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In recent years, the banking landscape has witnessed a significant transformation with the rise of challenger banks that offer innovative and tailored solutions to meet the needs of various customer segments. Small businesses in the UK have also reaped the benefits of this shift, as several challenger banks have emerged to cater specifically to their unique financial requirements. In this blog post, we'll delve into some of the best challenger banks for UK small businesses, highlighting their features and advantages.
What is a challenger bank?
A challenger bank is financial institution competing with the established high street banks, like HSBC, NatWest, HBOS etc. They are generally aimed at younger, tech savvy business owners and tend to offer mobile-only, or digital-only bank accounts. They tend not to offer business loans or credit cards, although some do, and they are noted for not having a physical branch network. Many start out as “e-money account” provider and then progress toward obtaining a full banking licence and therefore FSCS protection. All the banks reviewed have a full banking licence with the exception of Revolut, which we have included as they have a licence in many EU countries and it seems likely they will have one in the UK soon.
Starling Bank for Business
Starling Bank has emerged as a frontrunner in the challenger banking scene, offering a range of business banking solutions that prioritise simplicity and efficiency. Their user-friendly mobile app and web interface provide small business owners with easy access to their accounts, transaction history, and real-time insights into their financial health. One notable feature is the ability to set up multiple 'pots' or sub-accounts for different business purposes, facilitating better financial management. Additionally, their integrations with various accounting software platforms streamline bookkeeping processes.
Pros:
- Excellent support
- Fully regulated and FSCS approved
- In-app cheque deposit (up to £1,000)
- Switching service
Cons:
- No physical branches
- Cash deposit at Post Office only (charged)
- Only directors or owners can access the account
Customer comment:
“I use Starling for my consultancy business - simple to use, love the spaces which make it easy to set money aside for VAT and tax…”
Tide: Banking Designed for Business
Tide has gained popularity for its laser focus on serving the needs of small businesses. One of the standout features of Tide is its swift account opening process, which often takes just minutes. The platform offers expense categorisation, automated bookkeeping, and seamless invoicing capabilities. Tide also provides a unique multi-card feature that allows different team members to make transactions using their own cards, with spending limits set by the business owner.
Pros:
- No credit check required
- Free company incorporation
- Well-designed app
- 24/7 support
Cons:
- ATM withdrawals cost £1
- No cheque deposits
- No overdraft
- Support can be patchy at times
Customer comment:
“I use Tide as my Business Bank, really easy to set up & use, after the initial ID stuff you can access the App, set up as many accounts as you need, you can use a QR code to access an online version on a browser, transactions are simple & straightforward, able to categorise etc”
Revolut Business
Known for its international appeal, Revolut Business caters to businesses of all sizes with its impressive array of financial tools. While its strengths lie in its competitive foreign exchange rates and international payments, Revolut Business also provides domestic banking solutions that include expense management, virtual cards, and corporate cards for employees. The app's intuitive interface simplifies the process of handling finances, making it a solid choice for small businesses with global aspirations.
Pros:
- Truly international
- Crypto-friendly
- Good API integrations
Cons:
- Doesn’t have a banking licence yet
- No cheque or cash deposits allowed
- Most essential features are chargeable
Customer comment:
“Simple and easy to use, and works well abroad, although I am concerned at the lack of a banking licence in the UK”
Monzo Business
Monzo, originally recognised for its consumer banking services, has now ventured into the business banking arena with Monzo Business. The platform offers a seamless integration between personal and business banking for sole traders and small business owners. Monzo Business provides features like expense categorization, receipt scanning, and tax calculations. The user-friendly interface, combined with its transparent fee structure, makes it an attractive option for those seeking straightforward business banking solutions.
Pros:
- Well-designed App
- 24/7 customer support
- Multi-user access
Cons:
- No credit cards or overdrafts
- Cash deposits limited £1,000 every six months
- International transactions incur a Wise transfer fee
Customer comment:
“Banking made easy. Easy to set up on the app, took less than 5 mins to set up hassle free. Love the features to track spending, cap certain spending, definitely has the customers best interests at heart. Would recommend to any who wants to make the switch to do so.”
Mettle
Mettle is a digital banking service offered by NatWest, specifically designed for small businesses and freelancers. It aims to provide a seamless and user-friendly banking experience through its mobile app. Mettle offers features such as invoicing, expense categorization, and integration with accounting software. It also provides a clear overview of your financial transactions and insights into your business spending patterns. One of Mettle's key selling points is its simplified account opening process, making it attractive for startups and sole traders.
Pros:
- Backed by a reputable institution like NatWest.
- User-friendly mobile app with intuitive features.
- Streamlined account opening process.
- FreeAgent accounting software comes free with the account.
Cons:
- Only one director/owner can access the account.
- Maximum balance of £100k in a limited company account, £50k in sole trader account
- Cheques cannot be deposited
- No international transactions are permitted
Customer comment:
“You get FreeAgent software free with Mettle account , which is worth considering with software costs rising and is protected as a bank.”
Other options
Do bear in mind that, in addition to these banks, there are the traditional High Street banks, and the e-money account providers. Businesses who operate in retail and therefore have a requirement to deal in cash will often find the challenger banks to be quite restrictive and so might be better placed looking at the High Street, even if the branch network is becoming smaller and smaller.
At the other end of the spectrum are the e-money account providers. While they are not actually banks, they do provide most of the services and facilities of the challenger banks. They are often easier to open and if you have bad credit, some may be opened without credit checks. However, as there isn’t an actual bank account with it’s own unique account number and sort code, some businesses can have difficulty getting payments made as the details don’t match up. Some e-money providers are:
Anna
Airwallex
Monese
Counting Up
But there are many more.
And the winner is…
It’s a dead heat between Starling and Mettle. Each have much more plus points than minus points and customer feedback has been excellent too. Starling probably has more features, but Mettle’s free accounting software, FreeAgent, has brought it back level.
Conclusion
As the world of banking evolves, challenger banks are redefining how small businesses manage their finances. Each of the mentioned challenger banks offers a unique blend of features and benefits, tailored to address the distinct needs of UK small businesses. When choosing the best challenger bank for your business, consider factors such as account opening process, user interface, expense management, and integration with other tools you rely on. By embracing these innovative banking solutions, UK small businesses can streamline their operations and focus more on growth and innovation.
