Fintech Tips: Best digital bank for business

Digital banking apps want the lucrative SME sector as part of their mix of customers as the bid to challenge high street lenders.

Digital banks battle to gain traction among Britain’s small businesses is a key plank of the strategy of these players becoming serious challengers to high street lenders.

These banks have wooed millions of millennial customers to personal accounts with tech-savvy offerings, allowing them to carry out banking services in minutes on their smartphones.

But they are also chasing the lucrative small and medium-sized enterprise (SME) market that has felt undeserved since the financial crisis more than a decade ago, which saw traditional banks tighten lending to smaller firms fearful of defaults.

Market worth having

However, last year Britain’s small firms comprised 5.6 million companies, employing 16.3 million, with a combined annual turnover of £2trn, or 52 per cent of all private sector revenues, according to the Federation of Small Business. So, a slice of this market is clearly worth having.

Small firms also leave sizeable amounts of cash in their accounts, which banks can lend against. This contrasts with personal account holders at digital banks, who rarely use these accounts as their main one.

Many small businesses looking for a new business accounts hunt for a mixture of low charges and convenient technology, allowing access to their accounts on the move.

This often boils down to such features as free in-credit banking, interest on credit balances and an app that you can use on your phone.

However, unlike personal banking, most banks levy businesses monthly fees and other charges for their services. Though a number of lenders offer free introductory offers of between 12 and 18 months, particularly for start-ups.

Sole traders may be able to use their normal bank accounts for business, but some banks do not allow this. It is also worth remembering that mixing personal and business accounts will make record keeping more difficult, particularly if HMRC picks your tax return for a longer inquiry.

Below are some of the best business current accounts offered by full-service digital banking apps which also have consumer accounts—as opposed to dedicated digital SME banking apps like Tide or Coconut:

The Winner

Starling Bank - Business account  

Will not charge monthly account fees, or charges on electronic payments, domestic transfers, or ATM withdrawals as long as the firm employs fewer than 10 staff and turns over less than £1.7m a year.

The London-based bank added business accounts in 2017 are currently also free for larger businesses for a limited time. It doesn't offer an overdraft, unless agreed by the bank in writing. It also allows users to deposit cash at 11,500 Post Office branches nationwide for as little as £3 per deposit, while withdrawals attract a 50p charge.

The Rest

Revolut - Business account

The London-based fintech said it has “nearly” 20,000 businesses” in its network, adding that cash sent between these firms will not incur fees.

Revolut, which has amassed over 4 million customers since its launch in 2015, said its multi-currency business account allows users to receive and exchange 29 currencies using real inter-bank exchange rates, without fees.

Among other services Revolut offers pre-paid business cards and allows its account to integrate with popular work apps such as Slack, Xero and Zapier.

Monese - Business account

The Monese basic business current account costs £9.95 a month and also includes the bank’s Plus personal account.

This business account allows users to make cash deposits at over 40,000 Post Offices or PayPoint retail locations in the UK. It also comes with a contactless business card and is accessible in ten European languages. The banking app, founded in 2013, has over 800,000 customers across 30 countries, and adds that a Euro business account is “coming soon”.

The Plus personal account includes such features as six free monthly ATM cash withdrawals, as well as lower foreign currency exchange and instant top up fees.

And one to come . . .

Monzo - Business account

The digital bank said in February it will begin testing its new business accounts for 100 sole traders and limited companies.

In January, Monzo chief executive Tom Blomfield said: “We’ve heard calls for business banking, and that’s something we’re planning to launch later this year.”

The London-based business, which has amassed 1.5 million customers since its launch in 2015, has not released any details about its account, but in the past it has criticised existing business bank accounts of being “riddled with confusing fees”.