What are the Advantages and Disadvantages of Using a Neobank?
Neobanking is the new modern-day alternative to traditional banking that have gained popularity amongst tech-savvy businesses seeking financial assistance. In this article, we share insights on the advantages and disadvantages of neobanking, in order to help you decide if it is the right option for you.
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.
Benefits & Perks of Neobanking – Why do People Use Neobanks?
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.
- 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 lower fees and higher interest rates on checking and savings accounts for customers.
- 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 application.
- 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.
Downside of Neobanking – 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.
- As neobanks primarily offer basic banking services, it would not be recommended to engage a neobank for any complex financial transactions or assistance, as the lack of face-to-face contact or support may be frustrating.
- Are you tech-literate? Since neobanks are based completely online, it would not be ideal if you are not familiar with how to access their services through their application and/or website.
- Neobanks are less regulated than traditional banks. In some cases, neobanks may not be fully chartered or licensed, which can pose issues in the event a neobank goes bankrupt, potentially leaving the security of your money in jeopardy.
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!
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.