Formulas that price the true cost of branchless banks, one by one

Fee schedules are easy to compare, which is why everyone compares them. The costs that actually separate a branchless account from a conventional one are mostly denominated in hours and in disruption, and nobody publishes a table for those.

So this page is arithmetic for the unpublished half. It gives you formulas for the time a workaround consumes, what banking cash really costs, what switching costs, and what an outage would cost, so you can add them to a fee total and compare something meaningful. No calculator runs here, and no figures are quoted, because every input is yours.

What to take away

Formula one: what an hour actually costs you

Every later formula uses this, so do it first.

H = (annual cost of the person doing the work) / (working hours in their year)

Annual cost means what the business pays for that person, not what appears on their payslip. If the person is you and your time is billable, use the rate you would have earned instead. Where several people are involved, compute H for each and use the one who would really do the task.

Formula two: the cost of a workaround

For each thing the account cannot do, and that you therefore do another way:

Monthly workaround cost = (times per month x minutes each / 60) x H + direct outlay

Direct outlay covers third party charges, postage, travel, plus any subscription existing only to bridge the gap. Run this once per workaround and keep the list because workarounds accumulate quietly.

Formula three: banking cash

If any of the business is paid in notes and coin, price the whole trip rather than the deposit.

Cost per trip = (travel minutes + queue minutes + handling minutes) / 60 x H + deposit charge

Monthly cash cost = cost per trip x trips per month

Then ask what the alternative costs. If depositing less often is possible, the saved trips have to be weighed against holding more cash on the premises, which carries its own risk and possibly an insurance condition. A deposit made less often also becomes available later, and the federal baseline for that is Regulation CC.

If it is not possible, the number you have just computed is a fixed cost of that account for as long as you hold it. The wider list of places cost lands is in where the cost of a branchless account sits.

Formula four: switching, spread properly

Switching is a real cost and it is not a monthly one. Compute it once, then amortize.

Switch cost = (setup hours + repointing hours + parallel running hours) x H + duplicate charges during the parallel period

Repointing hours means telling customers, platforms, processors and anyone paying you where to send money, then chasing the ones who ignore it. Budget more than feels reasonable, because the long tail of payers who keep using the old details is the part that surprises everyone.

Monthly equivalent = switch cost / (months you expect to stay)

Add that monthly equivalent to the new account's running cost. A provider that saves a little every month and costs a week to move to may not be ahead within the period you can actually forecast.

Formula five: keeping a second relationship

If redundancy is part of your plan, and for most businesses without a branch it should be, count it.

Monthly redundancy cost = charges on the second account + (value of any balance you must strand there, valued at what that money would otherwise earn) + maintenance minutes / 60 x H

Keep this as its own line rather than folding it into the primary account. It is a deliberate purchase of continuity, and seeing the price makes it a decision rather than a drift.

Formula six: what one blocked day costs

You do not need to estimate how often outages happen. Estimate what one costs, and then decide what you are willing to carry.

Work through a normal week of payments. Ask what would fail if you could not send or receive for a full day: a supplier release, a payroll run, a customer refund, a tax payment on its due date.

Payments on different rails fail differently. The Federal Reserve's material on automated clearing house services describes why a batch missed by a cut-off waits for the next one.

Put a cost against each: late charges you would incur, work that would stop, and the hours spent working around it.

Exposure per blocked day = payments that would fail x cost of each failing + recovery hours x H

Compare that against the monthly redundancy cost from formula five. For most businesses the comparison is not close, and it is the most useful number this page produces.

Putting it together

Total monthly cost of the arrangement = provider charges + workaround costs + cash handling + amortized switching + redundancy

Compute that identically for each candidate, using the same twelve months of your own activity for the charge component. The method for the charge component alone is set out in pricing an account against your own statements; the formulas above are what you add to it.

Then look at the composition, not just the total. Two accounts with the same total are different propositions if one is mostly published charges and the other is mostly your own hours, because hours grow with the business and are the first thing you will resent.

What this arithmetic cannot tell you

Running it yourself

Compute H, then work through the workaround list, cash trips, amortized switching, redundancy and one blocked day. Add those to the fee total and compare candidates on the sum. The account that wins on that basis is rarely the one that wins on a pricing page.

Common questions

Is there a calculator on this page?

No. Six formulas in a spreadsheet is the whole tool, and the inputs have to come from your own operation. Anything automated would be guessing at H, at your trip times and at your payment calendar, which is the entire content of the answer.

How do I value my own time if I am not paid a salary?

Use what you would otherwise earn in that hour, or what it would cost to have someone else do the task. Do not use zero. Founder hours priced at zero is how businesses end up with accounts that cost them a day a month.

Should switching cost really be included?

Yes, and it is the term most often ignored. Include it and many marginal moves stop looking attractive, which is usually the correct conclusion.

How often should this be recalculated?

Once a year, and after any change in cash handling, payment mix, headcount or volumes. Also recompute the outage exposure whenever a new dependency appears, since payment calendars get denser without anyone noticing. The wider trade-offs of the model are set out in what you give up without a branch.