Bank Reviews: Neobanks Explained

This category is growing very rapidly in the United States. You see a lot of neobanks, many of them are consumer focused, but there are some that are business focused. Three that I'm gonna talk about in particular are Mercury, Novo, and Brex, but there's a lot of others. This is also what I consider one of the most interesting categories of all of the banks, because of their unique approach. You're gonna see a lot of changes here, so it's something that I'm gonna be keeping a close eye on, and you should too.

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Full disclosure. We haven't tested all of these banks in great depth, but we have used some of them. We've reviewed a lot of their messaging and their features, and we have a pretty good understanding of banks in general, so we know what they're talking about when they message certain features. Those we have tested will have videos in our channel, so go ahead and search our channel and you can see more details on some of those banks there.

1:16 Integrations with other software

So the first thing that we look for with any bank is their integrations with other fintech software. And in this area, neobanks tend to be very good because they are technology companies first.

You're gonna be able to have good integration with your accounting software, whether it's QuickBooks, Xero. Sometimes they'll integrate with other larger mid-market software as well, but most of 'em are gonna integrate with QuickBooks and Xero.

Brex, with their Brex Cash product, has a unique integration with Shopify and Amazon wherein they will look at your sales and allow for instant payouts. So as you know, there's always a delay between the time you sell a product and receive the cash from those channels. With the Brex integration, you have the ability to get that cash almost instantaneously.

Mercury advertises itself as a bank built for ecommerce, with payment processor integrations, virtual cards for paying vendors, and global payment options, all things that you're gonna need as an ecommerce business.

So Novo has some interesting integrations. First, they bring in your Stripe information right into their banking portal, so you can see that information there. Second, they are going to be adding instant payouts, and I'm recording this as of March 2022, so look for that as well. That's the feature where you'll get your sales payments earlier through the bank. And finally, you have the ability to track sales and balances across many ecommerce and payment processor platforms.

2:35 Bank portals and apps

So after integrations, one of the things we look at is bank portals. That's the online portal that you use to look at your information, move your money around, download statements, et cetera.

Bank portals is an area where I think neobanks are gonna shine better than their competitors. The challenge you find with many traditional banks is they will not update their bank portals more than once a year, if that. These neobanks, they are technology first companies, so they're constantly improving their bank portals, meaning you're gonna get more and more features.

You can expect the standard features of the ability to see your balances, download statements. As I mentioned, all those robust integrations. But there's gonna be a lot of interesting reporting features and so on that you can expect in these banks.

So, to use an analogy, if traditional banks are a 2000 Honda Accord, neobanks are like a Tesla. Always improving, super sexy, getting better all the time. That 2000 Honda Accord might be very reliable, like those big bank portals. You get what you get, but you're not gonna get much more out of it.

Finally, when it comes to bank portals, you can count on robust apps. A lot of banks have subpar mobile apps, but neobanks are gonna have really good apps, and like their bank portals, their web portals, they're always gonna be improving.

3:49 User access and read only views

The next thing we look at is bank portal user access. A lot of big banks and small banks have less than adequate user access. They'll either have one size fits all, they'll have no sub users, they'll have very limited permissions. Neobanks, because they're technology first, have the ability to really granularly define the accessibility of sub users. And like I said, you can expect that there will be improvements over time, whereas those traditional banks, whether they're big or small, are not gonna improve very quickly.

The biggest feature that we look for as an accounting firm with user access is a read only view. As accountants, or as a lot of other business members, they might only need to see the information. They shouldn't have the ability to transfer or manipulate the money. This is a really critical feature that so many big banks don't even have, and it's something that we look for first and foremost, and you should too.

4:41 Branches and customer support

One area that neobanks are not so great at is physical branches. These are online banks, so you're not gonna be able to go down to a physical bank branch and talk to a manager and have them work with you to address issues. So buyer beware, if that's something that you need, for whatever reason, you're not gonna get that with a neobank, at least not today.

Another category is support and customer service. Now, as technology companies, you can expect that the experience is gonna be widely varied, so you wanna do a little research. Also know that as technology companies grow, sometimes their customer service diminishes, and then they'll make investments and it'll improve. So take a look, see what their reviews are. Talk to people that are using 'em. The customer service is all over the place. And you can look at some of our reviews on banks and see what we say.

The other thing you're gonna wanna look at with customer service is how they communicate. Some will only use chat, some will use email, some will have phone numbers. Pay attention to their support levels and their times that they're available. It's not an issue until it is, so make sure you're comfortable with their level of service.

5:43 Lending limits

Another category that you look at with the bank is lending. Now, neobanks are gonna be very limited on what they provide to you. Typically it's the ability to deposit and send money, usually ACH and wire, but you're not gonna often have loan programs with a neobank.

This becomes very important for an ecommerce business. And what we've seen is lines of credit and loans become very critical. Neobanks aren't necessarily gonna do that. There are some unique banks out there like Clearco, formerly Clearbanc, that has some programs specifically for ecommerce. But the traditional neobank isn't gonna have a lot there, at least not today. But keep your eyes on them, because it'll probably change over time.

6:23 Where neobanks fit

Overall, I love what neobanks are doing. I love the technology first approach. This is what's needed in today's environment. The fact they're marrying technology with an underlying bank charter through a partner is really amazing. I love the fact that they're constantly improving. This is much needed, and I hope that neobanks will push all banks to invest more in their technology and give more options to consumers.

Their technology-first approach will be very appealing to those that are tech savvy. If you need face to face interactions, they are probably not a good fit for you. They're probably a good fit for early stage ecommerce companies who don't need a lot of complexity with their banking and just need the ability to do what they need to do with their money. As you get bigger, you might need a bigger bank for lending, for other situations, but they could be a great start to your business.

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