Challenger Banks – An alternative to the High Street
There’s a lot of buzz around the new breed of banks called Challenger Banks but what exactly are they and how can the help you in business ?
This, in a nutshell, is what a challenger bank is.
It’s a bank that’s far smaller than a national brand that’s been specifically designed to compete with the Big Four (HSBC, Lloyds, Barclays and RBS), be it through offering superior service, better deals, or more often than not, a combination of the two.
Some challengers are true newbies and are still finding their feet, while others are becoming established in their own right. Some have gone down the more traditional branch route such as Metro Bank launched in 2010 and already has 36 branches scattered across London but most have harnessed the power of the internet to offer online banking solutions without the hassle of a branch network.
A new way of banking
So with the interesting fact that many of these newer banks have an online presence rather than a physical one don’t expect to see many of them on the high street (the likes of Metro Bank and Virgin Money being the exceptions). Really, this shouldn’t be too much of a concern for many customers – people are increasingly turning to online and mobile banking anyway, and many challengers still offer ways for people to pay in money at a counter (through partnerships with other banks, for example).
Crucially, these new banks still rely on customer deposits to build their balance sheets and lend money to people, which is why they typically offer far better interest rates than their well-known counterparts. It’s for this reason that they’re dominating the best buy tables and are easily beating the big names, so they really could be worth considering.
Don’t be put off by their fledgling status
Challenger banks don’t have the legacy issues associated with the big names (they haven’t needed to be bailed out and weren’t caught up in the PPI scandal, for example), so really, they’re coming to market with a clean slate and a reputation that’s ripe for building. However, some people are put off by the fact that they’re not so well known, and others are still strangely loyal to their big name bank. Well, they shouldn’t be!
Challengers may be small, but they still have to comply with the same rules and regulations as traditional banks, and your money will still be protected under the Financial Services Compensation Scheme. The limit may be reducing at the start of next year, but that applies to all banking institutions, so your money will be just as safe as anywhere else.
So what can they do that High Street banks can’t do for business ?
Firstly you can open a business account in minutes rather than days and in some cases on the High Street weeks ! They have simple account opening procedures tha searches information in the public domain and undertakes their Money Laundering checks by simply seeing pictures of you and some ID, like a passport.
Add to that they have the facility to not only keep track of your money but can record the transactions into business categories. So in other words you are not only banking with them but also keeping your business / accounting records at the same time. This can’t be bad !
These accounting records can then be uploaded to your accountant and bob’s your uncle when it comes to Tax Return time !
When it comes to depositing cash you can generally do this at the Post Office giving you access to a “branch” network far greater than any High Street bank.
There is a cost to some of these challenger banks but usually its the price of a couple of coffees and when you consider you are getting accounting record keeping software built in then it’s minimal.
When it comes to lending, some offer overdrafts and many have links to alternative sources of finance.
My personal favourite is Starling Bank which has recently one an award as best business bank but there there are others such as:
If you want any further guidance on how a new style of bank account could help your business or you would like help opening an account then simply get in touch.
Happy Banking !!
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