If traditional banks and credit unions seem a bit cumbersome and outdated for your banking needs, consider opening an account with the latest fintech star: neo-banks.
These digital darlings of the tech world have a lot to offer… but they’re not the banks you know. Let’s take a closer look at how neobank can be the solution to the financial services you are looking for for your business.
What is the meaning of Neobank?
Neobanks (also called challenger banks) offer online business bank account services, personal accounts, or both. They don’t have physical branches like a traditional bank and all transactions are done online.
How neo-banks work
Neobanks offer digital banking services, usually a personal or business checking account. Some also offer personal or business savings account services, and some even offer small business loans.
Unlike a physical bank, neo-banks do not allow you to deposit cash as all services are available online. You can transfer money between accounts, use a debit card, and send payments.
What is the benefit of Neobank?
When it comes to financial services, fees are the biggest concern for many businesses. For smaller businesses, the $ 25 / month fee can add up. But thanks to financial technology, neobank providers can offer services at lower fees or even eliminate them altogether.
Pros and cons of Neobanks
While there are many advantages to the financial products offered by neobank, there are also some disadvantages to consider.
When it comes to small business budgeting, neo-banks are fit for the job. Many of them don’t charge any monthly fees (they make money from merchant services and fees for using ATMs outside the network). You can even find free business bank account options!
For those who offer savings accounts (such as Bluevine), the interest rates may be higher than those charged by traditional banks. Given the low cost of running a purely online bank, neobank can pass these savings on to customers.
Neobanks offer the financial services you’re used to, such as direct deposits, debit cards, and bill payments, making them familiar and easy to use. Many of them allow free use of ATMs throughout the country.
Finally, neo-banks are extremely easy to open an account. There are no requirements for how long your business had to run for startups to qualify. (Find out how to open a corporate bank account here).
If you’re looking for a comprehensive financial store, neo-banks may not deliver. Unlike traditional banks, most neo-banks are not lenders (though some are), nor do they offer an exhaustive list of services that can be found at traditional banks.
Be aware that not all neo-banks have FDIC insurance, which means that if something goes wrong with the bank, there is no guarantee that you will get your money back. There are some inherent risks involved in this.
If you need to make a cash deposit, this isn’t the bank for you. It would be better to have a traditional bank or credit union with a local branch.
What is the best neobank?
If neobank fits your business, know that the best business checking account is the one that has everything you need. Here are some of the neobank financial institutions we recommend.
Some neo-banks, including Monzo and Starling, serve other countries, such as the UK. Here are some of your options here in the US
Chime offers several free personal accounts including an expense account and a savings account. There is also an account to help you build credit if your credit score is low.
The account offers free debit protection, a debit card and an award-winning mobile app.
Revolution offers both business and personal accounts, as well as budget and analytical tools. Revolut also offers cashback rewards from brands you love.
Its business services include global money transfers, recurring payment management and bookkeeping.
Varo offers both personal checking and savings accounts without any credit checks or monthly fees.
Neobank also offers cash advances up to USD 100 and a secured credit account. Varo also offers up to 15% cashback on selected purchases.
already mentioned Bluevine’s high interest account (you can earn 1% on your company’s checking balance). Neobank also offers business loans, including invoice factoring and lines of credit.
Who is Neobank good for?
If you don’t mind using technology including a mobile app for financial management, neobank may be a good option.
If you don’t mind having fewer features than a traditional bank (with the benefit of low or no monthly fees) then take a look at them.
On the other hand, if you need to make a cash deposit for your business or have complex banking needs for the business, it might be better if you go to a traditional bank or credit union.
Why are NeoBanks so popular in India?
The banking industry is there strongly influenced by bureaucrats and has its share of corruption. Neobanks have stepped in to make it easier for companies to safely store money, open corporate credit cards, and obtain business loans.
India is a leading recipient of fintech services and usually the rest of the world follows them, so we can expect more US neo-banks to emerge in the near future.
Nav Verdict: Neobanks
If online banking services appeal to you and you like to use technology, neobank can meet your business (and maybe even personal) banking needs.
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