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If you are a business owner in Singapore, chances are that you have heard of a new trend in banking called neobanking.
This guide aims to help business owners who are considering switching from their traditional bank to a neobank make an informed decision. We discuss the key differences between the two types of banks, the advantages and disadvantages of neobanking, and whether neobanking is right for you and your company.
Key Differences between Neobanking and Traditional Banking
Neobanks have no physical locations for customers to visit, which means that you have to conduct all your banking transactions through the mobile application and/or website. In contrast, traditional banks have brick-and-mortar branches and online banking services.
Another difference between the two is that since most neobanks do not have banking licenses, they partner with traditional banks to insure their products. Traditional banks do not need to do this because they are fully licensed and chartered.
Lastly, traditional banks are very relationship-centric, which means that their success is largely determined by the strength and depth of the relationships they have with their customers. On the contrary, neobanks have flexible, short-term relationships with their customers.
Advantages of Neobanks – Benefits & Perks
1. Neobanks have very low and simple fees for their services. The reason for this is that the lack of physical branches reduces their overhead expenses. They then pass these savings on to their customers through lower fees and higher interest rates on checking and savings accounts. On the other hand, traditional banks tend to have many layers of complex fees for their banking services.
2. You can make an account in minutes through the app. Making an account is easy and paperless, so you do not have to worry about filling out numerous forms or mailing anything to your bank. On the plus side, it is also environmentally friendly!
3. Neobanks are convenient. As long as you have a stable internet connection and a computer or smartphone, you can deposit checks, manage your finances, and make payments 24 hours per day and from anywhere in the world.
Now that we have covered the advantages of neobanks, here are three key disadvantages to consider before you leave your traditional bank.
Disadvantages of Neobanks – Things to Consider
1. If you have complex financial transactions that you need help with, you will not like the lack of face-to-face contact. Remember, neobanks do not have physical branches so you cannot talk to anyone or establish a personal relationship with your banker.
2. Neobanks can be frustrating for people that are not tech-savvy. Since neobanks are online-only, users have to be very tech-literate to use neobank services.
3. Neobanks do not have many services. Most neobanks only offer checking and savings accounts, so if you need loans, retirement management, credit cards, and other financial services, a neobank will not give you what you need.
Is Neobanking Right for Me and My Company?
Neobanks are great for business owners who are extremely tech-savvy, conduct relatively simple business transactions, and don’t like talking to bankers in person. For example, if you’re a small business that only accepts online payments and does not conduct a great number of transactions every year, a neobank might be good for you. On the other hand, you might consider a traditional bank if you are a cash-only business, have lots of employees, or frequently need business financing services.
Regardless of what type of consumer you are, make sure to do your research before signing up for a neobank. Given that they are generally not chartered or fully licensed, you need to do extra research into their security protocols and verify that your money is insured in case the neobank goes bankrupt.
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.