Explore more insights

accountants, fintech, finance

Business Banking Switch Scheme

What is it and is it worth it?

Paul Surtees Mar 29, 2019

“Well, we’re going to run out of money in the early afternoon.” That was the answer RBS’s chairman Tom McKillop gave when asked how long the bank could hold on as crisis gripped the UK economy in 2008.

As RBS circled the drain, the government swooped in and recapitalised the bank. HM Treasury pumped a staggering £45.5bn of taxpayer money into RBS. In return, the state got a controlling stake of the group. The cash, the government determined, would come with a few caveats.

Initially, the plan was for RBS to divest part of its business into Williams & Glyn, a revival of an old RBS subsidiary. Williams & Glyn would comprise 314 branches and take on 250,000 small business customers, 1,200 medium business customers and 1.8 million personal banking customers.

But over time, this plan gave way to two alternative initiatives. RBS remained intact, but it would put £425m towards a capability and innovation fund that would help newer, smaller ‘challenger banks’ and fintech companies.

The bank would also front £350m for what was called the Business Banking Switch scheme. This money would be used to incentivise SMEs to switch their current accounts and loans away from RBS (and NatWest, which is owned by RBS).

How much are the incentives worth?

The incentives are actually quite handsome and they are tied to annual turnover:

  • Less than £15,000 in turnover = £750
  • Between £15,000 and £100,000 = £1,000
  • Between £100,001 and £500,000 = £3,000
  • Between £500,001 and £1,000,000 = £3,000
  • Between £1m and 1.5m = £6,250
  • Between £1.5m and 2m = £13,125
  • Between £2m to £2.5m = £16,875
  • Between £2.5m to £5m = £25,000
  • Between £5m to £7.5m = £25,000
  • More than 7.5m = £50,000

There are also incentives in place for loan products. In this case, the cash amount for loan product transfers will be calculated by multiplying the outstanding loan balance transferred by 0.025.

Here’s where accountants come in

The switching process is daunting. Not because it’s difficult or because there’s no incentive to, but simply because people don’t switch bank accounts regularly. Even after roiling IT chaos last year, TSB reported that it only lost 6,000 account holders.

Clearly, there’s a knowledge gap at play. People don’t understand what switching accounts or financial services will actually provide. The incentive payment is there, sure -- but is it worth risking the move to an unknown bank?

Accountants can help businesses be braver by offering guidance they’re getting nowhere else. Businesses shouldn’t put up with shambolic service from their bank, and they should be consuming financial services the same way they’d consume any other: by choosing what fits them best.

So is the Business Bank Switching Scheme a positive step? Sure. But it does not address the lack of knowledge businesses in the UK face. Here’s where the accountant can step in and offer advice beyond the numbers.

Business owners need guidance when it comes to banking and with bank branches closing at record rates, accountants might be just the people to fill the void and shepherd clients through the switching process.
 

finance
profitability
help
alternative finance
invoice finance
fintech
news
accountant
case study
trade finance
contract finance
working capital
startup loans
refinancing
fashion finance
merchant cash advance
future accountant
product of the month
women in funding
partner of the month
business tips
accountants
accounting
product
forecasting
live session
accountex
2019
capitalise
funding
monitor
ai
international women's day
covid19 coronavirus
corporate finance
accounting firm
m&a
asset finance
hire purchase
businesses
credit score
rls
business funding
business credit score
south africa
business
adviser
small business
business loan
property finance
commercial mortgage
credit imporvement
spring budget 2023
small businesses
spring budget
ccj
inflation
commercial mortgages
trade debtors
cash flow
truck finance
late payments
lorry finance
manufacturing
building a financial safety net
healthcare
trade debtor days
overdraft
bridging loan
credit checks
interest rates
overtrading
templates
balance sheet
construction
bad debt
company credit checks
debt collection
credit control
check company credit
business loans
instant offer
credit scores
credit review service
economy
company credit check
commercial property
Follow Us
Sign Up to Receive Updates

Related content

  • Post Wrapper

    finance, profitability

    Equity vs Debt: What is best for your business?

    Equity vs Debt:  What is best for your business?

    Paul Surtees
  • Post Wrapper

    alternative finance, fintech

    Fintech and banks' special relationship

    An unconventional fairy tale in the making

    Paul Surtees
  • Post Wrapper

    finance, help, profitability

    7 Steps to Profitability & Finding Success

    Our MD talks about navigating your business towards profitability.

    Paul Surtees
  • Signup to our newsletter

    Have insights about the accounting community sent straight to your inbox. Sign up to our newsletter.