Hello and welcome to the Business Current Account Masterclass, brought to you by the Current Account Switch Service (CASS).
Host Lawrence Gosling is joined by CASS senior service lines manager, Jo Ainsley, to discuss why it’s vital that SMEs review and switch their business current accounts regularly. They also reveal some enlightening statistics from research carried out by CASS.
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Read the CASS Business Current Account Masterclass transcript below
Lawrence: Welcome, everybody. My name is Lawrence Gosling and I’m the editorial director of SmallBusiness.co.uk.
When I think of major issues for SMEs, particularly through the pandemic, is managing costs and control of everything in their businesses – Where do the business bank accounts fit into that?
Well, clearly, they’re a very important part. I’m very pleased to be joined today by Jo Ainsley, from CASS, (the Current Account Switch Service) to talk through some of the issues around switching current accounts for businesses.
Jo, thank you very much for joining me, it’s going to start at the top. And CASS has done some research and surveys amongst SMEs, so small businesses and micro businesses, around the whole issue of business bank accounts. You’re going to talk us through some of that first, the key findings, and then you and I can chat through some of the key issues that come out of that. So, over to you.
Jo: Yes, thank you, Lawrence.
So just a little bit about me then. So, I’m Jo Ainsley. I’m the senior service lines manager within Pay UK that actually operates the UK to retail payment systems. In addition, he also offers the current account switch service. This is one of three services that I and my team actually manage on a daily basis. I’ve been in financial services for more than 20 years, previously working for one of the major high street banks. The Current Account Switch Service was actually created to enable some competition in the market, and to remove those perceived barriers for switching bank accounts.
So back in 2011, 2012, a number of the main high street banks were brought together. And that was to help to define and create the service, which would enable a customer to switch their current account., be that a business card account or be that personal account from one provider to another in an automated way, the service that was being offered at that time was actually a very, very manual service that could take up to 30 days for somebody to be able to transition their account from one organisation to another, the Current Account Switch Service actually allows that transition to happen in just seven working days. And it has a number of other key benefits that come with the service, the customer can actually choose their own switch day, which means that they then know when their new current account provider will have everything ready for them – all the direct debit standing orders, all the regular payments will be transferred over as well. So, anything that might be sent to the old account is automatically transferred over for them and the service itself is free to use. And as I said, it is available for business customers as well as personal customers.
So from a business perspective, as small medium entities with a turnover of up to £6.5m or small charities with an annual income of less than £6.5m and small trusts with a net asset value of less than £6.5m are all able to use the service to be able to switch their account from one provider to another. That means that from a current account switch perspective, we actually are able to reach approximately 99 per cent of that SME market in the UK, the service itself is also backed up by a guarantee. So that is the current account switch guarantee, which means that if the customer should receive any failures in any way, if the switch itself has any errors that occur, any refunds or any interests or charges that are applied to either their old or their new account, that will actually be corrected for them as part of the whole switch process.
Lawrence: Jo, thank you very much for that introduction. I mean, there’s, I guess, the most obvious question that comes to me to start with, why did you carry out the research amongst the SMEs in the first place and what we hoping to find out?
Jo: Yeah, so from a Current Account Switch perspective, we want to be a champion for the small businesses, we want to raise the awareness of the fact that the service is here to for them to be able to use as well to be able to help them to transition their account from one organisation to another, if that’s what they wish to do. We want to empower them to know that they have the ability to be able to do that. And many business customers, by nature of the name of the service, don’t necessarily associate this as being something that they can utilise. We want to make sure that they are aware that this absolutely is a service that is available for them to use as well.
Lawrence: Now let’s dig into some of the things that came out of the survey. I guess to the top line, as somebody, you’ve looked through it in great detail and I’ve run through some of the statistics that caught my eye as well, some of the big trends that you really spotted, and I’m slightly surprised you as well.
Jo: The biggest one for me really Lawrence actually was around the fact that more than 50 per cent of business customers have never switched their business account. I’m very intrigued to try and understand why that is. Is it because they don’t actually see that there is an opportunity for them to be able to switch it? Did they not see that there’s a benefit within switching as well? And I think that I have to say, that was a stark one. So many are probably missing out on some great opportunities to be able to get a better incentive from a new provider. And they’re not always monetary incentives as well, I think it’s fair to say it can also be about the facilities that may be provided could give them without money management applications, or better access to relationship management, for instance, which is always a key one for business customers.
Lawrence: I think one of the things that struck me was a lot of people are using their personal accounts to run their businesses through. Again, a couple of questions, really. Did that surprise you? I mean, you’ve worked in a high street bank before, you’re very familiar with a business banking system was that something you saw in your previous role, that people are using their personal accounts for their businesses?
Jo: Yeah, it was very common to see that, certainly for businesses where it was a sole trader or a small local business, potentially. And I think historically, that was probably the norm, initially, people would have set up a personal account, begin to run their business, though, and then just never actually change that.
I think the key error there really is that people are missing out on so much. So, these businesses actually can get far better use of their current account, if it is actually a business account. So, they could be able to go, there could be availability, to have, say, a better overdraft interest rate and a preferential rate on your credit card, on loans, etc. And as I say, that relationship management aspect, that’s a key functionality that is really, really welcomed by all businesses. If you’re running your business account through your personal account, you don’t have access to any of those facilities. So that in itself, that means that you are immediately disadvantaged, I guess, if we think about the pandemic, in the last 12-18 months, and a number of those payments that the government were making to be able to support the businesses through those really difficult times. Again, if your account was being met as a personal account, the chances are that you probably won’t have been entitled to claim that as well. So, there were a number of businesses that actually missed out who really should have been able to take advantage of what the government were offering.
Lawrence: The other thing that kind of strikes me about using your personal account for your businesses, I think you touched on it, there are any charges, any costs associated, you go over your overdraft, you might need additional facility, I mean, you know, you can run that through your business legitimately as a business cost, isn’t it? So, if you’ve got a business bank account, your accountant, for example, will be able to put that cost aside. But if you’ve got the whole thing rolled up into your personal account, you’re probably costing yourself and your business money ultimately, aren’t you?
Jo: Absolutely. As you say, Lawrence, you wouldn’t be able to actually put some of that cost through your books, when you’re dealing with your accountants, etc. Therefore, you’re not actually making some savings that you potentially could do. Whereas if it is going through a business account, all of those charges that are being leveraged, and the interest, etc, that would all be able to go through and ultimately give some savings for those business customers.
Lawrence: And as you said, at the outset, I mean, you know, still over 50 per cent of businesses, whether they be micro or small businesses, have not even considered switching their account. Do you think that’s down to a kind of a lack of awareness of how much simpler the process is nowadays than it than it used to be – 30 days as you said. Now, it’s seven working days.
I was struck by your point that you can actually choose which day to switch over. So again, that’s a great way of managing your cash flow, particularly from a bills perspective, though. Do you think people are not aware that it’s a lot simpler process than perhaps it used to be?
Jo: A couple of factors, if I’m honest. I think one is that by nature of the way in which the service itself is started, it says that it’s the Current Account Switch Service, certainly in discussion, but I’ve had historically, business customers deem themselves as not having a current account, they see that they have a business current account, and therefore that in itself may initially have made them think that the service wasn’t available to them. Therefore, it would actually be quite a long- winded process, and probably quite complicated, maybe lots of manual intervention.
I guess the other element is you build up a relationship much more as a business customer than potentially you will do as a personal customer. Therefore, there’s an element of if it that you’ve already built that relationship with your relationship manager, they understand your business, they understand the way in which your accounts work, it’s probably quite a daunting thought to actually move that and start that whole process again.
I think what we want to do here at Pay.UK is to reassure people that from a current account switch perspective, once you have explored your options and have been able to make that transition and move your account from one organisation to another, that the process of actually moving that account is very, very simple, very easy, very straightforward. There is no manual intervention from the individual at all. The business, the actual intervention is all done between the banks, it’s all automated, you’ll get updates throughout the whole process. So, you know exactly how the transfer of the switch is actually concluding. It will all be confirmed to you. I think the reassurance that that is the way in which the process works, and that it is available for the business customer, hopefully, we’ll be able to raise that awareness a little bit more in and give people the opportunity to have a look at what is available for them. Then when they make the decision that is right for them, the service is here then to support them with that transition.
Lawrence: Now one thing that caught my eye from the research was around charges. Charges seemed to be one of the major issues for everybody, which I guess is not surprising. We live in a world now where we’re always looking to see if we can get something a little bit cheaper than we did, whatever the service is, we’re surprised again – I think the number is over 50 per cent. For people who are the charges related to the account, a business bank account, I think, similar with their personal bank account, is one of the driving issues for them when they begin to look at it.
Jo: That is a very, very valid point. It is something that’s equally important to everybody. I think the consideration needs to be to look at what you get for that charge. So currently, you may pay a fee to your existing provider. And you may get very little in additional facilities for that fee that you are paying and that fees, they’re basically because the account is being run through that particular organisation, you may pay the same fee with a new provider, but you may have additional benefits that come with that. So, I think even if it isn’t that you can transition, and the fee then is reduced or removed, what you can potentially get is additional facilities that will support you as a business and give you a greater opportunity.
Lawrence: One of the trends obviously we’ve seen the last couple of years is certain banks getting on initiatives where they’re offering a switching fee, so you know, £100, £150, to move your bank account from A to B. In your experience, looking through the research, how important is that just essentially getting a sum of money for doing the switch or are businesses looking for more, they’re looking for those additional services that you were just touching on there.
Jo: I don’t always think actually, certainly, from what we’ve seen, historically, with the way in which the volumes of business switches fluctuated for the service, I don’t think it is up to that initial monitoring element that entices a business customer to want to move.
I think the element most definitely has to be around that wider package, be that the relationship management offerings, be that a money management application, be that to be able to actually, record your income and your expenditure easily through their own apps, those elements seem to have a bigger draw for the business customer wanting to move as opposed to it being just a monetary incentive. And so I think that’s why we’re trying to encourage the business person to explain to us what else it is, what are the things that might entice you to want to switch so that we can understand and that helps us to understand, equally, what stops you from wanting to switch. Therefore, we can have a look at that to see if there’s anything that we can do to support the wider ecosystem and the wider market to try and remove some of those barriers that stops the business customer from being able to take advantage of potentially a better business current account with another provider.
Lawrence: The issue of relationship management, which you’ve talked about a couple of times. Is that about the relationship with the individual at the bank? Or is that the bank itself? We all, over the course of our life, develop a relationship, whether it’s your GP, your dentist, your accountant, whatever. It’s all about the individual as opposed to the organisation or the institution they work for in your experience, person or institution that matters most?
Jo: From a business perspective, I think there is actually a mix. I think there’s an element of knowing that if you are with one of the major high street banks, Winston’s that if you aren’t able to get hold of your relationship manager, you can actually walk into a branch and speak to somebody else. And I think that what we found, and more so because of the pandemic, is that that shift now has moved. You are able to get hold of an individual, to speak to somebody even through the new type of banks through the digital applications that they have, or maybe even through their telephony services. So, there are just different ways in which you can interact. I think being able to see a high street one for some people is the reassurance because they know that there’s somewhere to physically go into to have a conversation with, whereas for others actually it’s that instant access.
So, I want to speak to somebody at 11pm in an evening. That’s not going to happen with a traditional high street bank. So therefore, from a digital perspective, you have the opportunity to be able to have that conversation. Hopefully banks are moving more and more in that space as well, they equally will have telephony services that are open 24/7, they’ll equally have their online chats that have become more and more common. So it’s just about understanding that if for you that interaction is about that person interaction, that face-to-face interaction, then have a look at the opportunities that are available from the bank to the building societies that are out there at the moment, that are offering that type of face-to-face and that personal interaction. But actually, it’s more about just having access for a longer period of time at various points of the day and days of the week, then look at the other alternatives and have a look at some of those mobile banks or those digital banks, and to see whether or not they can actually offer you something, I think there’s been a real shift. And the same also, I think, because of the pandemic as well, around people’s understanding of how you can actually still interact with a bank without physically sitting in a room, as you would have done traditionally, many years ago.
Lawrence: You mentioned the digital banks, challenger banks, whatever we want to call them, where do you think they fit into this kind of equation? I mean, obviously, on a personal level, it feels like we see lots of activity with various services. Again, from your experience and the research, do SMEs see the digital banks as being home for their business bank account, or is it still very much around the traditional high street banks?
Jo: We are definitely in favour more towards the high street banks, or we have definitely started to see a shift in the number of their business customers that are moving into that new digital space. And I guess, as everybody gets more comfortable with using the various digital platforms that are available, not just the banking, but for many other activities as well, that increases your confidence to be able to actually try that. And so, having that with a digital or mobile bank, what you have is that 24/7 access at your fingertips on a phone that you’ve probably got with you all the time anyway. As you think about wanting to do something, you can instantly do that. Some people might feel that from their business perspective that that isn’t applicable at the moment with their current provider. So that’s another reason I guess we did that we would encourage people to have a look and exploring to try and understand what is available out there in the wider market, could that actually improve things for you and for your business.
Lawrence: Clearly the high street banks have been around for, in some cases, literally centuries? So, we’re all familiar with their brand names, we know them? Do you think there’s a little bit of a lack of awareness of some of the digital banks? I think it’s only really in the last 12 months that we’ve seen some of them advertising on television, for example. I mean, they’ve obviously been talked about quite a lot. We talked about the month-to-month sales of individual customers, but in terms of making themselves known to be an opportunity for the business banking community, that there’s still a lack of awareness, because people are not really that familiar with them.
Jo: Most definitely. And I think you’re right. In recent months, we’ve started to see some of those digital providers, those mobile banks, actually advertising on mainstream television, which means that they’re getting their message out there that says, ‘we are here, we are available’. And actually we’re available for all customers.
It shows some of the benefits that you can seek if you wish to move to that particular provider. I think more and more of that advertising will continue to raise that awareness most definitely. But there’s plenty of information on the internet. So, I would definitely encourage people to go and have a look and to see what is available out there. And then you can always use the current account switch website which will give you the list of the participants that are currently active within our service. So, you’ll know whether or not you’ll be able to use the service then to be able to switch from your current provider to one of the new providers that you’ve chosen.
Lawrence: Obviously, you’ve got a list of other providers. Do you give any kind of detail on the services that they provide so that people can do a bit of a comparison? I guess part of it depends on what you what your business does now and importantly, what you hope it does in the future and then finding the bank that most matches your business needs.
Jo: Our website actually explains the process of the switch itself. So it talks you through the things that you might need to think about having in place in advance of switching your current account, and working through that detail and having that all to hand before you actually approach your chosen new bank to start the process. And as I say it does have a list of all the participants that we’re having – that gives you contact telephone numbers and also gives you access to their website, you can just click on the link and it’ll take you straight there. So whilst it won’t give you a comparison from one organisation to the other it does allow you to actually go onto their website where they’re switching pages are so that you can get some information about what they’re currently offering, and with their accounts, their current accounts or their business account packages. And then you can do a comparison from there.
Lawrence: Because CASS is as an independent organisation, so you’re not there to, to recommend or endorse any anybody. And it feels to me again, in sticking with this point of sort of digital versus high street, if that’s the right way of framing, that there appears to be a sort of steady convergence of services that they’re all kind of offering. Again, do you do think that perhaps, does that make the situation from a business perspective, easier or harder to kind of make a decision about switching because it feels to me, you know, everybody’s offering the same, it kind of gets a bit confusing.
But if I know that my business is going to do more international business going forward, and I might need, you know, international money transfer, then I can look for an account that kind of works for that. Whereas if they will do the same thing, I’m going to be scratching my head kind of wondering what I should be looking for.
Jo: Yeah, absolutely, Lawrence. I would totally agree with that. I think it’s about understanding from your business perspective, what are the key elements that you require for your business, what will make running your business and dealing with your financial activities easier, and then go and search for those particular elements and see which banks and which building societies are offering when the best deals on the best applications for you to be able to utilise those, and equally the element of around the access to that particular organisation as well.
So, it may be, as we said before, high street bank might be absolutely perfect, it might be that you’ve got local high street banks that you can go into on a regular basis. And that absolutely works for you and that is your particular need. But if it’s more around, as you say, international payment, then search and find which other organisations are actually offering maybe a different functionality to make that particular process easier for you. Business owners have so many things that they need to juggle, so many things that they need to consider. If you can get your bank to do more for you, then that can only make your day-to-day running of that business easier. So, it’s definitely worth exploring and seeing what is available.
Lawrence: That goes back nicely to kind of where we started. And potentially one of the reasons why maybe people haven’t or don’t think about switching is because they feel like they’ve got so many things to do running a business, particularly in the last 18 months, that you kind of go, ‘I’ll think about it’, and then you put it to the bottom of the list because suddenly something more pressing crops up that day. But it feels like something that perhaps, if we’re running a business, we should almost kind of review maybe on an annual basis just to consider we’re getting the right things for our business.
Jo: We did some research last year where we worked with a psychologist and she was exploring and trying to understand why is it that people put these things off. One of the things that we discovered from the research that we did there is that from a financial perspective, actually reviewing your finances being that your current account that you have your business account, or be that other financial areas that you need to explore it, people that were putting that off for more than half a year, they knew that it needed to be done. But it was one of those things that actually begin to be a little bit painful, a little bit time-consuming. We never quite got to the top of that priority list, it would move itself down. And what we want to encourage is that actually, if you do something that feels like it’s going to be a little bit difficult, if you do that, and you get a wind from it, it’s a real great sensation, and it will encourage you to do more. So just those small steps more regular maybe is the answer to some of the challenges that are being faced in the business customers.
Going back to that make that a part of a once a year activity, let’s explore once a year, is my business account still working for me? Does it give me everything that I need? My business has transitioned in the last year, does that still offer me what I needed it to do 12 months ago, and if it doesn’t go and explore, we do it very regularly from a personal perspective with regards to reviewing our energy providers, for instance, or our mobile phone providers. So let’s do the same for our current account to be that our business current account will be that personal current account, things change and things move and we might not always be aware of how they have changed, so go and export that and just make that a more regular activity.
Lawrence: We’ve got a regular reader of SmallBusiness.co.uk and he takes a week off from running his business to look after his own personal finances and his business finances. And absolutely to the point your psychologist made, the end of it. I remember talking to him about this a few months ago, he actually felt like a weight had been lifted off his shoulders and even though it actually hadn’t done anything other than crunch a lot of numbers for four or five days. You know, he just felt way better and just in control of things as much as anything, and in many cases had saved himself a lot of money.
Let’s crystal ball gaze a little bit, always a little bit difficult. So, I’m going to be presumptuous, when you and I are having this conversation in five years’ time or so. How do you think things will change from this perspective? Will, I guess first question, Will SMEs be wanting something different, perhaps, from their business bank account provider from what they they’re asking for now? Or is it going to be much the same, really, but perhaps delivered to them in a broad variety of ways? What do you think from that perspective?
Jo: I think they will want things to change, I think they will want access to a broader variety of facilities, as businesses themselves adapt to the way in which they’re taking payments from their own customers, or weekly in the way in which they need to make payments themselves to their suppliers. I think all of the banks and the building societies need to keep moving with that shift. And they need to be able to offer all avenues to all of their customers, so that they’ll have access to that.
What I would really like to see in the coming years, for me, is to see our numbers increase from those business customers being able to utilise the service that is there for them. On average, we see only between 5 per cent and 7 per cent of our total switch numbers in any one year is attributed to the business customer. And I would really, really want to encourage them to utilise the service that is here.
Yeah, as I say, it’s very easy, it’s completely stress-free, it’s all automated, it takes away all of that pain of having to get in touch with individual organisations that you’re making payments to to give them all of your new details, all of that is automated on their behalf. And it all runs very, very smoothly in the background. So, I would really, really love to see more and more business customers taking advantage of the service that’s here for them.
Lawrence: Going back to what we’re talking about in terms of businesses feeling like they are very busy, particularly during the period we’re living through currently, why would you say it is imperative for them to look at it, even if they don’t, they end up making the decision not to switch because, as you say, for all of you and the team, getting that number up, it will be a great success. But if I’m running a business, I’m really busy. I’m hearing what you’re saying, Jo, but I’m really busy. What would be the imperative to go, ‘Actually Lawrence, you really should look at it, it is worth looking at it?’
Jo: The additional facilities that you may get with a new provider, that could actually save you not just money, it could potentially save you time as well. And time is very, very critical when you’re a business owner. So, anytime that you can save, to save you may be having to manually do an activity. That kind of already may be done for you in an application that can be offered by a provider, then I would say that that would be the big thing to encourage people to go and look and explore and to understand what is out there because those small bits of time that you can save by your bank and your bank account working better for you, will allow you then to have a little bit more time to concentrate on the business itself.
Lawrence: Jo, thank you very much for your time. Really, really enjoyed talking to you. I think we’ve covered off some really, really important stuff. So just once again, if anybody wants to get more details on how the switching service works, what’s the website please?
Lawrence: Lovely. Thanks for your time today.