Monzo has launched a business bank account which is a fiercely competitive area for digital banks.
The London-based app-only bank, which has four million customers, has introduced a free Lite account as well a premium Pro version, costing £5 a month.
The Pro account comes with instant notifications, integrated accounting and tax pots, which allow businesses to pick a percentage of inbound payments that they need to set aside for tax bills.
Both accounts include free instant bank transfers, business debit cards and round-the-clock customer support.
Digital banks pile into business banking
Digital banks have focused on business banking, because these customers are used to being charged fees. They also hold more cash in their accounts and borrow more than non-business customers.
Challenger banks such as Monzo, founded in 2015, have amassed millions of customers in a few years, but they tend not to use them as their primary account. Customers often only hold small amounts in digital banks, but enough to allow them to take advantage of such services as cheaper travel money or restaurant discounts.
Deposits held across UK digital banks – such as Revolut, Starling and Tandem – slumped by a quarter to £260 from £350 last year, according to a report from professional services firm Accenture last month.
Revolut, which claims 10 million customers, offers business banking, as does Starling, which has just over one million accounts.
Neo banks hunt for profits
One of the few digital banks to turn a profit is business bank OakNorth, which earlier this month almost doubled its annual pre-tax profit last year to £65.9m. OakNorth, co-founded by chief executive Rishi Khosla five years ago, became the first UK digital bank to turn a full-year profit in 2018.
Monzo, which began operating in the US last year, said it has tested its business accounts over the last year with 2,500 small firms before launching its service.
Chief executive Tom Blomfield (pictured) said: “We’ve heard how difficult it is to find a business account that delivers what businesses need – and have also heard over and over that it can take days, and even weeks, to get an account up and running. Companies need stress-free banking that just works, so they can focus on what’s important – growing their business.”
Monzo has raised more than £300m in funding from investors such as General Catalyst, Y Combinator, Stripe and Passion Capital.
