Time to consider an alternative to traditional banks for your business needs?
With plenty of alternative options on offer, might it be time to turn your back on the big high street banks for your business banking needs?
Following the financial crisis, we all began to question why the ‘Big Four’ high street banks attracted such loyalty from customers in the UK. Now, a decade on, the market has changed dramatically with new alternatives to traditional banks turning up all the time.
Some are more established, with a presence on our high streets or with familiar brands, while others are fledglings still waiting for their banking licenses to be approved by the regulators.
But one thing’s certain, for those of us ready to take the plunge, alternative business banking is ready to shake up the system with a huge amount of choice.
The main alternatives to traditional high street banks
Challenger banks: The rise of the challenger bank has become hard to ignore. These small, non-traditional banks have started to win awards for customer service and are already placing highly on many best buy tables in terms of their rates. After all, they need at attract deposits in order to offer banking services and, when starting from scratch, offering great interest rates is an effective way to do this.
Crowdfunding: Crowdfunding is increasingly viewed as a viable means of seeking out business funding as an alternative to applying for business loans from banks. While it was viewed as somewhat of a novelty for a period, it is now gaining momentum as a popular form of funding, particularly within more creative industries.
Angel investors: Seeking funding from individuals who are keen to help projects get off the ground by investing some of their personal wealth has also become a viable alternative to traditional business bank loans. Angel investors help start-ups usually in exchange for equity in a business.
Peer-to-peer lending: Business owners who want to raise cash without going to a traditional bank can seek funding from individuals or groups of individuals through peer-to-peer lending tools, which are usually based online.
Government loans: For some entrepreneurs, it may be possible to win funding from the government for a start-up business loan to get your small business off the ground.
Cryptocurrencies: One of the newest alternatives available to start-ups is an Initial Coin Offering or (‘ICO’) whereby businesses can raise funds by creating and selling their own coins or tokens via a blockchain as opposed to selling equity in their business in exchange for cash investments.
How could your business benefit from alternative banking?
For those willing to seek out the services of these alternatives, there are clear benefits.
Challenger banks have undamaged reputations that are theirs to build upon. Their futures rely on them being seen as the kinder, more human side of banking. Given the spate of recent scandals involving the poor treatment of small businesses by large banks, this looks like a strong angle with which to attract small businesses.
Alongside good customer service and fair treatment, there are a number of other more measurable perks.
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How are traditional banks responding?
Despite this being an exciting time for those keen to see the traditional banking market disrupted, not everyone is washing their hands of the high street banks just yet. Predictably, the old guard are fighting back with its own innovations and renewed focus on customer service.
The popularity of mobile and online banking is driving much of the acceptance of non-traditional banks and the high street banks realise this. They are increasingly investing in developing their technology and improving their apps.
Many banks are going so far as to close physical branches and plough money into replicating the challenger banks’ model of superior online services, choice and flexibility. Those that succeed are likely to retain their customers as they can offer the same experience as the challengers combined with the security of an established brand and much deeper pockets.
For those traditional banks that fail to keep up with the changes in the market, it looks almost certain that they will lose customers to the ever-improving competition.
- Large number of new challenger banks being established, with many more still waiting for their licenses to be approved.
- Traditional banks responding with better tech and focus on customer service.
- Crowdfunding, P2P and angel investment all becoming more viable alternatives.
- Big banks unable to move with the times are set to lose business.
What's next for business banking alternatives?
Consumers are surprisingly loyal to the big brand banks, but entrepreneurs looking for a refreshing approach to business banking will undoubtedly find the new alternatives extremely attractive.
It’s vital for any business owner to research both the traditional banking and alternative banking solutions in order to avail themselves of the very best rates, customer service and cutting edge technologies now available.
Caroline Ramsey is a content creator who specialises in personal finance. More than a decade of working in editorial teams, she offers highly tailored content covering a number of topics. Read more