A common and, on the face of it reasonable question, frequently asked by start ups and businesses who might feel they are growing out of their current banking arrangements.
I say ‘on the face of it’ because the only reliable answer to such a broad question – whatever the subject matter may be – is ‘it depends‘.
Again, in common with big, generic Q & As, the tendency is to either revert to recommendation or price.
Recommendation can be fantastic – as long as the person making the recommendation has similar circumstances or can relate to your situation. Would you seek a restaurant recommendation from someone whose staple diet was chips, or would you seek someone whose palate reflected your own?
Price, on the other hand should always be a consideration further down the line; if you start by shopping on price your will immediately lose sight of the things that matter.
Bargain Basement: So, breaking it down to basic components, the simplest form of business banking involves receiving and making payments electronically. No personal contact, no cash, no quirky transactions or ‘one offs’.
If this describes your business, then a basic online account – at minimal cost – could well work for you. Though you might want to research which online system suits you best.
The Middle Market: We can all identify 5 brands in the middle-market, with new or splinter names appearing. Popular perception is that they are all the same, however your own circumstances might well refine your options.
- If you deal extensively in cash, then the location & accessibility of branches will be a big consideration.
- If you import/export, then there are key players like HSBC whose credentials might well add value.
- Do you want to see a face/deal with a named individual or will 0845 / call centre suffice?
- Does your business have high seasonality or operate in a specialist field?
In addition to situation questions, you might have personal views regarding ethics or any number of other matters which will sway your judgement.
Premium Banking: Quality & service come at a price – always. Handelsbanken have probably made the biggest impact on the premium sector, though there are others either playing exclusively at this end or with a premium product bolted onto the mainstream offering.
Premium banking is about contacts, accessibility and the ability to move swiftly; sometimes a business necessity, sometimes simply a little luxury.
The others: Recent events have thrown up a host of so-called ‘challenger banks’ from those with a huge roll out strategy, such as Metro Bank, to spin-offs like TSB, or ‘recovering’ brands such as AIB.
It is true that small banks, like most smaller businesses, will try harder with service to woo customers and to compensate for lack of presence (real or perceived) – it is also nice to support newcomers!
Alternatively you might want to travel the ethical route with Co-Op or Tridos.
Challenge your bank: Here is a simple challenge to test the service your bank offers.
Phone them, and ask for a short term overdraft of £10,000. Give a plausible reason and a clear event which will clear the funds within 5 days.
In the good old days, we anticipated the overdraft being granted. Now it is unlikely, but the response will tell you a lot.
– Do you actually get to speak to someone?
– Do they respond to your request?
– Do they provide reasons & alternatives?
Banking is a service like any other. You really need to understand your own needs and values before you compare prices.