Business Loans

Should You Open a Neobank Account for Your Business?

Jennifer Tjahyadi
February 7, 2023

Is It Worth Ditching Traditional Business Banking for A Neobank Business Account? 

At this point in time, you may already know that Neobank is an online-only digital bank that provides a variety of financial services, such as checking and savings accounts, credit and debit cards, and money transfer services. However, unlike traditional banks, Neobanks do not have physical branches and rely on mobile apps, desktop apps, and the internet to provide banking services to customers. 

 

Neobanks often have higher interest rates but lower fees than traditional banks, and that is probably why you are considering opening a business account with a Neobank instead of a traditional bank. It would also be unsurprising if they offered a more user-friendly app and innovative features such as budgeting tools and financial education resources. Neobanking is the cutting-edge substitute for traditional banking that has grown in popularity among tech-savvy businesses seeking simpler ways to manage their finances.

 

However, should you ditch traditional banks completely and open a business account with Neobank for your company? If you’re wondering what’s the catch, you came to the right place. In this article, we will uncover the benefits of using a Neobank account for Singapore businesses like Aspire, Fazz and Cash-in-Asia, as well as the challenges of using a Neobank account for business. Read on to find out more.

Benefits of using a Neobank account for businesses

1. Convenience

Neobanks offer banking services entirely through mobile apps and the internet, making it easy for customers to manage their accounts from anywhere. They are fairly easy to access and use for tech-savvy customers. As a result, you can quickly and conveniently create an account using their website and/or app.

2. Lower Fees

Neobanks often have lower fees than traditional banks for things like account maintenance and international money transfers, which can help businesses save money. This is only natural, as Neobanking companies do not require any physical bank branches, which helps them save on overhead expenses. Check out our comparison of corporate card fees among Neobanks and traditional banks in Singapore.

3. Advanced Features and Tools

Neobanks often use the latest technology and offer innovative features, such as budgeting tools and other financial management resources, to help customers stay on top of their spending and manage their finances more efficiently that may not be available through traditional banks.

4. 24/7 Support

Neobanks are operating entirely digitally 24/7, and their services may be accessed from any location in the world at any time. You can easily manage your company's accounts and make payments using a computer or mobile device, as long as you have an active internet connection.

5. Automated Bookkeeping and Accounting Integrations

Neobanks have the capability to automate bookkeeping entries, which can save businesses time and reduce the risk of errors. Neobanks like Aspire, Fazz and Cash-in-Asia offer digital integrations with accounting software like Quickbooks, Xero, etc., which can simplify the process of reconciling banking transactions with accounting entries.

Challenges of using a Neobank account for businesses

1. Access to Credit 

One of the leading challenges of using a Neobank account is that you may be restricted to obtaining credit from the Neobank itself or none at all. This is because many credit providers including banks are unable to read Neobank statements. That said, there is a slow receptiveness towards them. For example DBS and OCBC have begun to accept Neobank statements as part of the credit document submission. 

2. Limited branch & ATM access

While no physical branches may mean lower costs as Neobank companies can save on overhead expenses, this can also make it difficult for you to get face-to-face assistance or conduct in-person transactions. Neobanks may not have as many ATMs available as traditional banks, which can make it difficult for businesses to access cash when needed. 

3. Limited customer service

Because Neobanks are completely digital, they may not have as many customer service options as traditional banks, which can make it difficult to get help when needed. If you like to conduct your banking over the counter or want to speak with a real person about opening a new account or taking out a loan, a Neobank might not be what your business is looking for.

4. Limited transaction and withdrawal limits

Some Neobanks have set limits on the amount of transactions and withdrawals that can be done on the account. Because they have no physical branches, they may have stricter limitations in place to reduce the risk of fraud and comply with regulations and anti-money laundering laws.

5. Potential for technical issues

Neobanks are heavily dependent on technology, which can be vulnerable to technical malfunctions or security breaches. There is also the added risk of technical issues that can disrupt service. In some cases, the technical issues may be caused by the third party providers that these Neobanks partner with for some of their services, such as payment processing or core banking.

6. Limited banking product options

Neobanks may not offer the same range of services as traditional banks. If anything, they typically offer fewer account options compared to traditional banks, which can make it harder for businesses to find the right account to meet their specific needs. Neobanks may have limited access to credit, such as commercial loans or lines of credit. Businesses need to look at other non-bank and alternative SME lenders to obtain the funding they need to grow.

Is Neobanking right for your business?

While there is no right or wrong answer as to whether your company should open an account with a Neobank, we believe that Neobanking is best for companies that:

  1. Require an easy, fast, and secure way to manage their finances.
  2. Have limited access to traditional banking services and require a more flexible banking solution.
  3. Need a cost-effective way to manage their transactions and payment processing.
  4. Require quick access to their funds while abroad, with low transaction fees.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Jennifer loves helping SMEs in their business growth journey. She is also an epicurean and has perpetual wanderlust. During the weekend, she weaves poems out of thin air and buries herself in books.

2023
banks
business
business loan
SMEs
SME Loan
Digital Bank
Digital-only Bank

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