Duncan Ferris
Hannah Nemeth
The United Kingdom is a nation of small businesses, with more than 5.5 million of these enterprises existing at the start of 2023. This makes business banking a huge opportunity for providers, with banks jockeying to compete for the millions of potential customers.
It’s a space that is experiencing considerable change too, with new technologies and challenger banks emerging as so-called ‘faceless banking’ appears to rise in popularity.
NerdWallet’s 2024 business banking survey offers considerable insight into this evolving industry, including current customer priorities and the generational rifts that could further upend the current business banking landscape. Read on to find out more.
Key findings
- Almost half (45%) of UK business owners and senior decision-makers have opened an online-only bank account in the last 12 months.
- The two most desirable features for business were a free business bank account with no monthly fee (chosen by 43% of respondents) and free basic UK transactions (selected by 34%).
- 46% of UK business leaders trust online-only banks and traditional high street banks equally.
- 31% said customer service was an important factor in their choice of business bank account, including the ability to contact an adviser easily.
- Only one in five (20%) said convenient branch access was an important consideration when choosing a business bank account, compared to nearly double (37%) who said easy online access was a key factor.
Cost is king for business leaders
It’s interesting to find that, by some distance, the most important factor for business leaders is a free bank account with no monthly fee. This was singled out as a top priority by 43% of respondents.
This money-saving mindset doesn’t stop there either, as just over a third (34%) said free basic UK transactions were a key feature when choosing an account. With these topping the list of key features, it’s clear that the UK’s business owners and decision-makers have value for money at the forefront of their priorities. Considering the economic conditions of the past couple of years, as well as the sheer amount of free business bank accounts available, perhaps that’s not surprising.
But it’s not the only feature in the limelight. A third (33%) of respondents also wanted an easy-to-use app from their business banking provider. When viewed alongside the fact that just one in five (20%) thought convenient branch access influenced their decision when picking a banking or lending provider, this is a very intriguing finding.
It shows that having account management at your fingertips is now an essential quality for a bank account, and diving deeper into the survey results only further calls into question the future role of the high street bank.
While 31% of respondents said customer service levels influenced their decision when choosing a business bank account provider, significantly more (37%) said the same about having easy online access.
Low costs are important to consumers, but respondents’ desire for responsive and simple-to-use technology gives us an insight into how people use business bank accounts. For providers, it means maintaining a top-performing app and online banking platform must be a top priority if they wish to attract customers.
With so many respondents (45%) having opened an online bank account within the last 12 months, this need to compete is thrown into even sharper relief.
Is the future of banking faceless?
While the overall findings of our survey have revealed interesting data on customers’ priorities for business banking, when we dig into varying responses among the different age groups an even more compelling picture emerges.
One stark difference is that respondents aged between 18 and 44 were simply much more likely to have opened an online-only bank account within the last 12 months, with more than half (53%) having done so. This compared with just 30% among the group aged above 45.
In addition, younger customers were much more likely to be comfortable applying for financial products without speaking to someone face to face. More than a quarter (28%) of respondents over the age of 45 would not apply for or use a financial product without an in-person conversation, while that dropped to just 8% among the younger generations.
The perceived trustworthiness of different types of business banking providers also revealed distinct differences between older and younger business owners and decision-makers. Among the over 45s surveyed, 38% said they had more faith in a traditional high street bank, while just 6% were more trusting of online providers.
Younger generations appear far more willing to have confidence in online providers, with 28% trusting the high street banks more and 25% putting their faith in their online competitors.
While high street banks can take comfort in the fact they are clearly seen as more trustworthy across all age groups, with 32% of respondents favouring them, the younger generation does not see much difference between the two. In addition, younger customers place less value on the branch-based or in-person banking that traditional banks offer.
Are some banks missing a trick?
The revelation that UK business owners and decision-makers value cost savings above all else when choosing a business bank account is a major takeaway from NerdWallet’s survey. Customer service, borrowing options and a whole range of features take a backseat to the simple priority of saving on costs.
What makes this more interesting is that out of the 23 providers NerdWallet has researched as part of our business banking comparison tables, just 13 offer an account without a monthly or quarterly fee. This means 10 providers are likely falling at the first hurdle for 43% of business banking customers.
Whether this emphasis on costs is a temporary trend due to the harsh economic conditions of recent years remains to be seen.
In addition, traditional high street banks clearly have some work to do in wooing younger generations who are more interested in technological solutions more commonly associated with online providers.
If these older institutions fail to keep pace with challenger banks, they risk losing significant market share as older generations, who place more value in traditional banking and branch-based services, drop out of the workforce.
Amy Knight, NerdWallet UK spokesperson, comments:
“Business banking is shifting more online than ever now that bigger financial decisions, such as taking out a business loan, credit card or overdraft, can be actioned with a few swipes of a thumb. As in-branch services continue to fade out, access to online features has become increasingly important.
“Though most app-based and online-only banks offer users the same level of financial protection as their high street competitors, it will take time to build their reputation – particularly with business owners aged 45-plus who may not consider themselves digital natives.
“Challenger banks, such as Monzo and Starling, have designed their user interface to create frictionless digital experiences that appeal to Millennials and Gen Z. To compete with these newcomers, traditional banks need to up their game, ensuring banking apps are intuitive and engaging, as well as being inclusive and accessible to a wider demographic of business owners.”
Methodology
This survey was conducted online in the UK by OnePoll on behalf of NerdWallet UK in June 2024. We asked 1,000 owners and decision-makers of small to medium-sized business (SMEs), aged 18 and older, to respond to a series of questions about faceless banking.
Image source: Getty Images
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