Sole Traders Opting Out of Business Banking
Sole traders and home-based businesses are shunning business banking in favour of personal accounts, writes Farah Jifri.
According to research by Moneysupermarket.com, more than a million owner-managers are choosing to stick with their retail account rather than take advantage of specialist services that may accompany business banking, the survey suggests.
The British Bankers’ Association (BBA) believes this is largely because owner-managers do not get around to changing their accounts as their business that started as a hobby evolves. Moneysupermarket.com, however, claimed the main reason was the wide gap between interest rates available on personal and business accounts. A high street bank might offer up to eight per cent interest on balances up to £2,500 in their personal accounts; but less than one per cent for the same amount in a business account.
“The majority of sole-traders and business partners act and think like consumers,” said Kevin Mountford, head of current accounts at Moneysupermarket.com. “With the threat of fee-based banking coming into the retail sector, we could see a seismic change and the whole market merging into one.”
“Historically, business accounts were supported by relationship managers, but with increased pressure on costs and centrally-managed decision-making, the value of these accounts is somewhat diluted,” he continued. “We will undoubtedly see better priced, no-frills accounts coming into play.”
Alliance & Leicester has already lowered fees and eased some of the more onerous conditions on its business account, and as sole traders and small firms increasingly adopt consumer behaviour, other banks could follow suit.
A spokesperson for the BBA added,
“Banks are offering an increasing range of business accounts with varying levels of support. Traditionally, businesses have been charged for transactions like cheque payments, but now we’re seeing accounts that offer a free service â?? in particular to start-up companies. Our message to customers is to shop around.”
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