Computer Says No! The banking crisis impacting UK nonprofits

Opening a business bank account should be straightforward, yet for many membership bodies, trade associations, charities, clubs, and professional societies it has become anything but. Over the past two years, an increasing number of organisations have reported long delays, outright refusals, or sudden account closures. For bodies whose very survival depends on secure banking facilities, this is more than an inconvenience. It threatens credibility, financial stability, and member trust.

So why has something as simple as opening a bank account become so complicated?

Regulatory Pressure and Risk Aversion

The starting point is regulation. UK banks are under sustained pressure to comply with anti-money laundering (AML) laws and “Know Your Customer” (KYC) rules. These frameworks, designed to combat fraud and financial crime, require banks to understand exactly who their customers are, how they operate, and where money flows.

For corporate entities with a clear ownership structure, this is relatively simple; but for membership bodies, which are often volunteer-led, with multiple trustees or committee members, the picture is far more complex. Some are unincorporated, some registered charities, others companies limited by guarantee. Few fit neatly into the risk models designed by banks and what follows is delay, requests for repeated documentation, or rejection altogether.

The Shadow of “Debanking”

Compounding the issue is the wider trend of “debanking”, i.e., the closure of accounts deemed high risk, sometimes without notice. In 2023 alone, over 140,000 small business accounts were shut by UK banks. While the intention is to remove potentially suspicious activity from the system, the dragnet has caught many innocent organisations.

Charities and membership bodies have found themselves disproportionately affected. The Institute of Chartered Accountants in England and Wales (ICAEW) recently described the situation as reaching “crisis point.” Banks are closing or suspending accounts, levying higher fees, and providing limited explanation or recourse. For associations, losing a bank account overnight is not just disruptive; it can make it impossible to pay staff, collect subscriptions, or hold reserves safely.

The Rise of Automated Gatekeepers

Behind the scenes, much of the vetting process is now automated. Banks increasingly rely on algorithmic checks and centralised compliance systems. While efficient for straightforward cases, these systems struggle with nuance.

A community sports club with twenty committee members, a trade association representing overseas suppliers, or a professional body with complex governance can all trigger red flags in automated risk tools. Once that happens, the default answer is often “computer says no.” The result is a Kafkaesque experience where applicants find themselves bounced between online forms, call-centre staff, and compliance departments that seem unable, or even unwilling to exercise judgement.

Lack of Understanding of the Sector

A further complication is cultural. High street banks are used to dealing with commercial enterprises that trade for profit. Membership bodies operate differently: they may rely on volunteers, subscription income, or grant funding. Their governance arrangements are often designed for transparency and accountability, not speed or simplicity.

This unfamiliarity leads to suspicion. A professional society collecting fees from thousands of members may be viewed as a financial institution in its own right. A charity with overseas donors may trigger anti-terrorism finance checks. Even long-established trade associations find themselves having to explain, repeatedly, how they work and why they are not a commercial risk.

Shrinking Branch Networks and Human Support

Practical access has worsened too. The UK has seen almost 40% of its bank branches close over the past decade. For membership bodies, which often prefer in-person guidance for something as critical as setting up accounts, the lack of face-to-face support makes matters worse. Trying to resolve a technical application problem by phone or online portal rarely succeeds.

The Impact on Membership Bodies

The consequences are significant:

1. Operational risk: Without an account, organisations cannot process subscriptions, pay staff, or meet obligations.

2. Reputational damage: Members may lose confidence in a body that cannot secure basic banking services.

3. Financial exclusion: Smaller associations risk being driven to unsafe practices, such as using personal accounts for organisational funds.

4. Strategic constraint: Lack of reliable banking can deter grant funders, partners, and new members.

   
   

For volunteer-led organisations, already stretched for time and resources, the process can feel overwhelming.

What Can Be Done?

While the system is unlikely to change overnight, there are steps membership bodies can take:

1. Get governance documents in order: Constitutions, articles of association, trustee registers, and AGM minutes should be up-to-date and easily accessible. Banks will ask for them.

2. Consider specialist providers: Some banks and fintechs offer accounts specifically for charities and clubs. They are more familiar with non-profit structures and less likely to reject applications.

3. Use professional advisers: Accountants or solicitors experienced in the sector can help pre-empt questions and smooth the process.

4. Engage collectively: Bodies such as ICAEW, NCVO, and umbrella associations are lobbying regulators and banks for fairer treatment. Adding your organisation’s voice strengthens that case.

5. Explore digital banking as an interim measure: Fintech platforms can sometimes provide quicker onboarding, though they may have limitations in terms of deposits or cheque handling.

The Bigger Picture

At heart, this is not about banks disliking membership bodies. It is about systems built for profit-making companies being asked to accommodate organisations that do not fit that mould. The challenge is exacerbated by regulation, automation, and the retreat of human judgement.

The irony is clear: membership bodies exist to provide structure, trust, and collective voice. Yet they themselves are struggling to be recognised as legitimate and trustworthy customers. Unless the sector, regulators, and banks work together, the problem risks escalating into full-blown financial exclusion for organisations that play a vital role in civil society.

Opening a bank account should be the least of a membership body’s worries. Right now, it has become one of the greatest. Until the regulatory environment relaxes or banks adapt their systems to better accommodate nonprofits, membership bodies must prepare for longer lead times, heavier scrutiny, and frustrating obstacles. The task is not impossible, but it is unreasonably hard.

And for organisations whose mission is to serve members, communities, and industries, that is a systemic problem that deserves urgent attention.