It’s clear that in a bid to disrupt the ‘legacy’ high-street giants, most new banks are focusing on digital services. This makes sense, as the vast majority of small business’s financial activity is now conducted online.
After price, quality online and mobile banking is the top priority for small business owners when choosing a bank.
The growing assortment of primarily app-based business account providers, including Starling, Monzo, Revolut, Tide, and Coconut, offer not only their own account but also access to software that can manage other bank accounts and company financial administration.
However, the inability to provide face-to-face financial advice, the one activity that small businesses still prefer to do in-branch, means the lack of bricks and mortar will continue to be a double-edged sword for online-only banks. New banks are certainly more ethical than the established names. However, it is an open question whether this will remain the case.
Starling Bank, for example, has some good statements on avoiding investment in certain industries such as fossil fuels and arms manufacture. But its environmental reporting and transparency commitment is not comprehensive.
The Starling website also names its leading financial backers as Harald McPike, reported to be a “secretive Bahamas-based investor”, and Merian Global Investors.
Merian was recently acquired by Jupiter Fund Management PLC, a company that receives Ethical Consumer’s worst rating for likely use of tax avoidance strategies. However, a lack of clear linkages between the companies means Starling currently avoids losing any Ethiscore marks. With Starling’s sights set on rapid growth and an initial public offering in the coming years, it will have to work hard to not let its first ethical steps be diluted by the world of unethical finance.
In some ways, the Co-operative Bank remains a better option than these challengers because of its crystal-clear ethical policies. It also retains a small but diminishing branch network and a co-operative union of customers.
The brands ranked on the score table overleaf all provide current accounts for small business, but the offering for community groups and voluntary societies is much slimmer. Whilst the ‘challenger’ app-based banks listed above tailor their products towards making life easy for micro-businesses, they are still only for sole traders or registered companies. The banks that do have accounts for non-profit organisations tend to come with the stipulation of being a registered charity.
For example, in 2018 a customer of the Co-op Bank and member of Save Our Bank complained that they weren’t able to open an account for a voluntary association. In response, Co-op Bank clarified that their Community Directplus Account was only for registered groups: Charities, Co-operatives and Community Benefit Societies, Credit Unions and Community Interest Companies.
This policy was based on the bank’s risk appetite and regulation around fraud and money laundering. It acknowledged that it now didn’t offer anything for small community organisations, and that it would be reviewing the eligibility for its accounts in 2020.
When a small voluntary organisation does manage to open an account, they can miss out on important banking features, such as the use of a debit card. To help make sense of this, below we list the charity or community accounts on offer from the banks that achieve an Ethiscore of at least 5, along with their key features.
Accounts for charities or community groups