Neobank for Business: Advantages and Disadvantages

Neobank for Business: Advantages and Disadvantages

Download Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist

With bank turmoils like Silicon Valley Bank and Signature Bank, there is no doubt that neobanks have been gaining momentum more than ever. We believe that businesses have started to diversify their bank accounts and place deposits with more variety of banks, especially neobanks.

As recent bank runs have demonstrated, relying on a single bank can put businesses at risk of losing their entire deposits. Neobanks, which offer digital banking services without brick-and-mortar branches, can be a convenient and cost-effective option for businesses to consider. In this article, we will explore the advantages and disadvantages of using neobanks for business banking, so you can make an informed decision about whether it's the right option for your company.

What is a Neobank?

A neobank is a banking platform that is purely digital, and offers basic banking services to customers through an application and/or website. In contrast, traditional banks have brick-and-mortar branches on top of their online banking services. There is no saying that one is superior to the other; you simply need to choose the option that best fits your business needs or have both dedicated to specific uses.

Neobank Phenomenon in Singapore

Neobanks typically collaborate with traditional banks that are affiliated with a deposit insurance corporation, such as the Singapore Deposit Insurance Corporation (SDIC), to adhere to regulations and safeguard customers' funds. Although the name of the deposit insurance company may differ by location, the process remains consistent.

All full banks and finance companies in Singapore are required to be members of the Deposit Insurance Scheme.

The Deposit Insurance Scheme protects SGD deposits of non-bank depositors such as individuals, charities, and companies. The coverage is up to $75,000 per depositor per Scheme member and covers standard savings, current or fixed deposit accounts. It also covers SGD deposits placed with any scheme member under Supplementary Retirement Scheme, CPF Retirement Sum Scheme, and CPF Investment Scheme.

In Singapore, digital banks team up with conventional banks to furnish financial services and secure customers' funds in a single bank account. Depositing money in a digital bank account is as secure as depositing it in a regular bank account since the conventional bank operates the underlying account for both types. For more information about the security of adopting neobank for your business, check out here.

All in all, Here’s a few notable neobanks in Singapore:

  1. Aspire: Financial platform suited for small-medium enterprises (SME)
  2. Wise : Best for managing international financial flow
  3. YouBiz : Singapore based multi-currency mobile wallet

Benefits & Perks of Neobank – Why do People Use Neobank?

With the growing interest in neobanks lately, it is only natural to wonder what sort of perks you would receive if you switched to neobanking, Sprout Asia’s got you covered when it comes to what some of these perks may be.

  1. Due to the technological nature of neobanks, they do not require any physical bank branches, which helps them save on overhead expenses. As a result, neobanks are usually able to offer zero or low fees as well as no minimum balance accounts for customers.
  2. Neobanks are fairly easy to access and use for tech-savvy customers. As such, you can easily set up an account within minutes through their online application.
  3. Since neobanks are completely digital, they operate 24 hours a day and their services can be accessed anywhere in the world, at any time. All you need is an active internet connection and a mobile phone or computer. Neobanks are a convenient way for you to deposit checks, manage your finances, and make payments with ease.
  4. More digital tools and workflow improvement solutions: Neobank apps can come flushed with tools that allow users to invoice, collect and pay bills in a streamlined user interface. These apps can be integrated with your favourite accounting software to facilitate bookkeeping providing you with convenience and a hassle-free experience.  

Get A Free Business Account

With Grof, you can streamline your finances, manage cash flow and secured banking all-in-one place. Get started today with no upfront fees needed.
Sign me up

Downside of Neobank – Things to Consider

Given that neobanks are also fairly new innovations, it is important to consider the following when making your decision on whether you would like to get involved with one.

Let’s not put this. But instead refer to bank products which are typically not available with Neobanks such as

  1. Users are unable to make cash withdrawals and deposits due to the absence of physical bank branches.
  2. Chequebooks are not available in neobanks because they are less commonly used by people nowadays.
  3. As neobanks primarily offer basic banking services, it would not be recommended to engage a neobank for any complex financial transactions. The lack of face-to-face contact or support may be frustrating in these situations.

Is Neobanking for Me?

If you are a tech-savvy businessperson looking for basic checking and savings accounts services, neobanking is right for you! However, it is always recommended to research into whether your selected neobank has deposit insurance that protects your money in case the bank runs into financial trouble.

On the other hand, you might want to consider a traditional bank if you are a cash-only business with many employees. Otherwise, if you frequently find yourself requiring complex business financing services, a neobank might not be the ideal option for you.

Sprout with Us!

In addition to deciding on your preferred financial medium, the prospect of keeping up with manual bookkeeping and DIY accounting can be a daunting and frustrating experience. At Sprout, we only want the best for 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.

Also, we would like to introduce our newly launched product, Grof, a powerful tool for business owners like yourselves to streamline business processes and keep your financials in check. Get started today with $0 fees!

Supercharge Your Business

Running a business can be daunting and time-consuming. Let us simplify it for you so you can focus on what you do best!
Get started with Grof