Future Business: Coconut, the bank account for freelancers

Fintech startups are a dime a dozen in London. They’re all promising to do amazing things with my money and an app, and they all work without ties in offices that more resemble a climbing wall than a place of commerce.

But I’m interested in Coconut because they’re doing something a bit different. They’re not trying for a banking licence, and they’re not trying to get me to do my everyday spending or savings with them.

What Coconut is promising is quite appealing, however. An app, containing a bank account, that can store all of my expenses receipts and calculate my tax and national insurance obligations. A freelancer’s wet dream.

"We found that the money management side of things is really challenging, ... despite us being Chartered Accountants having trained at PwC."

I meet co-founder Sam O’Connor on a muggy London afternoon in the share office space Coconut calls home, just south of London’s tech hub around Old Street tube station. He looks the part - open collar, untucked shirt, and glasses with rims thicker than Ronnie Corbett’s.

Like many good ideas, the Coconut concept came to him as the result of an unmet need. A few years ago he began consulting on his own, but found he had to jump through hoops to open a business account with the high street boys.

“We found that the money management side of things is really challenging, and that’s despite us [O’Connor and his co-founder Adam Goodall] being Chartered Accountants having trained at PwC.

“The main challenges when we actually went out and chatted to our friends, who are creative designers, consultants, photographers - people like that - is figuring out how much tax you owe at any point in time.

“Whether you want to spend money on a holiday or a pair of shoes or a MacBook or whatever, people often have a shoebox of receipts.”

O’Connor said it was these types of problems that just don’t occur with employees, but when working for yourself they become painfully obvious.

“What we do is use rich real-time payment data to automate a lot of those processes and it’s very neatly in a bank account.”

“You can also add a receipt, so that the record it kept with the transaction and you can just ditch the receipt."

Coconut is also trying to ease the pain of opening a business account, allowing users to go through that process on their phone and supplying them with a debit card a few days later via post.

“You just spend on the debit card in the normal way and you can see your list of transactions.”

Transactions are automatically categorised in the app itself, although you can re-categorise if it doesn’t get something quite right.

“You can also add a receipt, so that the record it kept with the transaction and you can just ditch the receipt.

“It also calculates your tax so that you know how much money you’ve got at any point in time, and you know how much tax you owe.

"Loans and other financial products that you need to grow your business will be much more readily accessible.”

Coconut does exist in a very busy fintech space in London, but Sam is more than certain they can carve out their niche.

“Startups like Monzo and Loot … they’re actually really shifting customer expectations about what a bank account can and should do.

“But when it comes to business banking, there is quite a lot of exciting stuff you can do for businesses that consumers just don’t really need - especially around the accounting and bookkeeping side of things.”

O’Connor says business banking innovation is at an early stage, adding that Coconut is getting in at the ground level.

“Where we see the future is that your business bank account will become just an integrated part of how you run your business, and what that means is that things like loans and other financial products that you need to grow your business will be much more readily accessible,” Sam adds, hinting at a future ‘marketplace’ of financial products for Coconut customers.

"When my bank wants me to visit my branch I find it quite painful so I avoid it at all costs."

So, what of the future of banking? Does Sam think the traditional branch will head the way of the dodo?

“I never visit my branch, and when my bank wants me to visit my branch I find it quite painful so I avoid it at all costs.

“The majority of the people that I know in my friendship group and work also avoid visiting the branch, and they don’t really need to because technology has developed so much that we can do the things we need to from our phone.

O’Connor says the challenge is that banks haven’t kept up, and so still require customers to visit branches for some things where they don’t need to.

He did add that the kind of people who do still visit branches religiously are people like his father, who does everything in person.

“Over time I think the people who are comfortable using phones and online banking will grow up, and the people that use the branches will need to transition to the new technologies or find another way to do things.”