Many business owners, big and small, never question their banking accounts. The one they signed up for years ago is still the one they’re using now. But are they leaving money and other benefits on the table?
Today, we’re answering that question.
Digital banks have seen a meteoric rise in users in the last five years, taking a chunk out of traditional banks but also attracting a new generation of entrepreneurs that didn’t find the current brick-and-mortar bank accounts suitable for doing business in these modern times.
Some digital banks offer both personal and business bank accounts. However, there are also specialized digital banks that are focusing strictly on freelancers, SMEs, ltd., partnerships, or all of them.
Being dedicated to business users means that they have also developed custom tools and reports for them that can simplify doing business to a great extent.
Let’s see for what reasons businesses, sole traders, and freelancers should open a digital bank account rather than one with a traditional bank.
1. Easy Signup Process
We have to discern online banks and digital banks. Online banks are simply traditional bank accounts offered online. There’s nothing special about them. No extra tools or features. Same with mobile banking.
Digital bank accounts are usually offered by new fintech companies that are challenging the status quo and that are going above and beyond to satisfy their users, especially their business clients.
One of the main selling points of digital banks is the easy and streamlined registering process. It’s also one of the main reasons why they’re so popular in recent years.
Their KYC (Know Your Customer) process is either outsourced to a specialist third-party company or done to perfection in-house.
Either way, opening a digital business account is much easier, with no or far fewer documents, and completely online via a browser or, even better, an app.
There’s no need to go to a branch, wait in line, and talk to a clerk. Everything is automated to save money and time for both sides – the entrepreneur and the bank.
READ ALSO: 5 Great Examples of Banking as a Service
2. Fees and Costs
Business bank accounts can cost quite a penny. That money is spent far better on your business than to line the bankers’ pockets.
Digital bank accounts, on the other hand, are either free or offer some paid plans with additional perks and benefits for large companies that SMEs or freelancers wouldn’t need at that point (or ever).
Traditional banks also try to charge you for everything. This includes account opening, minimal opening balance, monthly maintenance fee, closure fee, a fee to transfer money to other banks, out-of-network ATM fees, etc. You see the pattern.
Challenger banks are, as one of their names says, challenging the old-school banks. That means fewer or no fees for everyday banking, free transfers and international transactions, no maintenance fees, free ATM withdrawals, and much more.
3. Budgeting and Analytics
The last time you logged into your mobile banking app, did you see any spending or expense graphs or analyses? No? I thought so. Traditional banks are way behind fintech companies on this one.
You either have to use a third-party tool or app, or do manual spreadsheets to see what your budget looks like.
The best digital banks out there even let you set limits or set aside chunks of money for special purposes, as well as a breakdown by merchants, categories, countries, expenses, invoices, revenue, etc.
Efficiently display daily, weekly, monthly, or annual insights for a deep dive into your spending habits, expenses, and revenue.
Knowing exactly where you stand financially whenever you want by simply looking at a mobile app was outlandish until recently.
Piles of receipts are a thing of the past, thanks to paperless invoices. Some merchants still rely on paper, though, and this can make our lives harder in this digital age. Keeping track of, or not losing the receipts and invoices can be a real pain.
Digital banks have made expensing and tracking of invoices and paper receipts a breeze.
In the mobile app, you can efficiently see and manage transfers made by your employees. Easily set spending limits for each of them and create your own rules for expense approvals.
Real-time spending alerts let you know exactly what’s going on at the time it’s happening. Review what’s already been taken care of or track and approve/disapprove what hasn’t.
After each card transaction, team members get instant reminders to upload a receipt. Once it was uploaded, it’s automatically attached to the right expense, meaning less work for you.
Accounting has never been easier with digital banks. Simply integrate your bank account to your preferred accounting software like Xero or QuickBooks to keep expenses, accounts, and employees in check.
Run your business on the go by sending invoices, claiming expenses, reconciling, seeing an up-to-date snapshot of your cash flow, or giving your accountant access so they can see the information they need.
There’s no need to upload anything manually anymore, as everything is automated for the best user experience.
The tax season can be extremely stressful for business owners, but that doesn’t have to be the case. If you prepare for taxes as you go, there won’t be any last-minute deadlines and nasty surprises.
Link your accountancy program to your digital app, open a sub-account to collect money for taxes all year long, and safely store all your invoices, receipts, and business documents in one place for tax reports.
With open banking, connect your other banking apps under one roof, so you have all the data in one place.
Some digital banks even calculate how much VAT you’ll have to pay to the local tax authorities.
READ ALSO: 6 Ways Digital Banking Helps You Save Money
We mentioned invoices briefly already. You usually need to get a third-party app to issue invoices. However, digital banks let you do that straight from your banking app.
You can effortlessly create professional-looking invoices in under a minute by using your phone or laptop. Monitor them to see when they get paid, or set up automatic payment reminders that will nudge your customers in case they forget to pay.
If you include multiple payment options, such as cards, PayPal, Apple Pay, or bank transfer, you’ll get paid faster than ever.
8. Money Transfers
Speaking of money transfers, they were, up until recently, very slow and cost plenty of money. That may still be true for some traditional and digital banks. Most digital banks, though, offer free and instant transfers if the sender and receiver are part of the same bank.
International transfers and currency exchange still costs a lot of money, depending on the institution. Dedicated money transfer apps have brought much cheaper payments to the market because they offer a fairer exchange rate.
Challenger banks catering to retailers and e-commerce businesses offer card payments via POS or even a QR code. A QR sticker can be placed anywhere so you can get paid instantly.
The payment methods via this code are versatile and include Apple and Google Pay, cards, or other digital banks that work with this technology.
The more payment options you can give to your customer, the better. Having limited payment choices is bad for business as it means disgruntled customers.
And what about those pesky fees for accepting payments? They are often lower than other competitors in the field.
With next-day settlement, your cash flow is also much better, and the money can be accessed instantly to pay your employees, pay for goods, or invest back in some other way.
Digital banks that support more than one currency let you accept payments like a local. You can accept, settle, and manage payments in the same place in different currencies until you decide to (or not) convert them.
10. Card Management
Managing tens or even hundreds of cards is easy with the right digital bank. You decide where team members can use the cards, set limits, or freeze them how and when you decide.
Accounting is made easy, as we already mentioned, by the fact that employees are prompted to take a photo of the receipt so it can be added to the expense side automatically.
Handing your team members their own cards is one of the best ways of managing a business because you can track their spending in real time for full transparency and the best money management.
This is what I love the most about digital banks, personal or business ones. You can create sub-accounts. Think of them as separate bank accounts but in the same bank, where each has its own account number that can be used for payments and transactions.
A card can also be linked to each of these sub-accounts, making it easy to budget teams and individuals.
However, a sub-account can be used for much more than that. It can be a separate account for tax payments, wages, miscellaneous expenses, a savings account for bigger expenditures, etc.
12. Ease of Use
Although digital banks pack many features into their apps, that doesn’t mean they are hard to use. There isn’t even a learning curve you need to get over in order to figure out all this digital banking stuff.
The mobile and online apps where you’ll do all of your banking are as straightforward as they can be. Simple menus, tiles, and screens with helpful tips along the way.
Sounds much better than clunky traditional banks that don’t care about users one bit. Their business model is finally going away as customers flock to banks that help and appreciate their client base.
A bank can have hundreds of financial products, but if they are hidden behind endless menus, what’s their point?
13. 24/7 Banking
Being able to bank whenever you need to and not when the bank branch is open is a game changer.
Modern business isn’t waiting around for anyone, and if you can’t respond to an urgent issue even though it’s after hours, that could cost your business money and reputation.
With digital banking apps, one can do money transfers, pay contractors, or get paid for work done anytime, day or night.
Having a bank in your pocket is an incredible feat of technology that we don’t think about often. If you could go back in time 30+ years ago and tell someone that, they’d look at you like you were crazy.
14. Customer Support
When you’re a customer of a faceless global bank, you can’t expect much customer service. Whatever help you need with your account, you’ll probably have to go down to your local branch, wait in a queue, and talk to a clerk that may or may not be able to help you.
Digital banks that cater to businesses often have dedicated customer support agents ready to answer all your questions and help you out with your account.
Some banks go as far as to scan all your paper receipts to digitize them, so you don’t have to keep them in your office or archive them in dusty boxes.
15. Reduce the Carbon Footprint
Digitalizing your banking can mean a lot to the environment. Switching to paperless operations, procedures, payments, statements, and money transfers saves a lot of energy and, of course, paper and, therefore, trees.
Digital banks also don’t have physical bank branches, which means they have a lot fewer people employed, which in turn also means fewer computers, and less energy expended.
Customers also like to see when a business is green, as we all should do our part for the environment.
For all the reasons above, opening a digital bank account is a no-brainer for businesses, no matter how big or small they are.
With so many benefits that help save time and money, at least looking into digital banking accounts for your business would be a wise choice.