Should You Open a Business Account with a Neobank?

Should You Open a Business Account with a Neobank?

Many entrepreneurs have asked us if they should forgo traditional banks and open their business bank accounts at a neobank instead. While we cannot tell you what to do, we can help you understand if using a neobank might be suitable for your business.

In this article, we will help business owners understand whether they should open an account with a neobank or if they should continue using a traditional bank. We will also discuss how businesses can benefit from neobanks, some downsides of using them for your business accounts, and help you come to a decision if it is wise to use a neobank for you business.

What is a Neobank?

Neobanks are financial institutions that offer online-only financial services and have no physical branches. Customers access and manage their finances through an app and/or website.

How can SMEs Benefit from Neobanks?

1. Around the clock business banking. The economy is so dynamic that businesses need to be able to access their finances 24 hours a day, every day of the year. Since neobanks operate entirely online, they provide 24/7 business banking and customer service. There is hence no need to worry about making it to the bank within office hours anymore.

2. Low fees. Small businesses often have little cash flow because they are still scaling their businesses and perfecting their product(s). Neobanks offer low and sometimes no banking fees along with no minimum balance requirements. This means that you do not need to worry about adding yet another cost to your budget.

3. Smart reports and great data. Since neobanks are so tech-focused, they constantly add useful features to their app, such as financial reports and data insights. These features help business owners understand their finances better and make smarter business decisions.

What are Some Problems that SMEs Face when Using a Neobank?

1. Lack of access to financing. Although this is slowly changing, most neobanks only offer basic checking and savings business accounts. However, many small businesses often need working capital loans and other forms of financing. If your business has such needs, you will likely need to go to a traditional financial institution to obtain such loans.

2. You have to keep up with technology trends. If you are uncomfortable with technology or have an older workforce that is not very tech-savvy, using a neobank might be frustrating for you and your finance staff in the long run.

3. No business consulting services. Traditional banks often have employees who provide business advice and coaching to new business owners who open accounts there. Neobanks do not provide this type of high-touch, customer-centric assistance, which means that business owners will have to seek help somewhere else.

Should You Open a Business Account with a Neobank?

All in all, it all depends on your individual situation as an entrepreneur. If you do not have too many financing needs, are very early in your business journey, and just need a business checking and savings account to separate your personal  business finances while you build your company, a neobank could be a good option for you.

Moreover, if you see your bank solely as a place where you deposit and withdraw your money rather than as a financial partner that guides you through your entrepreneurial journey, a neobank is a good, low-cost alternative to a traditional bank.

Whatever you do, do not be afraid to research your alternatives and take your time to choose the right type of bank for your business.

Sprout with Us!

Sprout Asia wants you to focus on what you do best, while we take care of the rest. That is why we offer budget-friendly accounting services, so that our chartered accountants can manage your finances with ease and accuracy.  

Feel free to reach out to us with any questions you may have about our services, and we will respond to you within 24 hours.