Why is opening a business bank account so difficult?

At the beginning of 2017, I started a new company...

Below is a story about opening a business bank account and the problems we faced.

Let's first provide some context

We had to have a bank account to receive our first lot of investor funds, so I dutifully went along to the bank where I have always banked personally, which also had one of the longest fee-free periods for business banking.

To provide some context, we should have been a really straightforward customer — a fresh software start-up with new directors, who wanted nothing more than a current account to make and receive payments.

Now, I work in fintech, so I really should have thought a little harder about which provider would have fit us best, but in the UK we have a reflexive attitude to just go to the bank to which we’ve always gone.

I went to a large branch of the bank I’ve always banked with in the City, where I was told that I could make an appointment to meet someone to open the account in around six weeks from then, or that I could open an account online. So I applied online — pretty straightforward.

Rejected without justification

We then waited for the account to come through. We were rejected, without justification, around 2 weeks afterwards. I tried multiple methods of asking for an explanation, but never got anywhere.

Panicking, I then went to all the biggest banks simultaneously. For one, I filled in a simple online application form, only to receive that information parroted back to me in a cover letter on top of two inches of paper application forms that we got through the post a week or so later.

With a second, I was bounced between the SME and corporate banking teams, where the SME application form excluded us on the grounds of expecting too much to come in to the account in our first year of trading, and the corporate team very simply explaining we wouldn’t be eligible for them either (which was obvious).

We finally ended up at one of the big five, where we somehow managed to get a meeting in person (no online option available) with someone in just about a week. For some reason, all three directors had to be there for a meeting which lasted about an hour and a half, in a vast and empty branch in a prime Central London property.

The guy handling the process was very attentive and professional, and we sat there, answering some pretty basic questions, which he entered into an online form which we could perfectly well have filled out ourselves, but wasn’t publicly available.

My manager told me he didn't read his emails...

At the end of the meeting, he handed me his card, which had his name and email and a general helpline number on it.

He then told us not to bother emailing him, as he got so many emails that he just didn’t read them any more, and then gave me his personal

Whatsapp in case we needed anything. In fact he texted us to clarify something after the meeting — he was really very good.

The service that we’ve had since opening the account has been, frankly, fine. The online banking works well enough, and we haven’t used any other of their services.

There are a couple of new providers out there who are providing the customer service which you might expect, most notably Tide & Handelsbanken. The former offers a great tech experience, and the latter is focussed on building long-term customer relationships.

But the key which makes me think that they and their like are going to be the eventual winners in the SME banking space is that they both have taken the time to think about what their customers really want.

I know that it’s well known that SME banking is broken for quite some time, but I hadn’t experienced it so starkly as a consumer before. There are banks out there that are doing it right, and I think that we’ll all be surprised therefore at how quickly the landscape changes in the next few years.

There’s more opportunity than the pretty crowded consumer banking space, and it’s easier to reach profitable unit economics (unlike for the consumer neo-banks). If you want my best guess, the next UK fintech big success story is likely to be a new business-focussed bank.