Yet, the plot thickens when we consider where businesses fit into the free banking debate. The high fees and charges often attached to the standard business bank account delivered through our five incumbent banks are starving businesses of key funds. Business bank accounts often require an upfront fee and yet businesses still end up paying over the odds in additional fees, in the form of interest rates, foreign transfers and overdraft charges. In fact, a recent YouGov survey revealed that small businesses in the UK are paying £2.3 billion every year to banks in business account fees. This is a shockingly high number, especially when one considers that Project Merlin, which was intended to encourage lending from the top 5 banks to small businesses in the UK, actually missed its target by a whopping £1.1 billion.
This is a situation which banks need to be aware of – after all, the same YouGov survey revealed that over half of businesses would move their business current accounts to another provider to reduce account cost outlays. Given the number of new finance companies which are currently chipping at the banks’ heels, keen to offer businesses lower charges and more innovative banking solutions, we are definitely now faced with an era in which implicit loyalty to our banks is over. Business banking will never be ‘free’ but now is the time to free banking of complicated and unclear charges using bank account models that help organisations drive funds back into the balance sheet.