Can E-Commerce Businesses Leverage Digital Banks to Their Advantage?
If you're just starting a business and you haven’t opened a bank account before, you probably don’t know that it can be an overwhelming process to have a bank account in the name of your business. Depending on where you reside and register your business, many requirements need to be fulfilled, ranging from capital expectations, insurance, partners, proof of employment, citizenship, and more.
If you're in a large country or live in a remote location, having to go to a brick-and-mortar bank takes both time and money. Not to mention it could become an everyday chore to do so.
How Digital Banks Are Widening the Market for E-Commerce
There's much more than just one benefit of using digital banks that e-commerce businesses could take advantage of. Digital banks operate with the help of innovative, quick, and easy-to-use mobile applications for devices like smartphones and tablets. The mobile applications are constantly updated and on par with the best security standards.
While in the United States only about 5 percent of the population has never used a bank account in their lives, there are regions like South America, where this number reaches 70 percent. In large countries like Russia, China, and India, more than 20 percent of their population isn't using any banking system, according to Statista.
If you’re wondering how this is connected to e-commerce, well, it’s simple. People who have no banks have no way of paying you online. So they won’t be your customers. Digital banks are steadily changing this since it's much easier to open a digital banking account online in two minutes than to have to walk into a physical location carrying documents with you.
Why Are Digital Banks Efficient for E-Commerce?
With the help of digital banking, just from your phone, you can instantly get funding, credit services, monitor and manage personal finance, pay bills, schedule transactions, and even pay salaries on a monthly or weekly basis to your employees.
The process of registration is simple and concise, and mostly only requires proof of ID. When done, you have a fresh bank account.
E-commerce is growing at a rapid rate, but so to are fraud and online attacks. In order to stay protected from credit card fraud, loyalty and refund frauds, as well as account takeovers and social engineering, digital banks have implemented a smart variety of tools that you can use.
One of these is virtual account numbers (VANs), which are temporary and can be changed with each transaction or after a certain amount of time. You can use a one-time debit card number for different payments. This ensures identity theft can’t happen, and even if someone gets hold of your information, it would be useless to them.
Flexible Payment Options
Every single customer expects a seamless checkout process and a good experience. Of course, you should be accountable for optimizing the smoothness of the user interface and experience; however, the more payment options there are for your customers to choose from the more inclined they would be to finish the payment if they see their preferred method being available.
Aside from increasing the number of viable payment options, the usage of digital banks also allows an e-commerce business to pay bills electronically through a system called EBPP, as well as to send over electronic invoices to customers and partners alike.
Saves Potential Fixed Costs
Having to rely on expensive accountants and accounting software to know whether your finances are in place is one thing. Having a digital banking app on your phone, which can tell you all the information in a matter of seconds, is another.
Of course, every business should get an experienced accountant at some point, but when you’re just starting an e-commerce business you won’t get the best return on investment from hiring an accountant. Instead, focusing on product development and marketing expenses would be a better idea. Digital banking software could open this opportunity cost for you.
Aside from saving costs by replacing employees and expensive systems, neobanks are a way to save money from charges and fees. Brick-and-mortar banks with physical locations have to pay a lot of money to maintain their staffing and offices, as well as manage reports and data. Neobanks don’t have such expenses. Instead, they invest in improving their products and services and charge less because they don’t have so many costs.
With the rise of digital banking, more and more people who previously had no interest in opening bank accounts are starting to do so. This greatly benefits e-commerce, as these people are now potential customers. Stay informed and know which payment methods are preferred in the region of the market you're targeting and provide these to your customers. Having a digital banking account can save you both time and cost and makes things more convenient.
Serge Beck is the CEO and founder of Optherium Labs, a blockchain technology company offering an ecosystem of products and services, powered with Optherium blockchain, AI and biometrics.
With over 10 years of experience on Wall Street, Mr. Beck founded Optherium to reform defective financial and security infrastructure functions. He is driven by the belief that people deserve sounder, more secure financial services in the tech world. Earlier in his career, Beck was responsible for spearheading innovative technological infrastructure at premier financial institutions, including Bear Stearns, Republic National Bank, HSBC Bank and Merrill Lynch.