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E-Bank or Brick-and-Mortar?

By Deborah Jeanne Sergeant

Online banking may offer convenience but experts say having a personal relationship with a local bank is crucial to business success

Online banks and traditional banks each offer business banking clients distinct advantages and disadvantages. Because every small business is different, it can be difficult to say which is the better way to go.

“You need a banking relationship with someone local,” said Brenda Weissenberg, owner and accountant at Affordable Business Solutions in West Monroe. “But I would say for day-to-day banking, e-banking is fine.”

John R. Halleron, advanced certified senior business adviser at the Small Business Development Center, also sees both pros and cons in e-banking.

“I have mixed feelings about e-banking for business,” he said. “While some transfer dealings between accounts and payment receipts can be done electronically, I don’t really see how large deposits lend themselves to e-banking.”

E-banks often offer higher interest rates and provide convenience over banking in-person. These draws certainly offer good advantages. However, they lack the professional relationship provided by a brick-and-mortar location.

“Historically, part of the bank manager’s role was to raise business, find new companies that would come to the bank and deposit their cash with the bank and the bank would be able to lend money that would involve fees,” said Tom Barkley, professor of finance practice at Syracuse University. “The bank manager’s role was to find small- to mid-sized businesses that would have a symbiotic relationship. With the internet, a lot of online banking has lost that relationship feel.”

If a business develops financial problems or needs a loan but doesn’t quite meet the perfect lending requirements, an e-bank will not make the occasional exception that a conventional banker might. Lending decisions can partly rely upon the strength of that real-life relationship.

Although Barkley sees advantages to the fast transactions of online banking, “you might not be getting the best experience as to knowing what you have to offer. The bank might not be aware of when the company is getting into trouble.”

Most brick-and-mortar banks offer online banking, making it easy to compromise between a fully online experience and a fully in-person experience.

“Digital banking overall provides many enhanced and intelligent services to help businesses manage their money in real time,” said Jonathan Spilka, senior vice president and business banking business development manager at NBT Bank. “The use of secure digital banking enables business owners or designated key employees to review accounts and complete many transactions from any device and without physically making a trip to the bank.

“Time is everything for small businesses, so there is real value in that convenience. The added benefit is that when we meet with customers in person, we’re able to focus on our relationship-based approach and counsel them on the tools and resources to help their businesses grow.”

The pandemic has spurred growth in the online banking sector, whether the bank was wholly online or small business clients were using the digital version of their conventional bank.

“Online banking gives small businesses instant access to information like what funds have been received and what payments have been made,” said Shelley Quinn, customer care center and cash management sales director at Community Bank.

Some “hybrid” banking products include free or low-cost online platforms that offer bill paying, the ability to digitally invoice and receive electronic payments from customers and more.

“Payments are easily tracked in the system and a lightweight accounting software tool can be used to integrate automatically with bank accounts,” Quinn said. “Profit and loss statements, balance sheets and bank reconciliation reports can be generated with the click of a button.”

These features can provide small businesses with useful tools to lighten their administrative load.

Although convenience reigns online, Quinn wants small business owners to build a relationship with their local banker “so they have a partner as their business grows and their needs change. Small businesses are what keeps our communities growing and thriving and we’re eager to support them and help them celebrate in their successes.”