In today’s changing financial world, businesses are looking for new options for business checking beyond traditional banks. They want efficient, affordable, and tech-friendly banking solutions. This has led many businesses to explore non-traditional choices like online banks, credit unions, and fintech platforms. This article will explain and compare these non-traditional business checking solutions and provide advice on how to pick the best one based on specific business needs. We’ll also highlight new trends and innovations in business checking that address the needs of modern businesses.
Why Are Businesses Leaving Traditional Banks?
Banks are an essential aspect of any organization. Traditional banks, in particular, can be difficult to work with because of their complex and time-consuming processes.
They can impose strict requirements on businesses seeking their services. According to the Asian Development Bank, only 13.8% of small businesses secure loans from big banks, compared to 19% approval rates at smaller banks and 24.7% for non-bank loans.
Furthermore, traditional banks can be expensive due to high monthly fees, international transfer costs, and wire transfer charges. The average interest checking account fee is $15.33 per month, with a required minimum balance of $8,684 to avoid it, while yields remain low at just 0.05% APY in 2023. International transfers can cost between $0 and $65 or more due to various fees.
Alternative Options for Business Beyond Traditional Banks
Online Banks
Digital banks, also known as online banks or neobanks are those which operate purely through the internet. Companies like Axos Bank and BlueVine provide almost all banking services traditional institutions do but they charge fewer fees and offer better interest rates mostly.
Advantages
- Reduced Operating Costs: This allows digital banks to lower the charges on their business checking accounts.
- Higher Interest Rates: Many times savings accounts and interests bearing checking accounts have higher interest rates.
- Convenience: Online tools for managing the financial aspects of businesses can be accessed anytime, anywhere using computers and mobile phones.
Disadvantages
- Limited Branch Access: Not having physical premises can inconvenience some firms that depend on face-to-face banking services.
- ATM Network Availability: Though some online banks allow free withdrawal from several ATM networks, it may still be difficult to locate one nearby at times.
- Customer Support: Some businesses prefer face-to-face customer service, which online banks typically lack.
Credit Unions
Credit unions are member-owned financial cooperatives that provide similar services as traditional banks but usually at more favorable terms.
Advantages
- Personalized Service: For their members, credit unions typically emphasize personalized service and support.
- Lower Fees: Non-profit credit unions usually maintain low fees and competitive loan/ account rates due to low profit motives.
- Community Focus: Some develop services targeting specific neighborhoods or professions in order to meet members’ needs.
Disadvantages
- Membership Requirements: Membership to a credit union can involve meeting specific prerequisites, which may limit its scope.
- Technology Gap: A few credit unions may lack the digital infrastructure necessary for full internet banking capabilities.
- Limited Locations: While credit unions might participate in shared branching networks, their physical presence can be limited.
Fintech Platforms
Novo offers an intuitive business checking service that suits the needs of today’s entrepreneurs and small businesses. Novo seeks to challenge traditional financial institutions by providing a range of features designed specifically for businesses.
Key Features of Novo
- No Hidden Fees: Novo lets businesses have free checking accounts with no monthly charges, minimum balance requirements or hidden charges.
- Integrated Tools: It connects with popular business tools such as QuickBooks, Stripe, Shopify, and Slack.
- Reserve Accounts: Allows businesses to reserve funds for taxes or other purposes in virtual sub-accounts.
- Refunds on ATM Fees: For the mobile business person, Novo gives back all global ATM fees paid by users anywhere in the world.
- Easy International Payments: Allows users to send and receive international payments via TransferWise.
Advantages of Novo
- Ease of Use: Simple account setup and an intuitive mobile app.
- Automation: Offers automation features for invoicing, payments, and expense management.
- No ATM Fees: Refunds ATM fees globally.
Disadvantages of Novo:
- Limited Cash Deposits: Cash deposits are not supported directly and need to be done through third-party services like money orders.
Other Fintech Platforms
- Brex: Focuses on corporate credit cards but also offers cash management accounts with no fees.
- Mercury: Tailored for startups, it provides both checking and savings accounts with robust analytics tools.
- Lili: Ideal for freelancers and independent contractors, Lili offers integrated expense tracking and tax-saving features.
Comparing Alternatives: Fees, Accessibility, and Additional Services
Fees
Online Banks: Lower fees due to reduced overhead costs.
Credit Unions: Competitive fees due to their non-profit nature.
Fintech Platforms: Often offer no-fee or low-fee business checking accounts.
Accessibility
Online Banks: 24/7 access via apps and online platforms, but limited in-person services.
Credit Unions: More localized and community-based, with access to shared branch networks.
Fintech Platforms: Highly accessible through user-friendly mobile apps, though physical services are limited.
Additional Services
Online Banks: Competitive loans, credit products, and high-yield savings accounts.
Credit Unions: Often offer specialized loans and insurance services.
Fintech Platforms: Advanced integrations, automation, and analytics tools.
Selecting the Most Suitable Business Checking Option
Choosing the best business checking solution depends on the specific needs and preferences of the business. Here are some key considerations:
Business Size and Industry
Small businesses or startups may benefit from fintech platforms like Novo or Mercury due to their low fees and tech-savvy features.
Larger businesses may require the comprehensive services of traditional banks or credit unions.
Transaction Volume and Type
High transaction volume: Online banks and fintech platforms often offer fee-free or low-fee transaction processing.
Cash handling: Businesses dealing with cash frequently might prefer credit unions or traditional banks due to their branch networks.
Integration Needs
Businesses using specific accounting or e-commerce tools should consider fintech platforms with seamless integrations.
Customer Support Preferences
Those who prefer personalized customer service might lean towards credit unions or traditional banks.
Tech-savvy businesses comfortable with digital support can explore fintech and online banking options.
Conclusion
Online banks, credit unions and fintech platforms are revolutionizing the banking scene. These alternatives provide options that go beyond traditional banks due to their tech-driven, low-cost and customer-focused policies. Prudent analysis of factors such as charges, availability and other support services enables businesses to arrive at the right choice according to their particular demands.
