What is alternative banking? What to look for in a provider

For years before the 2008 Great Recession, traditional banking dominated the financial landscape. If you needed an account, you’d open it with a bank on the high street; if you wanted to send money overseas, you’d arrange an international transfer and pay a range of fees. 

Challenger banks began to emerge in the wake of the financial crisis, offering a range of products and services designed to improve the customer experience. Capitalising on low consumer confidence in traditional banking, they sought to make domestic and international transactions simpler, less opaque and more user friendly. 

If you’re wondering what alternative banking is, you're in the right place. We’ll begin with a brief definition, then explain what to look for in an alternative provider. 

What is alternative banking? 

Alternative banking companies are financial technology (fintech) businesses that provide a wider, more flexible range of services than those offered by traditional banks. They may offer multi-currency accounts, better exchange rates, lower interest rates on loans and lower account fees.  

Unsurprisingly, alternative banking platforms have become very popular among businesses and retail customers in recent years. Because they often have more-relaxed entry requirements than traditional banks, entrepreneurs and high-net-worth individuals often have much less trouble sending payments overseas using these platforms.  

With that said, products and services offered by alternative banking companies can vary widely. In addition, some organisations, like Interpolitan Money, provide dedicated account managers, while others don’t offer much support at all.  

Why choose an alternative banking provider? 

Alternative banking solutions are far from a last resort. Many business owners and individuals use them in addition to traditional bank accounts. Others find them invaluable when making cross-border or escrow payments.  

Often, people living overseas with private or business-related interests in the United Kingdom open alternative accounts because they’re much easier to set up than non-resident bank accounts. Corporations with complex structures, private equity firms, family offices and intermediaries acting on behalf of high-net-worth individuals find they can set up accounts in days, rather than months. In the end, it all boils down to convenience. 

What to look out for in an alternative banking provider 

Now that we know what alternative banking is and why it’s so popular, let’s explore nine things to look out for before signing on the dotted line with a provider. 

1. A comprehensive suite of services 

First, make sure your provider offers a range of services, including: 

• Multi-currency accounts that are not just restricted to USD and EUR – particularly if you need to make or receive payments in a variety of currencies. 

• Independent third-party accounts for escrow and settlement services. 

• Payments via SWIFT, SEPA, BACS and Faster Payments. 

2. A strong track record of managing complex global challenges 

Your provider should demonstrate expertise in global payments and a good understanding of complex financial regulations and laws across different jurisdictions.  

• Look out for case studies and testimonials from customers.  

• Research the senior management team. 

• Who are the company's partners? Are they well-known?  

• Has the company received any prestigious industry awards recently? 

• Does the company have a global profile with offices on different continents? 

3. Customer support that isn’t restricted to chat bots 

Chatbots have come a long way in recent years. They can answer basic questions with simple ‘yes’ or ‘no’ answers, but they can't tackle complicated queries. 

If you have complex requirements, you’ll want to speak to a dedicated account manager who can give you tailored advice when you need it most. So, make sure your provider offers a mixture of digital and human support. 

4. No minimum account balance or residency requirements 

Many traditional banks require a minimum deposit of £10,000 to £50,000 for non-resident accounts. As a result, individuals or entities with limited financial resources and new businesses have trouble accessing mainstream banking services. Individuals or entities who don't meet traditional banks’ residency or minimum asset requirements also find it harder to open accounts. 

The good news is that not all providers have minimum account balance or residency requirements for new applicants. Alternative platforms can afford to be more flexible and less stringent because they’re not subject to the same regulations as traditional banks. 

5. Funds held in safeguarded accounts 

Tier one banking partners provide an extra layer of protection. So, make sure your new alternative provider stores client funds in segregated tier one bank accounts.  

While safeguarded accounts are not covered by the Financial Services Compensation Scheme, all client funds will be held separately from the company's assets and won’t be invested or used to fund loans. 

6. A seamless, fast onboarding process with ongoing support 

It often takes months to open a business account at a traditional bank, but a good alternative provider should have your account up and running within 10 working days. If you're struggling to open an account elsewhere and you have a transaction to make or employees to pay within the next month, setup speed is crucial. 

7. Willingness to communicate with intermediaries and businesses acting on behalf of HNWIs and foreign entities 

If you're acting on behalf of a client, choose a provider that has experience working with a diverse network of partners, affiliates and introducers in different sectors and jurisdictions around the world. They should be comfortable communicating with intermediaries and businesses acting on behalf of HNWIs and foreign entities. 

8. FCA-regulated status 

The FCA (Financial Conduct Authority) regulates around 50,000 financial services firms in the UK, which is renowned for its high compliance standards. Alternative providers that accept payments, safeguard assets and offer other regulated financial service must be authorised by the FCA to issue electronic money, in accordance with the Electronic Money Regulations 2011. 

9. Competitive exchange rates 

If you regularly make international transactions, you might have to pay a lot of expensive foreign exchange fees. Alternative providers that offer more competitive rates than traditional banks could save you a significant amount of money in the short and long term. 

Balancing convenience with safety 

There are lots of reasons to consider an alternative banking platform instead of (or in addition to) a traditional bank. However, remember that customer service and account features can vary widely, so before opening an account, make sure your provider:  

• Offers bespoke support for your unique challenges, with account managers available by phone or email. 

• Provides named accounts and local IBANs (International Bank Account Numbers), negating the need for you to manage multiple business accounts in different countries. 

• Works happily with intermediaries to help them meet their clients’ goals and build valuable, long-term business relationships. 

At Interpolitan Money, we blend cutting-edge technology with truly personal service to deliver a comprehensive alternative banking solution. Click here to find out more or open an account today.