In countries with developed financial systems, small and medium sized businesses have long been at a disadvantage for banking services relative to large firms and even relative to consumers.

In this piece and the one that follows I’ll review some of the basic business banking services on offer which I’ve experienced firsthand as both an investor and startup owner. But first, how did we get here?

How did we get here ?

The IT revolution facilitated incremental innovations for large companies, and these extended to include the modernization of their financial systems across borders.

Small businesses, however, did not reap the benefits of a globalized financial system. The problem became particularly acute once the internet revolution fostered the creation on a massive scale of startups who, despite their modest initial size, began targeting global markets early on.

This disparity was probably not more pronounced in developed countries than in the U.S. For this reason, I’m restricting my assessment to banks and financial services firms which will accept U.S. SMEs as clients. Not to let European or Japanese banks off the hook — I once wasted 3 months with a French bank to open a local account for my Belgian startup — but at least European and Japanese banks acknowledge that more than one currency exists in the world.

Of the incumbent banks with whom I’ve been working with most recently I will only pick on three of them: Bank of America, Chase Bank, Citibank. Although I would have a lot of positive things to say about incumbents like Lloyds TSB (UK), BNP (France), and Prestia (Japan), they are excluded from this assessment because they will not open business accounts for U.S. entities.

Business banking evaluation criteria

My evaluation criteria prioritize what I view to be the most important attributes for an SME which conducts business globally, specifically:

• ability to handle multiple currencies
• online interface for all essential banking services
• ease of access from multiple countries and time zones
• currency exchange functionality
• transparency in fees

I have yet to find a U.S. retail bank that offers a multi-currency functionality to small businesses. Certainly the three largest of whom I am a customer do not do this. All incoming wire transfers in foreign currency are automatically converted into USD at a spot rate net of some opaque and price-gouging spread. Furthermore, the security and access requirements for these banks are so archaic and provincial that they should be forbidden from using the word global in any of their marketing materials.

Chase Bank is the worst offender. Almost any banking activity performed online from an IP address outside the U.S. seems to trigger a freezing of the account. The account can only be unlocked by visiting a physical branch with a photo ID. For a person working internationally, this is so ridiculously inconvenient that it’s laughable. When exactly such an incident forced me to incur a $500 penalty due to a missed deadline, I dramatically curtailed most of my business banking with Chase.

Bank of America is a bit better. They’ve never frozen me out of my account, and their telephone customer service always seems to be first-rate. The disadvantage of B of A’s online system is that their two step verification process requires a U.S. mobile number to which to send the SMS verification code. International mobile numbers will not work, and even U.S. cell phones will not reliably receive the SMS verification when abroad. The only way around this is to use a security token, a privilege for which Bank of America will make you pay $20. It’s a shame because of the three major U.S. Incumbent banks, I think B of A’s  customer service and online web interface is the best.

As a result, Citibank has become my first choice of incumbent financial institution for U.S. business banking. Citibank requires the same security token system like Bank of America but in contrast do not make you pay for it. I’ve been lucky enough to come to know the manager of a certain branch, who responds to my inquiries over email and has proven incredibly helpful. The only knock on Citibank, well two knocks actually is that: i) like their peers, they cannot handle multiple currencies (every incoming wire is automatically converted into USD upon arrival); ii) Citibank’s clunky online banking interface reminds me of the mainframe days of the 1980s.

Is it any surprise that most people, “would rather see their dentist than their banker?” (Goldman Sachs’ Harit Talwar at CB Insights’ Future of Fintech event).

The real killer app for fintech disruptors ?

The good news for globally-minded SMEs is that radical improvements are underway, and it’s thanks to the fintech revolution.

In the next piece I’ll review some of the fintech startups, of whom I’m also a customer, who are aiming to disrupt the aforementioned incumbents.