What are the benefits of digital banking for a small business? 

The banking industry has evolved significantly in the last thirty years following the advent of the internet. Fewer people are now going into branches to perform banking tasks, preferring to handle everything online. The convenience and immediacy of online banking are appealing to business owners and consumers alike.

The major banks’ online offerings are a front end to what are, ultimately, legacy banking systems behind the scenes. Recognising the need for innovation and competition in the banking sector, the Financial Conduct Authority (FCA) is actively encouraging competition from a new generation of ‘challenger’ banks which are not constrained by the limitations of legacy systems or the punitive costs of maintaining a branch infrastructure.

A new ‘digital-only’ form of banking has therefore emerged to rival the traditional approach. These online banks offer many of the same services as traditional banks and have no requirement for branches since the primary form of communication with their customers is online. Unconstrained by legacy systems with delayed transactional updates, the new banks can provide real-time information on spending and transactions. 

Digital banking 

There is little doubt that digital banking is advantageous for banks and customers alike. With significantly reduced infrastructure costs, digital banks can offer attractive interest rates on savings and loans that their traditional counterparts may struggle to match. Similarly, attractive fee reductions may apply; for example, many challenger banks do not levy additional fees for spending abroad. 

Fast application

Traditional banks tend to have reasonably lengthy and convoluted processes for opening a bank account for a business. Once again, some of the associated friction may be attributable to limitations with legacy systems, many elements of which may date back to the 1970s and 1980s. The result can be endless form-filling to the frustration of banking personnel, and the business customer alike and the resource-intensive nature of the process imposes yet another unwelcome cost on the bank. 

The challenger banks take a very different approach, striving to offer a fast, frictionless account opening process to both business and retail customers. While there are, of course, regulatory and identity verification factors involved, digital banks fully exploit new technologies in endeavouring to minimise the work required to satisfy the regulator. 

Comprehensive banking at your fingertips 

Digital banking mirrors the functionality available with traditional banks’ online offerings to some extent, for example, in the ability to monitor transactions, move money between accounts and pay bills. However, because their platforms are modern and agile, they can add and enhance functionality in a fraction of the time that it would take a traditional bank. 

This is evidenced in some of the consumer-centric functions already seen in many digital offerings, for example, bill splitting, transactional analysis and downloads, the option to change PIN codes via the app and the ability to freeze and unfreeze cards in the event of loss, theft or merely in the interests of budgetary control. 

It is entirely reasonable to assume that this functionality will grow as challenger banks seek to differentiate their offerings and attract business customers. 

Budgeting and forecasting

Digital banking simplifies budgeting and forecasting for business owners by providing detailed summaries of income and outgoings. Using a digital account makes breaking expenditure down into categories easier. This enables a high-level view of the firm’s finances, with owners or finance teams able to determine whether funds could be moved around to make better use of their money. The ease of access to detailed transactional and analytical data is invaluable in financial planning and forecasting for any business.

A digital account will help you to plan more efficiently by identifying the trends and patterns that can inform good business decisions. You can easily link your accounts to accounting software which opens up a wide range of further benefits from addressing the requirements of Making Tax Digital (MTD) through to management and stakeholder reporting. 

There is little doubt that fully digital banking is defining the future of the sector. There is already significant potential value to business customers in the context of frictionless processes, 24/7 operations, reduced fees, more attractive interest rates and a wide range of data and analytical advantages.

If you decide to explore your options, do ensure that the bank you choose is FCA regulated, which affords some protection in the event of failure. Many of the new challenger banks are new and may not have the stability or resources of their more-traditional counterparts. It is also entirely reasonable to assume that there will be some convergence between the old and the new worlds as the mainstream banks evolve their own service offerings to meet the challenge head-on.

Ready to take control?

Sign up today, and discover just how simple your expense management could be.

Sign up