Digital Banks vs. Traditional Banks For Small Business...
Choosing a new bank for your small business can be a challenging task. There are a variety of factors to consider and it’s important to make sure you choose a solution that makes sense for your business. Traditional and digital banks offer a variety of benefits and challenges for new businesses, which is why it is important to look into the features that could make or break your decision moving forward.
The best way to find which banking model is convenient for your small business is to consider the nature of your business and the conveniences that are required.
Digital banking is best suited for businesses that process their transactions electronically and rarely handle cash transactions. On the other hand, traditional banking is convenient for businesses that require regular cash deposits and value in-person service over digital platforms.
The two banking systems differ in rates, customer service, transactions, network size, and fees. Let's explore some of these differences further.
Traditional banks typically charge a monthly maintenance fee for business accounts. The prices can range anywhere from $10 to $20. However, it's possible to circumvent the maintenance fee by maintaining a minimum balance, setting up a monthly direct deposit, or opening several business accounts. There are typically limited/no maintenance fees associated with digital banking, and if a digital bank does charge you, it's usually at a lower rate than that of traditional banks and is minimized by the amount of money you have deposited. This is because digital banks can operate without the overhead costs of operating multiple physical bank locations and the required staffing that comes with that.
Digital banking usually offers its customers high-interest rates on accounts such as savings accounts and certificates of deposit (CDs). It is also easier for businesses to check whether their account is earning interest from digital banking over that of a traditional bank. You might get 0.10% APY (or even 0.01% APY) on a savings account at a traditional bank, where it's much more accessible to earn more in interest from your account at a digital bank. As mentioned before, a traditional bank will often charge $10 or even $20 per month just to keep your checking account open with them.
Network Availability and Customer Service
If you’re someone who enjoys the face-to-face interaction and support from your bank, then traditional banking may be better suited for you. Traditional banks have physical branches that allow small businesses to open accounts, deposit, withdraw, and receive in-person assistance. Many also provide the same options that digital banks do for customer service, including over the phone, emails, and web-based assistance.
Digital banks have no physical locations, so you can only make bank transactions electronically. All services are done over the phone or other digital platforms, including interaction with customer assistance. In many cases, there are digital banks that allow you to communicate with their customer service team outside of the traditional banking hours because of this flexibility. This experience can often be frustrating for businesses at a traditional bank where the only time to connect with a service rep is during the same hours that you are operating your own business within.
The most distinguishable difference between digital and traditional banking is the ability to deposit cash. Traditional banks allow cash deposits and withdrawals since they have physical branch locations. On the other hand, digital banks don't have these privileges because they only exist virtually and not physically. However, some digital banking systems allow limited cash deposits through partner companies like GreedDot for a small transaction fee. It's also not possible to withdraw more than the withdrawal limit unless you contact customer service.
Sign Up With WireBee And Enjoy Your Business Banking Experience
While looking for the best digital bank for your small business, it’s important to consider other banking products that may be relevant to your business such as payroll services, loan options, and other convenient vendor services that can help contribute to the growth of your business.
At WireBee, we have the best accounts built with business owners like you in mind. After opening an account with us, you can access the best business banking features like bill pay, wire payments, and accounts payable automation. Our accounts will be available soon, so sign up today and join the waitlist for better