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Choosing a business bank account is an important decision. Traditional banks are competing with app-based rivals to provide the best business bank accounts, so if you’re not entirely happy with your existing provider, it’s well worth considering other options.
The first half of 2025 has been marked by persistent inflation, along with huge increases in staff costs following the government’s increase in employers’ National Insurance Contributions (NICs).
At a time when British businesses face rising costs and are being squeezed on all sides, banking has become another budget line that SMEs need to scrutinise. So, how can you work out which type of provider will be the best fit for your business?
Challenger vs traditional: How to pick the right business bank account
For years, high street banks (Barclays, HSBC, Lloyds and NatWest) dominated the UK market, leaving small businesses with limited choice. When Metro – the first challenger bank – launched in 2010, it was the first new UK bank in 100 years.
Then, the Competition & Markets Authority (CMA) and the Office of Fair Trading intervened and blew open the doors to innovation and competition. Out came the digital banks: Starling launched in 2014, followed by Monzo, Revolut and Tide in 2015.
The big banks responded by enhancing their online and mobile banking capabilities. Some traditional banks have developed their own app-only products (NatWest’s Mettle and HSBC’s Kinetic), to improve the digital experience for their customers.
However, several of the ‘big banks’ have suffered widespread outages in recent years, leaving companies unable to make critical transactions, costing them thousands of pounds. High-profile cyber attacks have further damaged trust. If you’re unsure whether to stick with your current provider or switch business bank account, start by asking yourself these three questions.
1. What does good customer service mean to you?
Different banks offer different customer service options, from apps and chatbots to call centres and in-branch appointments.
Customer service, including easy access to an adviser, was an important factor for more than a third (35%) of small business owners, according to recent NerdWallet research – up from 31% in 2024.’ But waiting on hold to speak to a human isn’t everyone’s preference.
Challenger banks: Managing your account over the phone or in person is not an option with some banks such as Starling and Monzo, yet they still ranked highest for quality of service in the latest banking satisfaction survey by the CMA.
Mobile apps make it possible to interact with your bank 24/7. However, chatbots can’t always handle more complex or specific queries. “You quickly get impatient and think ‘they aren’t helping, there are too many barriers here,’” said Andrew Martin, CEO of SMEB, a finance company offering payment services to businesses in rural locations. He told NerdWallet he has found it difficult to navigate through chatbots to get to a human decision-maker and still prefers to speak to someone in person.
Traditional banks: Small businesses with more sophisticated financial needs, such as international payments, might find it easier to deal with the customer support provided by a traditional bank. “If you’ve got suppliers from different countries, you’ve got a more complex proposition that tends to take you back to the retail banks, the traditional players,” explained Martin.
🤓 Nerdy Tip
Read online reviews of business bank accounts to find out how other users have experienced their customer service. If you attend business networking events, ask fellow business owners about their experiences.
2. Are you prepared to pay a monthly account fee?
Almost a third (31%) of businesses feel that high or unclear fees charged by traditional banks are pushing them towards opening an online-only business bank account, according to NerdWallet’s 2025 business survey.
A total of 43% of UK business leaders look for a business bank account with no monthly fee, and more than a third prioritise free UK transactions, according to NerdWallet’s 2024 study.
When shopping around for zero-fee business bank accounts, it’s worth reading the small print: An account that’s marketed as ‘free’ may start charging you after an introductory period.
Challenger banks: Leveraging digital-first models helps challenger banks keep their overheads down, making it easier to attract business customers with more cost-effective banking solutions. Several app-based banks provide free business accounts, including Tide, Monzo and Starling. So, if having no monthly fee is top of your wishlist, it makes sense to include challenger banks in your search.
Traditional banks: Some high street banks attract new customers by offering a fee-free account when you first sign up, including 12 months free with HSBC and Lloyds. This could be a good option for you if you’d prefer to begin your business banking journey with a more established brand.
🤓 Nerdy Tip
Compare transaction fees for moving money within the UK. Exporting goods outside the UK? Check which banks offer free international transactions too.
3. How quickly do you need to open a business bank account?
Few business owners have hours to spare filling in forms. Set-up time is therefore an important consideration.
Challenger banks: Many challenger banks enable users to open an account on the same day, appealing to freelancers and side hustlers who can set up business banking online and from the comfort of their sofas. “Simple businesses with a modest need for banking can get off the ground with a challenger bank mostly within a few minutes of downloading a banking app,” said Lawrie Chandler, a financial adviser who works with individuals and businesses.
Traditional banks: Opening a new account may take longer with a traditional high street bank – even their digital versions. For example, it can take up to 72 hours after applying for NatWest’s Mettle account to be up and running. Lloyds advises business customers to allow seven days and Bank of Scotland can take up to six days. But if your business has more complex financial needs, it could be worth the wait.
🤓 Nerdy Tip
If you need to separate your personal and business finances quickly, a challenger bank may give you the convenience you need right now. But, keep an eye out for services that could benefit your business in the future – your needs might change as you grow.
The way forward for business banking
For simple start ups and the newly self-employed, challenger bank accounts can tick all the right boxes – especially if you get free accounting software and plan to do your own accounting.
As the roll-out of Making Tax Digital continues, more small businesses will soon be required to choose HMRC-compliant software that integrates with their business bank account. This could spark more business owners to reconsider their choice of provider and prioritise online user experience.
However, more established businesses may want services and support that aren’t available through an app.
If you like elements of both traditional and newer app-based accounts, opening a digital bank alongside a traditional one could give you the best of both worlds, said Mike Conroy, director of commercial finance at trade association UK Finance.
A multi-banking strategy – where you keep a primary account with a high street bank while using a digital bank for day-to-day transactions – can reduce your exposure to outages while allowing you to cherry-pick the best features.
Remember that it doesn’t always pay to be loyal to one provider for years. Switching your business bank account is straightforward, and if your bank is signed up to the Current Account Switch Service, you can move your money for free. Payments will be transferred across, so there’s less admin for you.
Banking with more than one provider could also broaden your options when it comes to choosing a business loan or credit card.
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