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We could have titled this article ‘How to find the best business account’ but that would have been misleading. There is no such thing as the ‘best’ account when it comes to business accounts.
It’s more about finding the account that fits your payment needs like a glove. And that will differ for every business. The best place to start is to determine what you need from a business account.
To help you on your journey, we have pulled together some key questions and details to keep in mind. As a payment provider, we know a thing or two about the payments world. Some things in this article are obvious, others are less well-known. With our insider take, you will be up to speed and ready to find the business account that fits your needs.
A few caveats
For the purposes of keeping this article brief, we have taken the view that a business account that makes the task of receiving and making payments smooth and easy is a ‘must have’. Additional services or the ‘nice to haves’ - like payment cards, online accounting integration, and expense management - are not taken into account.
Also, we refer to banks and fintech in the article, but the article does lean slightly towards fintechs, as the fintech industry is what we know best.
Key questions to answer before selecting a business account
There are a few questions you should ask about your business and its needs before choosing a business account. The answers will help you determine what you need from an account and what type of account will be the right fit.
Is your company eligible for the business account you have in mind?
On most occasions, you will have to dig deep into the terms and conditions of the business account on offer to determine if your company will be successful in opening an account. Eligibility for different business accounts can be boiled down to a few questions we have gathered for you here.
Where is your company registered?
With a bank, your company usually needs to be registered in the country the bank is in. Fintechs can be more flexible and offer a range of countries you can apply for an account from. The list of eligible countries will generally depend on the licenses held by the fintech and its risk appetite. Countries considered too high a risk for political or criminal reasons will be excluded.
What is the form of your company?
Businesses come in different legal forms with different degrees of transparency. For example, understanding the shareholding and governance of a limited liability company is much easier than it is for a trust. In order to satisfy “Know your customer” requirements imposed by the regulators, a bank or fintech may only engage with businesses that take on certain legal forms they are comfortable with. Like limited liability companies, partnerships and sole proprietorships.
What is the nationality and/or place of residence of your company’s shareholders and directors?
This is another compliance issue banks and fintechs need to make sure they are across. From a compliance perspective, countries are rated differently based on local regulations around money laundering, terrorism, tax evasion, and other matters, like corruption. If your directors or shareholders reside in a country considered high-risk or are nationals of a high-risk country, finding a bank or fintech that will allow you to open a business account with them could be challenging.
What industry does your business operate in?
Some industries are considered too high risk by banks and fintechs because of the potential for criminal or fraudulent activity in that industry. The usual suspects are casinos, adult entertainment, cannabinoids, precious metals, and cryptocurrencies. Others might surprise you, like the pharmaceutical industry, for example. This is because of the volume of fake drugs circulating the world. Whether an industry makes it onto a bank or fintech’s prohibited list comes down to the risk appetite of the bank or fintech. The more risk they are willing to take on, the more industries they will be willing to do business with.
How much does it cost to set up and maintain a business account?
Account opening fee
A traditional bank, like Citibank Hong Kong, will typically charge an account opening fee. This fee covers the cost of making sure a business is eligible for an account, and setting the account up on the provider’s platform. Fintechs like Statrys, on the other hand, do not charge an account opening fee. Why? Because they have fewer expenses to cover than a bank. Be sure to check the fine print of a business account offering to see if an account opening fee is charged.
Most banks and fintechs charge a monthly fee to maintain a business account. How much this fee depends on the country and the provider. For example, Statrys is headquartered in Hong Kong and its monthly fee is HKD88. In contrast, Standard Chartered Hong Kong charges a fee of HKD200 per month. Over in the UK, Monzo offers its Business Pro Account for GBP5 per month. These monthly fees should be weighed against other fees and charges. If the bank or fintech is a fan of transparency, pricing information should be easy to find.
Traditional banks usually require an upfront deposit to open a business account, to lock in your cash. Most fintechs don’t. Traditional bank HSBC Hong Kong, for example, requires new business account customers to deposit HKD10,000 upfront. Statrys, Aspire and WorldFirst - all fintechs - do not require an upfront deposit.
Are there limits on transaction amounts and volumes?
Maximum amount per transaction
Some banks and fintechs will set limits on the amount you can transact at any one time. Other providers, like Statrys, do not set a limit. If your business deals in large transactions regularly, you might be better off choosing a no-limit provider.
Maximum transaction amount in a given period (usually a month)
Some banks or fintechs might also set limits on the amount you can transact within a certain period, typically a month. This is a cash management tool used to ensure they have enough funds in their accounts. Be sure to check the bank or fintech’s fine print for any kind of transaction limit that could pose a headache for your business.
What kind of payments can you receive and make?
Get familiar with the different types of payments
- Local payments. This is when you make or receive a payment using a local payment system. Examples include the FPS in the UK, SEPA in the EU zone, and ACH in the US.
- International payments, also known as SWIFT payments. Some fintechs offer this and some don’t. Fintechs that don’t offer SWIFT capability are typically based in the EU or the US and are targeting clients doing business within a localized area. In Asia businesses often operate across multiple countries. Fintechs based there, like Statrys, offer SWIFT capabilities.
- Local remittances. This is when you can make a payment to your client in the local currency of the country where they are located without using the SWIFT system. For example, your client is based in Mexico and you pay them Mexican pesos. Local remittances are usually faster and cheaper to make than international transfers. Check with a bank or fintech to confirm if local remittance is possible for a specific country.
Countries where payments can be received or made
Some fintechs offer the ability to receive or make payments in a large number of countries. Others might have a list as small as 20 countries. If you deal with clients or suppliers in developed economies, there is usually no need for concern. Outside of these countries, you may want to check if payments can be made to and from a particular country. Be aware, some fintechs have long lists of countries they do not do business with for risk reasons (see Eligibility above).
What are the fees for making payments?
Whenever you receive or make a payment, a fee is typically charged. That’s how banking works. One of the reasons why fintechs have emerged and become so popular is because they aim to offer lower transfer fees compared to the traditional banks. In general, most succeed, but it’s worth checking as some fintechs can be sneaky and confuse the client about the actual fees involved.
How are some fintechs sneaky? With marketing and fine print. The fintech will promote a service at a certain price, but somewhere in the fine print, it will say the price will only be met under certain conditions.
For example, a fintech says you can make payments in 50 countries for free. You think: great, that’s what I need, and you apply for an account. Then you discover payments are only free in the case of local remittances, not in the case of international transfers (see payment types above). To continue the example, say your supplier is in Mexico and you pay them in Mexican pesos. That’s a local remittance that does not attract a fee. But now you want to pay the same supplier in US dollars. The fintech labels that an international transfer and charges you a transfer fee.
As you can see, it gets a bit technical and it is easy to be confused. Make sure you read the terms and conditions for a business account with a bank or fintech with a cautious eye.
What foreign exchange services are on offer?
When looking for a business account, business owners and managers will often focus on transfer fees, which is an understandable approach. But foreign exchange costs (FX costs) can be a big game changer, particularly if your business deals in multiple currencies regularly.
There are two fundamental things to keep in mind about FX costs:
- The exchange rate used for the conversion. Does the bank or fintech use a real-time mid-market rate? A mid-market rate is a middle point between the buy and sell prices of the two currencies, as agreed by global banks at the time the conversion is made. You want the rate used by the bank or fintech to be as close as possible to the market rate at the time the conversion is made.
- The FX commission or spread. The commission or spread is the difference between the FX rate used by the bank or fintech and the real-time mid-market rate. It’s money earned for a service, but a bank or fintech might not be upfront about it. The larger the difference between the FX rate used and the real-time mid-market rate, the higher the commission the bank or fintech is earning. Spreads can differ greatly, so be sure to ask a bank or fintech what their typical commission or spread is. Getting a clear answer is another challenge!
Small details that can make a big difference
Which bank is the fintech partnered with?
Fintechs are not banks but they are handling money and need to put this money somewhere. So they partner with a traditional bank and deposit it with them. This means that any funds you hold with a fintech will in fact be sitting in a bank account opened by the fintech with its preferred banking partner. You can tell which bank a fintech is partnered with from the SWIFT/BIC code a fintech provides you for your business account. This code will be the code of their partner bank.
Now, you will feel a lot better about life if your fintech is partnered with a reputable bank with capital in reserve in case something goes wrong. Also, your clients will feel more comfortable paying you knowing their payment is going to a top-tier bank. The most reputable banks are Tier 1 banks, like Citibank, DBS, and BNP Paribas. Tier 2 or 3 banks are ranked lower because they have less capital in reserve. Banks in Cyprus or Gibraltar, for example, may have a Tier 2 or Tier 3 ranking.
Be sure to confirm which bank your fintech is partnered with and its tier ranking. Knowing your money is with a higher-tiered bank will make you feel a lot more confident when using your business account and transacting with customers and suppliers.
Does a payment you make to a recipient appear as coming from your business or from the fintech?
If you have a business account with a fintech, there are two ways payments made to a recipient can appear in the recipient’s account, depending on the fintech’s payment architecture:
- Credited as coming from your business. Here, your company name appears as the maker of the payment in the transaction details. The recipient can see the payment has come from your company.
- Credited as coming from the fintech. In this case, the name of the fintech appears as the maker of the payment in the transaction details. The recipient cannot see your company name.
You might be thinking: so what? Well, when payments are always credited as coming from a fintech, it can create problems. Bank and fintech regulations require them to monitor accounts and to know where payments are coming from. If they cannot see who is making a payment or regular payments, they may start asking your recipient questions, or worse, stop accepting your payments. Again, it is something to be mindful of when considering different business accounts.
How often does a supplier ask for proof of payment?
This point depends on the strength of the relationships you have with your suppliers. Less regular suppliers may withhold sending goods until they can see your payment has landed in their account. This is where sharing payment confirmation with a supplier can give them the comfort they need to ship or send the goods on.
For international transfers, payment confirmation takes the form of the MT-103 document. Your supplier should be familiar with this document and ask for it if they need it. Make sure your bank or fintech can produce this document easily so you can avoid any costly delays.
We split this article into key questions and small details to be aware of, but really all of them should be taken into account when assessing the merits of a business account.
A business account that does not offer solutions for your ‘must haves’ will not be a good fit for your business. Instead of saving you time and money, they will cost you both. It’s worth spending time to find the right fit.