Online Financial Institution vs. Traditional Banking Benefits and Business Account Opening
8 minute read
How do you like to deal with your business finances? Do you like to visit your bank for transactions, bill payments, and money withdrawal?
Or maybe you do everything on your phone or computer? If people can shop, play games, and watch TV shows on their phones, why not go an extra step and deal with finances through an app?
If you prefer to manage business finances online, you are familiar with the term digital banking. As you probably know, digital and mobile banking are the online version of traditional banking activities.
Money deposits, withdrawals, transfers, account services, and so on, are available thanks to online financial institutions. People can access their personal and business accounts using a mobile phone or other smart devices. From there, they can manage their funds however they like.
If you’d like to learn more about all the benefits of using online banking institutions and how you can open your own business account with them, keep reading.
- Pros and cons of online financial institutions
- How to open an account
- Pros and cons of traditional banks
Benefits of online financial institutions
Even though many banks have adjusted to the online environment, there are also online-only solutions that offer certain advantages for consumers.
Banking but easier
As a business owner, you will appreciate that the online banking feature provides you with the convenience for banking anytime and anywhere.
The website services are available all year long for internet banking. Even though there are certain periods when the servers and websites are being maintained, these usually don’t take more than a few hours.
When you open the internet banking page, you should see the summary of your real-time bank account. This way, you can check your account at any time you desire. In case you need to make some changes or even make payments, you are only a few clicks away from making it happen.
Convenient payments transfer
Nowadays, one of the more important things for businesses is time. Therefore, they want to spend it on something that is providing additional value.
Online banking helps businesses easily transfer payments in their employee bank accounts. Some of the regular transfers can also be automated, so managers and business owners are able to use their valuable time completing tasks that are more important.
Little to no paperwork
When a company opens an account at an online financial institution, the chances are that the user will only have to deal with paperwork one or two times.
Everything else happens online. To be precise, most banks of this kind have their own banking app where all important things can be done. A user only needs a computer or mobile device and a good internet connection.
Improved productivity in business
Thanks to digital banking, businesses don’t have to rely on bank operation timings anymore.
Now, all of the transactions can be made and received even in the odd hours. Additionally, there are processes such as paying bills or making regular payments that can be automated thanks to the banking platform features.
Ultimately, the businesses are able to save a lot of time on the manual processes, which beneficially affects their productivity.
Cons of online financial institutions
Sometimes it’s far better to have a face-to-face conversation with a human being when solving certain issues. However, is lack of face-to-face communication the only shortcoming of online banks? Let’s see.
The ability to access accounts online will be affected if your internet service is running slowly or if it is completely out for a period of time. Consequently, if the bank’s servers go down or are temporarily unavailable due to site maintenance, you won’t be able to access its online services or anything related to internet banking.
Daily or monthly mobile deposit limitations may make it difficult for individuals, but especially businesses to make large deposits online. Once the designated limit is reached, you’ll need to trek to a branch to deposit money. Also, not all types of checks are easily read by computer scanning software.
In general, online financial institutions are safe. Websites and apps, all of them are protected and all the details are encrypted. However, no system is completely foolproof and accounts can be hacked, resulting in identity theft through stolen login credentials.
So, while you can use mobile or online banking with general confidence, be careful to avoid using networks that are not secure. In addition, make sure to change passwords and protect your login information.
How to open an account?
First of all, you should consider if you need access to a physical branch to make cash deposits, or if a business checking account with a branchless bank will be enough.
Once you have that clear, it is time to choose the best possible option when it comes to digital banking companies.
Then, choose the best online business checking account. Consider its overall costs, branch locations, ATM availability, online banking experience, customer service, and bookkeeping integration.
Then gather all the necessary documentation for an online business checking account. This varies from one bank to another, but generally, you will have to provide documents that verify your trade name and any other essential information that the tax authority provided to you. Once you do this, you need to apply for an account at the bank’s website.
Finally, many banks require you to deposit a minimum amount into your online account. Hence, prepare some money for this final step.
Benefits of traditional banks for business
To this day, the most common banks remain brick-and-mortar banks. They have branches and many of them offer internet banking services which are usually optional.
Even though using a traditional bank might seem too conventional, there are certain advantages unique to doing banking with a financial institution that has brick-and-mortar branches.
Take a look at some benefits of traditional banks to see if they are a good fit for keeping and handling your business finances.
Whether you want a personal savings or checking account, most traditional financial institutions can provide all these services in one place.
All big banks in the world have brick-and-mortar locations and ATMs that are available to their customers all across the globe.
Even though there are strides in tech development, the industry still has to contend with a traditional form of currency — cash. If your business often deals with cash, a traditional bank may be an attractive and convenient option.
Cons of traditional banks
Traditional banks offer critical conveniences. However, they do have their own shortcomings.
Traditional banks always bring common bank fees and the reason for this is simple. It is much more expensive to manage a bank with physical locations, so they have to charge higher fees.
Less flexibility and availability
When you do business at a traditional bank branch, you have to take some time out of your day to drive, visit, and get everything done. Limited service hours, combined with the aforementioned constraints, could prove to be a headache for some people. Also, once at a branch, you often have to wait in line to see a teller or even to use an ATM, which takes even more time out of your day.
Higher rates and fees
It is considered normal for traditional brick-and-mortar banks to charge higher fees than their online counterparts in an effort to cover the various expenses required for them to stay in business. This should be expected, given the fact that online bank services don’t have the overhead of maintaining physical branches and are often willing to offer more incentives to compensate for the lack of a physical presence.
How to open an account?
- Choose the best type of business bank account to suit your operation.
Generally, most new business owners go for a business checking account. But, you could also open a business savings account to earn interest on capital that is not ready to be deployed.
- Find the right bank for you.
The bank you choose will influence segments such as the overall costs and fees, the number of available locations, online banking experience, customer service, and other business financial products.
- Check the costs.
Simply put, all banks usually charge for some transaction fees. So, try to find out what costs you will have to cover related to your new account.
- Gather all necessary documentation to open your account.
In general, you will need to provide documentation that verifies the name and general nature of your business. In most countries, you will need a document that proves you have registered the company with the tax authority. This also proves that you have the legal authority to set up the account.
- Head over to the bank and open the account.
- Deposit funds into your account.
This is the final step — depositing funds. Either write a check to your business from another account or make an online transfer.
Now you are aware of how things work both at traditional banks and online (digital) banks.
Each option has its own benefits. Therefore, think well before you decide where you want to put your money. After all, it is important that you find a solution that best suits your specific needs.
If you need help with opening a bank account, do not hesitate to contact Sleek!