What is alternative business banking?

Opening a business bank account in the UK should be simple and straightforward. However, it can be much more difficult - sometimes impossible - if you don’t have a permanent address in the UK or your business is a complex structure.  

Here, we’ll explain why entities and individuals may want to consider an alternative business banking platform instead. 

Why is it so hard to open a business bank account in the UK? 

First, there are high barriers to entry. Traditional banks have stringent eligibility criteria.  For example, if you don’t meet their residency, citizenship, income or minimum asset requirements, you may not be able to access banking services at these institutions. 

Banks are also becoming much more selective about who they do business with. This trend has been driven by new regulations, such as the Money Laundering Regulations in 2017, the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, and the Economic Crime and Corporate Transparency Bill, which is expected to become law soon.

If you’re declined for a business bank account, it can be very difficult to trade, both domestically and internationally. 

The risks of being underbanked 

Even if you’re not declined for a business bank account, you may find yourself in the category of the ‘underbanked’ customer. For, example, you might have limited access to international payments, or limited payment options.  

Without access to a full suite of banking services, you may struggle to: 

• Access loans to raise money. 

• Expand your customer base. 

• Offer flexible payment options. 

• Hold funds in multiple currencies. 

• Get paid in a timely way. 

Why do you need a full suite of banking services?  

Having access to the above makes it easier to: 

• Expand your business into new regions and navigate complex laws. 

• Minimise the cost of your international transactions with cheaper currency conversions. 

• Offer payments in local currencies to improve your client relationships. 

How can an alternative business banking provider help you? 

Firstly, if you’re not familiar with what an alternative business banking provider is, this is an online platform that offers more-flexible banking services but doesn't have any physical branches like a bricks-and-mortar bank. 

Many alternative business banking providers offer benefits like these:

• A much broader choice of international payment options. 

• The ability to hold your money in multiple currencies to reduce your currency risk. 

• Lower currency conversion fees to reduce the cost of your international payments. 

• A provider with expertise in solving complex global banking challenges. 

• The ability to make and receive payments quickly. 

Next, let’s look at seven benefits of business bank account alternatives. 

1 - Account opening requirements vary

Alternative banks are classified as electronic money institutions (EMIs) which have lower capital requirements and are regulated differently from traditional banks. Interpolitan Money is a regulated EMI. 

• While banks will regularly use money from customer deposits to lend money, EMIs must keep client funds segregating in designated safeguarding bank accounts.

• Banks in the UK are covered by the Financial Services Compensation Scheme (FSCS), which protects funds held across all accounts in a bank or banking group to the value of £85,000.  

• Any personal or business funds that exceed this amount will not be protected if the bank goes bust. 

Quick comparison: Interpolitan Money versus a traditional UK bank 

How secure are funds held in an alternative bank? 

Interpolitan Money’s bank-level operations are FCA-regulated, and all client funds are safeguarded with a tier-one bank. 

When you deposit funds with Interpolitan Money, it will never be:  

• Mixed with our company assets. 

• Used for investments. 

• Used for lending. 

2 - You can open an account without having to be resident in the UK 

Interpolitan Money can onboard residents from over 160 countries. Although traditional banks sometimes accept applications from non-residents, Interpolitan Money can do this in a fraction of the time – sometimes in as little as five days.  

With a non-resident account, you're no longer constrained by borders. This makes it easier to: 

• Grow your customer base. 

• Hire new staff. 

• Pay suppliers. 

3 - You can hold funds in multiple currencies 

One of the biggest limitations of traditional banks is the inability to hold funds in any currency other than your home currency. This makes your business more vulnerable to the impact of short-term currency volatility, which we discuss a bit later in this article. 

With an alternative business banking provider like Interpolitan Money, having the ability to hold funds in dozens of currencies on the same platform negates the need to open and manage multiple bank accounts - which is inefficient, costly and time-consuming. 

4 - Benefit from faster onboarding times 

As mentioned before, onboarding with an alternative bank is usually a matter of days. At Interpolitan Money, we aim to get your account up and running within an expedited time frame of 7-10 working days. 

With a traditional bank, it’s not uncommon to wait weeks, sometimes months, to open an offshore bank account, due to stricter compliance procedures and risk-averse entry criteria. 

5 - Receive a bespoke service 

Customer service at traditional banks is often centred on antiquated ticketing systems, which can result in lengthy waits, even for simple queries. Most fintech payment platforms tend to be a little better in this regard, usually hosting an in-app live chat feature that can respond to general queries. 

For complex queries, however, there is no substitute for speaking to a human who can provide expert insights and bespoke advice. At Interpolitan, we study our clients’ business models to: 

• Identify growth opportunities. 

• Develop risk mitigation strategies. 

• Provide the financial resources they need to overcome their unique banking challenges. 

6 - Protect your business from unfavourable currency movements 

With traditional banks, when you receive money from a client paying in another currency, you are at the mercy of the markets. If the exchange rate doesn’t work in your favour, your income and profit margins could suffer. 

At Interpolitan Money, we allow our clients to hedge their exposure to currency risk so they aren’t forced to convert funds when exchange rates aren’t favourable for them. Over time, this can result in significant cost savings for you and your clients. 

7 - Tap into new markets 

Traditional banks often charge high fees and spreads for international transfers, which can be costly for businesses that do many international transactions.  

While some fintech payment platforms charge lower FX fees, they often impose limits on larger transactions and may not support all major currencies.  

Interpolitan Money enables clients to hold funds in over 55 currencies and provides tailored FX risk-management solutions to help them reduce their foreign exchange risk and mitigate against currency volatility. 

Interested in learning more about how we can help you overcome your unique banking challenges? Download our brochure or apply for an account with Interpolitan Money today.