Many startups in FinTech are attempting to disrupt the banking world with consumer-focused apps, but the real prize and the most lucrative is going to be in the small business space. Especially since Main Street / High Street banks don’t really care enough about small businesses as they are small fries compared to much of the rest of the business. UK startups Tide, out of the UK, is doing just this and announced its $2 million seed round in summer last year.
It’s now come out of the gate with its full launch, allowing us to get under the hood of this ambitious startup.
The problem they are solving is that it can take weeks to set up a business account with a high street bank. Tide does this in minutes by scanning a passport or driving licence via the laptop or smartphone.
It also has an automated bookkeeping service, minimising potential accountants’ fees and the ability to upload any supplier invoice and prepare a payment. Users can also create and send fully customisable invoices. There are no monthly fees, just 20p per bank payment and £1 per cash withdrawal charge.
It launches on iPhone, Android and webIt’s also integrated with Xero.
George Bevis, Tide founder and CEO says “business services offered by high street banks have failed to meet the needs of the modern small business owner. With slow sign-up processes, hidden charges and poor customer experience, business banking has been stuck in the dark ages.”
Not however that Tide is not a bank: member deposits are kept in a ring-fenced account at Barclays under an FCA-regulated e-money license by PrePay Solutions (a large B2B deposit manager co-owned by Edenred – a multi-billion dollar B2B financial services provider – and MasterCard). Funds are held under an e-money license, not a banking license. The primary difference between an e-money license and a banking license is that banks can take investment risks with the money held in their accounts without any prior knowledge of the business owner, however e-money license-holders can not do this. Tide deposits are held by PPS in a ring-fenced account at Barclays and cannot be invested by PPS. But to all intents and purposes, a small business would simply use Tide just like it would use a normal business banking account.
That said becoming the ‘interface’ to the bank effectively means you get to own the user, and that’s very powerful.