Is Faceless Banking the Future for UK Businesses?

We asked 500 decision makers from UK businesses what they thought of online-only, or ‘faceless’, business banking providers. Generally, businesses are moving toward an acceptance of online-only banking. Here, we take a deep dive into the results of our survey.

Kristina Fox Published on 18 November 2022.
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Is Faceless Banking the Future for UK Businesses?

Historically, bricks-and-mortar branches have dominated the UK banking landscape. Often known for their grand architecture, these banks have also been a ubiquitous physical feature of the British high street for centuries.

But with ongoing news of branch closures – 5,233 bank branches have either closed or been scheduled to close since the beginning of 2015, according to analysis by consumer group Which? – what does the future hold for businesses that once relied so heavily on traditional banks?

Making an appointment to see your bank manager about setting up a business or applying for business funding were rites of passage for many start ups and going to deposit the week’s takings was part of a weekly routine.

But just as our survey last year revealed that online banking providers have become a familiar feature for personal banking, NerdWallet’s latest survey for 2022 shows that they are gaining a strong foothold in business banking as well. These so-called ‘faceless providers’ offer business banking services solely online, without branches on the high street or members of staff to talk to face to face.

Read on to find out more about how today’s business owners and decision makers are embracing the age of digital banking.

Key Findings

  • 44% of business owners switched from a high street bank to online business banking in the last 12 months
  • 47% of those who switched to online-only banking in the last 12 months did so after having trialled digital banking in their personal life
  • 52% of decision makers in UK businesses have taken out a business loan, credit card or opened a business bank account with an online-only provider in the past year
  • 43% of those polled were open to the idea of using a bank with no branches
  • 53% of respondents trusted high street banks and online-only providers equally

Online banking – the new normal?

44%

of businesses switched from a high street bank to an online business banking platform in the last 12 months.

Why are businesses making the switch? It could be a newfound familiarity with a digital way of banking, driven in part by necessity due to the pandemic. As work moved online, so did business – and banking. What’s more, 47% of those who switched to online-only banking in the last year did so after having trialled digital banking in their personal life.

As they are new on the business banking scene, online-only providers have been able to create a platform from scratch, based on the needs of today’s businesses. Unlike high street banks, which may have had to update antiquated systems, challenger banks have been able to start afresh.

This could be one of the reasons why 65% of those who switched in the past year thought that online banks offered better products, and why 63% thought they offered a more suitable pricing structure.

This even applies to more traditional services such as paying in a cheque. Gone are the days of travelling to a branch just to deposit a cheque – mobile banking apps may now allow you to pay in cheques by simply taking a picture on your phone.

Support has been extended too. Digital providers may offer a range of communication methods to suit different customers. Online support may be available 24/7, allowing business owners to bank wherever and whenever they want. Opening an account can also be quicker – with some banks offering to set up a business account on the day you apply.

» MORE: What is a same day business bank account?

Making the switch

According to our research, UK businesses aren’t just switching to the online platform for everyday banking, there is a move towards using them for financial products, such as loans and credit cards, as well.

Just over half (52%) of decision makers in UK businesses have taken out a business loan, business credit card or opened a business bank account with an online-only provider in the past year.

Early adopters

In particular, it’s the younger generation of business owners who are happiest to bank digitally. The majority (84%) of Gen Z respondents (those aged between 18 and 24) switched from a high street bank to an online-only bank for their business banking in the last 12 months. Most chose a digital provider because they said they found it easier to do their banking online.

Interestingly, those aged 65 and older reported a similar level of interest in online-only banks, with 60% of respondents in this age group happy to consider a digital-only bank.

Surprisingly, our research suggests that it is the millennials and early Gen Xers who are resisting change, with 57% of 25- to 34-year-olds and 51% of 35- to 44-year-olds rejecting the idea of using a bank with no branches.

Reticence remains

A digital lifestyle doesn’t suit everyone, and the same can be said for digital banking.

In fact, our respondents were split down the middle when asked whether they would consider an online-only bank to manage their business finances – 43% of respondents were open to the idea, but another 43% rejected it.

That said, what’s interesting is that more than half (53%) of those polled trusted online providers and high street banks equally, while 28% trusted online-only and app-based banks more than traditional banks This suggests that having a bricks-and-mortar branch doesn’t necessarily drive trust in the way it may have done in the past.

Furthermore, it could mean that one of the potential barriers to online banking – trust in a new, digital service provider – has now largely disappeared, allowing online-only providers to compete on an equal footing in the business banking market.

All banking providers are authorised by the Financial Conduct Authority (FCA). However, it’s worth noting that only banks, building societies and credit unions benefit from protection through the Financial Services Compensation Scheme (FSCS). E-money providers do not get FSCS protection, though they must still follow safeguarding procedures for your money.

» MORE: Why choose an online business bank account?

But it’s not all plain sailing. There is still a minority (10%) who trust online or app-based providers less than traditional high street banks.

Additionally, more than two in five (43%) of those who trusted online banks less said they weren't sure who to speak to if something went wrong.

Online-only banks may offer support via phone, email or through an app. This may be unfamiliar or off-putting to those who prefer to speak to bank staff face to face.

If you’re not comfortable with these methods of communication, then an online provider may not be the right choice for you.

» COMPARE: Business bank accounts

Conclusion

We found that business attitudes to faceless banking were generally positive. Over half of those surveyed (52%) had used an online-only provider in the last 12 months, suggesting a growing acceptance of digital banking in the business sector.

However, businesses still seem more reluctant to move to online-only banking than individuals. In our 2021 survey of personal banking customers, a majority of those surveyed were comfortable applying for loans, overdrafts and credit cards online – more so than the businesses we asked.

In conclusion, faceless providers aren’t the norm yet for business banking, but they are certainly changing the way we bank. As our society becomes ever more digital, and with high street banks continuing to close their branches, perhaps more businesses will turn to online-only banking for all their business finance needs.

Image source: Getty Images

About the author:

Kristina is a writer at NerdWallet. A recent graduate trading French for finance, she has experience creating content for student newspaper Cherwell and an edtech company. Read more

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