22 September 2023

Why are businesses bypassing traditional banks and opting for digital alternatives?

Bad banking services can severely impact your success. Learn why more business are switching to digital providers.
Why are businesses bypassing traditional banks and opting for digital alternatives?

With the rise of fintech, there are now several banking options and solutions available to businesses. Let’s delve into them!

What is 'traditional' corporate banking?

What do we mean when we say a ‘traditional bank’? Well, traditional corporate banks refer to the brick-and-mortar branches that service the banking needs of businesses. Several features distinguish them from other banking solutions, such as a regional headquarters and their own (branded) ATM machines.
Traditional banks facilitate the financial needs of businesses such as: 
  • Sending and receiving payments
  • Making deposits
  • Opening business savings accounts
  • Applying for business loans
Due to their physical locations, traditional banks usually service local businesses, and account holders in the same country will require ID, like proof of residency, to open an account.
Examples of traditional banks that offer corporate banking services in the UK include:
  • Barclays
  • Lloyds Banking Group
  • HSBC holdings
  • Santander UK
  • National Westminster bank
  • Nationwide Building Society

What are the benefits of traditional business banking?

Before the emergence of digital banking solutions, traditional banks were the primary option for businesses seeking to open an account. There are still many pros to this type of banking today:
  • In-person support: a huge benefit of traditional banking for businesses is the ability to speak to a customer service specialist in person for real-life support.
  • Access to products and services: as well as transactions, traditional banking gives its users access to additional products and services such as loans and savings accounts.
  • Access to ATMs: traditional banking infrastructure and its physical presence means users can access local ATMs to service additional banking needs.

Traditional banking: the cons

However, the traditional business banking model in and of itself is becoming more outdated. As a result, it’s failing businesses that require modern banking services to scale. This is especially true for small to medium enterprises (SMEs), which traditional banks often overlook.
Some of the difficulties businesses face when using traditional banks include:
  • Bureaucratic application processes.
  • Limited support due to physical branch closures (earlier this year, several bank branches across the UK closed down, including the likes of Nationwide and Lloyds Bank.)
  • Costly transaction fees.

Enter the bank challengers

As the global business landscape develops with the emergence of new trends and technologies, business needs and operations also continue to evolve. Corporate banking is high on that list however, traditional banks are no longer meeting the needs of many modern businesses.


That’s where bank challengers, or ‘alternative banking solutions’ come in. Alternative financial institutions are leveraging the power of technology and evolving in line with the changing needs of businesses and consumers.
Digital banking platforms are rising in popularity with businesses. In a survey conducted by PwC, “27% of respondents reported shifting towards digital banking since the onset of Covid-19”.
Not only this, but according to the British Business Bank, “challenger and specialist banks accounted for over half of gross lending in 2022.” This figure accounted for their highest-ever share on record.


What services are available with alternative banking solutions?

In addition to those provided by traditional banks, bank challengers provide a whole host of services that benefit businesses. 3S Money, for example, offers a Local IBAN, which can help massively with scaling business. Other services include: 
  • Multicurrency accounts with 3S Money, businesses can access over 65 currencies and transact to over 190 countries
  • Local IBANs
  • Merchant services such as point-of-sale systems and e-commerce payment gateways.
  • Invoicing and billing tools that can be integrated with other accounting software.
  • Foreign currency exchange and international transactions services.
  • APIs and integrations, such as accounting tools, CRMs, and e-commerce platforms.
Here are examples of financial institutions that fall under the ‘bank challenger’ category:
  • Neobanks
  • Peer-to-peer lenders
  • Fintechs
  • Electric money institutions (EMIs)

Why bank challengers are great for SMEs

Although SMEs are small, they do have a big impact on the economy – especially in the US. According to the U.S Small Businesses Administration Office of Advocacy, “there are an astounding 33.2 million small businesses across America” making up “99.9% of businesses across the US”.
Bank challengers like EMIs and digital banks are growing more popular with SMEs, and here are some of the reasons why:
  • Fairer access to funds: alternative banking solutions give financial access to those who have been marginalised by traditional banks.
  • Convenient: due to the nature of EMIs and fintechs, gone are the days of business owners having to physically travel to branches to access services. They can head straight to mobile banking apps or online banking, freeing up time to focus on other areas of their business.

Key takeaways

We've covered lot's in this blog but let's go over the main takeaways.

  • Traditional banks are no longer the primary option for businesses seeking to open an account.
  • As the global business landscape develops, business banking solutions like digital banks and EMIs are meeting the needs of many modern businesses.
  • Challenger and specialist banks accounted for over half of gross lending in 2022 - their highest-ever share on record.
  • There's a vast array of corporate banking services available with bank challengers. With EMIs like 3S Money, this includes local IBANs, multicurrency accounts and foreign currency exchange services.
  • Alternative banking solutions are financially inclusive, providing fairer access to funds, they're easy to set up and are a more convenient option for budding businesses.

Get started with a 3S Money account

In a global economy, optimising your business banking operations is a necessity. With a 3S Money International business account you can redefine your international transaction experience.

Ready to revolutionise your business's banking operations and scale to new markets while doing so? Click our 'get started' button below.


Meet the authors

Sharyh Murray


Sharyh is the lead Content Writer at 3S Money with a strong background in crafting high-quality, compelling fintech and FX-related articles. With extensive expertise in the field, Sharyh's writing resonates with a variety of audiences and drives action among readers, whatever the financial topic.


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