Back in 2010-2016, when I was advising Australian companies to setup in the UK on behalf of the City of Greater London, one of the most common problems that Small Business & Startups had to deal with was Banking. Two things:
- Businesses needed a local bank account in a local currency for their business, so that they can pay people and bills fast plus reduce the Foreign Currency Exchange cost.
- Small Business generally wanted to put a minimum amount of money in the account and top it up fast when needed, to help manage cashlow. They don’t want to be penalised for lots of small transactions or suffer delays.
Two problems though for these Small Businesses:
- Even global Banks aren’t interested in recognising the business as a single entity in two jurisdictions. The Australian company is Customer 1. The 100% owned subdiary in the UK is Customer 2. You need to endlessy “re-prove” who you are. Many countries have much more vigorous money laundering laws, so setting up a business account was a much bigger hassle. British Banks had a tendancy to ask for original documents, not copies, proving all shareholders and Directors who were they said they were, running up through the parent companies.
- Their Foreign Exchange was slow and expensive.
Sadly, despite the fact there was some interesting products out there amongst the big banks, at the end of the day I couldn’t recommend anyone as the products weren’t for small business or individuals (of the non-high net worth individual kind). Not really my problem though, and I couldn’t change the way it was.
Of course there was foreign exchange dealers around who sped things up and reduced the cost, but they didn’t solve the bank account on the ground in the other country problem.
I lost interest in 2016, after leaving London’s employ.
Fast forward to 2019. I’m now in Washington DC, setting up an AI business for Real Thing Entertainment, and kicking some goals . Foreign Exchange and Banking are becoming real issues for me again. My problems:
- I need US$ cash readily available for incidentals, so therefore I need a US$ bank account here, to get it without paying a bomb.
- I need to be spending in US$ on my credit cards, not having it converted back to Australian dollars at a high rate plus an international transaction fee tacked on (thanks CBA).
- I need online banking solution for the business that I’m not paying an additional fee for (thanks Presidential).
- I need a brick and Mortar bank that my US customers are comfortable paying into (remembering that checks are still widely used in the US and the internet is viewed with mistrust in plenty of quarters, so Fintech raises eye brows).
- And I need a better solution for my wife, so she doesn’t have to be totally reliant on me for cash (she doesn’t have a Social Security number so has been knocked back by the banks here).
Consequently, I ended up doing the diving back into reviewing banks and products. What I came up with fascinated me, and has me rethinking how I do all my banking. I ended up choosing a product called Transferwise for both the company and myself.
- The test foreign exchange transfers I completed, ended up costing me on average about 5% less than the banks and the funds arrived a day quicker (4 days v 5 days).
- I discovered I could hold balances in a variety of currencies at Transferwise. And each of these currencies appears to be a bank account in the country of the currency. Changing funds between currencies is done at the mid market rate (much lower than the banks) and happens instantly. So effectively I now have a mechanism to move currency between countries almost instantly.
- I have been issued a Mastecard Debit card , which allows me to buy things locally in US$ and withdraw US$ cash from an ATM, paying a small foreign card fee – when I need cash here.
- It has a feed straight into our Xero accounting system so the bookkeeper is happy.
The best thing though is that with Transferwise, my wife could quickly get a US Bank Account, without having a social security number!
Of course the account doesn’t generate me interest or points, but it gets me what I mostly need and I still have an AMEX for airfares and accomodation (with points, and lounge access). I still had to setup a bricks and mortar bank account (I chose Chase) because my Government agency customers prefer that type of bank, plus I will need merchant facilities downstream. Chase was highly recommended as the small business bank in the US, but it doesn’t do Xero feeds properly as yet. However Im only expecting to do a a couple of transactions a month with it and no foreign exchange, so no biggy.
Setting up the Chase account took only 90 minutes in branch because I had collected all the documentation first. The Transferwise setup took 10 mins online and a scan of my passport.
If I need to spend time in London in the next couple of months (highly likely) I can spin up a UK Currency account in under a minute and get cash locally at a low transfer rate.
Sad I can’t go back in time and recommend this to the hundreds of small business I met whilst at London & Partners.
Still, being stoic, I’d have to say Im Winning.