The pros and cons of challenger banks vs traditional banks
At its simplest, your business bank account is a place to store, spend, and receive cash. You’re the one who’s got to use it every day though, so it needs to run smoothly, and demand as little management as possible. You’ve got more important things to be getting on with.
We’ve weighed up the pros and cons of choosing between one of the big banks we’ve all heard of, and the plucky upstart challenger banks.
What exactly is a challenger bank?
Challenger banks are pretty much exactly what they sound like - new independent banks, set up to challenge the way we’ve always managed our money. You’re unlikely to see them open a branch on your high street, instead they do everything online.
Some accounts are aimed at normal consumers, but quite a few have designed products and accounts specifically for sole traders and small businesses.
The pros of challenger banks
If you’ve always been with traditional high street banks, making a switch might seem like a lot of effort. With their big focus on customer needs and solving problems, challenger banks can actually be a breath of very fresh air.
Here are some of the big benefits you can expect if you sign up.
You can do pretty much everything you already do, plus more
They might look a bit different, but challenger banks let us do all the things we’d expect. You can generally pay in physical cash, check your balance whenever you want, make online payments, and link up with your accounting software.
Extras can include low (or no!) monthly fees, helpful reminders, and really good currency exchange rates.
They’re usually a lot faster
Traditional banks have sped things up quite a bit, but challenger banks can often beat the clock. Some give you the tools to set up an account in 10 minutes. If you go with a high street bank, you could be waiting for your business credit card to arrive for up to a week.
You’ve got technology on your side
You’ll have access to best-in-class financial technology. The Big Four banks are developing this kind of stuff too, but it usually takes them a lot longer. Challenger banks are defined by their techy features and can dodge the red tape.
You’ll be able to manage most things on your phone
Online banks let you manage your finances remotely. Not only will you never have to go into a physical bank, you probably won’t even need to go near your desktop to make payments and check balances.
You’ll be the first to benefit from all their innovations
Sticking with the banks we’ve used for decades can feel stable, but also a little bit samey. As challenger banks grow, you’ll continue to be at the forefront of all this fintech development.
Their innovation, and often quite fun working environment, means challenger banks are attracting more and more smarty pants graduates to their workforce. With all that brain power, we’re sure to see some impressive new features emerge every year.
The cons of challenger banks
The biggest fear small business owners have is - what happens to my money if they fold? Even challenger banks have to be covered by the Financial Services Compensation Scheme, so you’re covered up to £85,000. For some businesses though, that wouldn’t be enough insurance.
Some small business owners go for scale and ‘tried and tested’ - that makes sense! If your bank gives you good interest rates, you have a personal relationship with them, or they’ve thrown some extras in you just can’t pass up, then stick with them.
The most important thing to remember, is there’s no right way to manage your business finance. More choice is empowering for business owners of all sizes.
Whatever bank account you end up choosing, Solna can help you keep the invoices coming in. Create professional, branded invoices in a flash, credit check your clients, and send automatic reminders to get paid faster.
Do more of what you love and less of what you don’t. Get started now.