding to the Marketplace all the time.\u201d Of course, some of the key features aren\u2019t high-tech. Starling and Tide offer cash deposits via the Post Office, with Frean noting that it\u2019s one of Starling\u2019s most popular features.<\/span><\/p>\n

What\u2019s next?\u00a0<\/h3>\n

Prill predicts\u00a0<\/span>the banking market will fragment even further<\/a>, particularly for businesses. Rather than choose the best of few options from five or so big banks, we\u2019re already seeing more competition from the likes of Tide, Starling and the rest. \u201cIn the long term, there will be many different models to suit different customer needs,\u201d he says. \u201cWe think this is a sign of a healthy market, that there is not a monolithic culture but offering true choice.”<\/span><\/p>\n

Such banks will become less about your finances, and more about all aspects of your company \u2013 that\u2019s Tide\u2019s idea with the \u201cOS for SMBs\u201d concept. Right now, invoices and accounting are built into challenger business accounts, but within the next several months, Tide plans to also offer company formations. \u201cThe data we collect to set you up with a bank account\u2026 we might as well set up the company for you,\u201d Prill says. \u201cWe could register your domain and website for you too.<\/span><\/p>\n

\u201cI think we\u2019ll continue to see traditional banking providers lose share,\u201d Prill adds, promising more richness of services, as well as more variety \u2013 and that\u2019s where\u00a0<\/span>artificial intelligence (AI)<\/a>\u00a0could come in, he suggests, with machine learning used to find and suggest the best services for your business from a multitude. So many features and services that small-to-medium sized businesses need help choosing between them? That\u2019s a nice change from which of the five boring banks will stash your money.<\/span> <\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

Nicole Kobie<\/p>\n

15 Jan, 2020 <\/p>\n

Forget walking down the high street to queue at your bank branch to set up an account, make a deposit or do any other basics of business banking. Thanks to\u00a0the rise of mobile and online banking,…<\/p>\n","protected":false},"author":414,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-40198","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts\/40198","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/users\/414"}],"replies":[{"embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/comments?post=40198"}],"version-history":[{"count":2,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts\/40198\/revisions"}],"predecessor-version":[{"id":40254,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts\/40198\/revisions\/40254"}],"wp:attachment":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/media?parent=40198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/categories?post=40198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/tags?post=40198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}