I was wondering if there were any plans to bring business accounts to the US?
I’m kind of hoping for this too. I’m self-employed and the fees Chase has been charging me just to keep my basic business bank account open during this pandemic (when funds are running low, below their minimum balance of $1500) are making me uncomfortable.
We complain about business banking fees in the UK too, but I hear they’re minor compared to the US. Someone like Monzo could definitely clean up in small business banking services with a better offering and a cheaper price in the US, I guess.
That depends. As an example, what I pay with Chase for business banking as a single-member LLC (in UK terms, it’d be like a sole trader but with limited liability):
Basic banking fee: US$12 a month if my balance falls under $1500 a month
Transaction fee: $0.40 per transaction over 100 a month
Cash processing fee: $2.50 per $1000 beyond $5000 a month when deposited or withdrawn at a branch, free at ATMs
ACH (electronic) payment service fee: $25 a month to send up to 25 electronic salary or vendor payments per month, $0.15 per payment after
International wire fee: $40 per wire in US dollars, free for wires sent in foreign currency if I agree to the bank’s rate (so they make that fee back in the spread)
When comparing with challenger banks like Revolut or Monzo, banking in the UK looks quite a bit more affordable compared to what I’m paying now.
However, when comparing like-for-like, my account with a US big-name bank to other big banks in the UK like Barclays or HSBC, I can actually end up paying more in the UK. I found this out when I tried fiddling around with the fee estimator thing on the Barclays business banking website.
As an example, were I paying in or withdrawing around £3000 cash, making 25 electronic payments a month, and writing 5 cheques, it’d cost £45 under the Barclays mixed payment plan. Meanwhile, with Chase all of that is included in the service fee, and I’d pay $25/month if I could keep my balance above $1500, or $37 a month if I couldn’t (while I do have to pay to have chequebooks printed here in the US, it’s something like $35 for 600). Only by factoring in international wires ($40 out and $15 in per wire with Chase vs £15 out and £6 in with Barclays) does the scale tilt in favor of the UK but, well, I’ve got TransferWise for that.
Basically, whether business banking fees in the UK are minor compared to what’s charged in the US depends on your business’s transaction volume due to the “charge per transaction” model UK high street banks use compared to US banks offering an inclusive allowance of a set number of free transactions.
That being said, Monzo can certainly find its place in the market if it comes to the US. Higher-volume businesses that will blow past 100 or so transactions a month easy, businesses that want budgeting in their banking app, businesses that don’t want to pay a separate fee for the privilege of sending salary and vendor payments electronically, and for the paid tier, businesses that want integration with their accounting software and for their bank to automatically figure out how much they should be saving for tax payments. Those are all selling points they have over others in the market. But if they want to get really small businesses on board with Monzo early on so that they stay with Monzo as they grow, they’ll need to come up with a couple more selling points to get them to accept the trade-offs that come with banking solely online, since what the US has that the UK doesn’t have is a multitude of smaller regional and local banks that offer free basic banking for low-volume businesses (usually 50-100 transactions completely free or with a requirement to use your business debit card X amount of times due to debit card interchange being relatively higher for small transactions here) at the expense of not having the polished online experience that Monzo would offer.
Edited to expand some more now that it’s gotten a bit of attention
Thanks Jason. Really interesting to see a real comparison. When the actual transaction costs for payments are essentially coming down to zero because more competitors are in this space (your example of TransferWise, of course, being a good one), and the real cost of banks doing these transactions also comes down…how long can a per transaction pricing model last?
Hi all, thanks for the input here - @jamar0303 that comparison between US and UK business banking is particularly insightful. We understand there is definitely a lot that could be improved with business banking here, particularly for smaller businesses.
We currently have no plans to offer business accounts in the US, as right now we’re focused on building the best checking account that we can during our Beta phase. However, we’re really proud of our business accounts in the UK, so maybe it’s something that we will look into in the future for the US.
I did want to come back and add to this, since I realize that I may not have covered it even in my wall of text above-
The reason I mention Monzo might need more to attract the smallest businesses if business banking comes to the US is because what the US has that (as far as I can tell) the UK doesn’t is a multitude of smaller regional and local banks, as well as credit unions that offer completely free business banking for low transaction volumes. For example, US Bank, one of the banks I have personal banking with, offers business banking with no basic monthly fee or minimum balance requirement if you’re processing fewer than 125 transactions a month, 25 of which can be paying in cash. They’ve also started building some basic budgeting tools into their online banking and app. For a lot of sole traders, this would absolutely be enough, and having access to physical branches and dedicated staff can outweigh the app-based advantages of Monzo’s free business tier without some tweaking.
Thanks Jason, that makes sense. We’ll keep this in mind if we decide to look into business accounts in the future - we really appreciate your input on this!