Online Vs Traditional Business Bank Accounts
One the first financial decisions you will make as a business owner is deciding where to open your business bank account . In the past, it was as easy as walking into your nearest branch. But now, you have the traditional accounts versus online ones.…
One the first financial decisions you will make as a business owner is deciding where to open your business bank account . In the past, it was as easy as walking into your nearest branch. But now, you have the traditional accounts versus online ones. Both offer the same service – a place to manage your finances and payments.
However, the experience of each one and the way in which these activities are carried out is very different.
Traditional business bank accounts are usually offered by banks who have physical branches and, in most cases, well established reputations. On the other hand, online accounts operate – you guessed it – entirely online through apps and websites.
Business bank accounts to consider include:
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So how do you know which one is right for you? Let’s get into it.
An Overview Of Traditional Business Bank Accounts
These bank accounts are associated with your brick-and-mortar banks where it’s easy for you to go in and receive assistance. They will provide you with the full-service banking experience including business loans and overdrafts, point-of-sale systems and international banking.
Depending on how large your business is, you may even work with a dedicated account manager to provide guidance when you need it.
Platforms like Revolut and Monzo have emerged as online bank account providers, also known as neobanks. You can’t physically visit these banks and all services are done through apps or online dashboards.
What sets these banks apart is their digital convenience. It’s easy to set up an account in a matter of minutes and receive real-time notifications, no matter where you are.
One the first financial decisions you will make as a business owner is deciding where to open your business bank account .
These accounts are also known for having lower fees than traditional banks because they don’t have the same overhead costs, ideal for startup owners on a budget.
CompanyMonthly FeeOther RequirementsClaim offer Trusted by more than 50,000 companies3 Month Free Trial3 Month Free Trial and managed through an easy to use mobile app. 1 Month Free then £14.90 + VAT per month (or £149 per year)10 minute sign up, accounting functions and easy to use invoicing tools to get invoices paid faster
Traditional Vs Online: Which Is Right For You?
When it comes to choosing a type of business bank account, there is no right or wrong choice. Every business owner will have differing needs and requirements and should choose the one that best caters to those.
However, it is worth knowing how they compare across the factors that most business owners will look at.
Traditional banks often come with monthly account fees and transaction charges. But they are better suited to bigger cash deposits and if you have very specific financial needs.
With online accounts, fees are generally cheaper or there may be none at all for some transactions. Even international transaction costs are lower so for those wanting to cut costs, it’s a good option.
Opening a bank account at a physical branch is a bit more tedious. It often involves you physically going to the branch and handing over documentation, then waiting a couple of days for approval. Most of the traditional banks have apps which you can use for online banking, but some services may require a visit in person.
On the other hand, you can set up an account online fairly quickly and usually without paperwork. You can upload supporting documents and verify your identity digitally. Once your account has been created, you can start banking straight away and everything is done online.
With traditional banks, you can make deposits or withdraw large amounts of cash without any issues. So for businesses who work with cash transactions like restaurants, this type of banking is highly beneficial.
For online banks, this is definitely their weak point. Without any physical branches, it’s difficult to deposit cash unless they have partnerships with ATMs. It’s possible but it’s not as convenient as just walking into your nearest branch.
Traditional banks have business advisors and if you need financial guidance, their support is invaluable. They offer that one-on-one human support where you have the opportunity to build relationships with them and your bank.
Online banks will offer support through emails or chats. While they have 24/7 availability, it’s not quite the same as a face-to-face interaction.
Some banks have been around for decades and have built up a strong reputation. Given that they have a solid track record of stability and established systems, some business owners may opt to use them instead.
Overall, online banks are fairly secure. Most have encryption and two-factor authentication but since they are new to the game, some users may feel some hesitation.
It’s actually pretty common for a lot of businesses to take a hybrid approach when it comes to their company’s finances.
Traditional banks are good for credit lines and handing large sums of money given their credibility. On the other hand, online banks are convenient for day-to-day transactions and managing smaller expenses.
This type of approach definitely offers more flexibility as opposed to choosing one over the other. But ultimately, it will come down to your business needs to determine which way forward is the best for you.
Based on reporting by techround.co.uk.