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Advantages Small Business Digital Banks Offer That Traditional Banks Can’t

By now, it’s common knowledge that the last few years have been brutal for small to medium-sized businesses (SMBs). Ask any SMB owner how they’re doing, and you will likely get a laundry list of serious problems, including the state of our economy, pandemic issues, taxation, the Great Resignation, online competitors and more.

Somewhere in the mix, you might even hear how SMB owners do not enjoy the same level of perks that banks hand out freely to giant corporations.

That last item may have been true for years, but the terrain is shifting. There has been a surge of exciting innovations in the financial technology (fintech) sector. Perhaps one of the more noteworthy developments has been the “democratization” of services offered by digital banks. Customers no longer need to carry a big stick to enjoy increased benefits and convenience.

SMBs: The Backbone of Any Economy

At this point, SMB owners need every break they can get. Leveling the banking playing field is great news for beleaguered SMB owners who need to spend more time recruiting and training competent staff and less time writing checks or driving to a brick-and-mortar bank downtown.

According to Chris Tremont, the chief digital officer of Grasshopper Bank, “Historically, small businesses have been underserved by financial institutions, lumping them either into a consumer or larger commercial segment where the products or platform do not match up quite right. An advantage of digital small business banks like Grasshopper is we focus solely on the SMB market and can tailor our offerings to their needs.”

Saving Much-Needed Time for Other Priorities

Consistent and effective use of paid staff time is easily one of the lynchpins keeping the average SMB operating in the black. Thinner profit margins (wrought at least in part by online retailers) mean that a business owner needs to make every minute count. This is especially true during regular business hours when most traditional brick-and-mortar banks tend to conduct the lion’s share of their business.

If you want to become fast friends with an SMB owner, show them how to reduce the amount of time it takes them to accomplish anything. Perhaps more than most other business people, they know that efficiency is one of their greatest allies. Today, digital banks hit the SMB owner sweet spot in several categories, but four stand out:

1. You can open an account quickly…without driving anywhere.

Because digital banks have their online business security model baked in, account holders can (and do) conduct all of their business online. Yes, you still have to prove that you are who you say you are to open an account. Still, you can take care of this without driving to a downtown location, digging through stacks of paperwork, or waiting for a customer service representative to become available. Many traditional institutions still force prospective customers to jump through various hoops that once served a purpose but no longer make much sense.

2. Digital banking allows you to make payments on the go.

SMB owners might have to wait for their checks to clear before a vendor agrees to ship supplies. With digital banks, you can move funds around more quickly. As a result, SMB owners no longer have to introduce unnecessary delays to their productivity. This ease of payment for goods and services will enhance your reputation with creditors. That improved level of responsiveness can lead your company to receive priority over another.

3. Paper checks can be deposited using your smartphone.

With a digital banking account, you no longer need to write checks (unless you want to). However, we still live in a world where some businesses and individuals prefer this payment method. Let’s face it; you want to accept payment in whatever form someone wants to offer it! However, you no longer will need to collect all of your checks, write up a deposit slip, or risk losing a payment. Using your smartphone, you can quickly deposit any checks you receive and reduce the time between getting the check and having it clear.

4. Transfers between accounts can happen in real-time.

With digital banking, you won’t need to worry about whether your debits and ACH transactions cause any problems. Most digital banks prioritize keeping everything straightforward, even to the point of sending out text message notifications anytime something happens affecting one of your accounts. Should you suddenly realize you need to move funds around, you can do so immediately, typically with a secure smartphone app.

Increase the Operational Efficiency of Your SMB

When your SMB begins receiving payments faster, pays its employees more quickly, and can track all financial transactions in real time, other operational efficiencies also start to show up.

As just one example, digital banking typically cuts down on questions about payroll. This results in less time spent at work composing emails for your accountancy team, less time spent responding to said emails, and less irritation on both sides of the equation.

Digital banks benefit from not having any legacy systems to accommodate. In other words, they tailor their products to how you work rather than insist you customize your banking practices to accommodate their procedures and protocols.

And don’t move too quickly past the substantial advantage of real-time financial reporting. Having it in hand allows you to resolve money matters quickly and accurately. Gone are the days when an employee steps into your office with a payroll question, and you are obliged to respond with something like, “Hang on while I call someone at the bank.”

Take Advantage of Enhanced Customer Benefits

Digital banking may not be for everyone, but it sure feels like a dream come true for harried and increasingly inflation-stressed SMB owners. Digital banks have far less overhead tied up in real estate, legacy systems, building maintenance and other significant expenditures. As a result, they offer an excellent option for the small business owner who typically doesn’t have time in the average work week to meet and greet a bank representative over lunch.

As with anything else involving your financial security, spend time reading through and fully understanding the terms and conditions of any accounts you open. Because digital banking has quickly grown so competitive, do a little shopping before committing. Your digital banking expectations should begin with fewer or no fees, plus unlimited transactions. Make sure you secure a better APY on your current accounts. Set up an automated savings plan with an opt-in for employees. Compare and contrast the various options for your needs.

One of the best ways to shop for a digital banking solution might be to make a note every time your business day is interrupted by a money-related issue that takes your attention away from your primary job. Then look for a digital banking partner to help you eliminate those interruptions forever.

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