Software Provider or Traditional Bank? Which one should you choose for your SMB?

For businesses operating globally there’s a plethora of options to manage their financial operations to send, receive, hold and exchange funds - from traditional banks, online banks to software providers operating in the fintech space. To make an informed decision, you need to take into account both your business's present and future needs. Interestingly, a recent study conducted by Edgar, Dunn & Company found that over 72% of SMBs operating globally believe traditional banks will not be able to satisfy their needs for global payments and financial operations, while about 6 in 10 think fintechs and software providers are a better alternative. A combination of these findings and concerns regarding global payments - notably security, speed, and cost when moving money globally using traditional methods - suggests that SMBs around the world are in dire need of flexible solutions that can scale with them as they expand into new markets and are tailored to their needs. In this article, we will explore the pros and cons of choosing a traditional bank versus a software provider for your global financial operations and give you a list of questions to ask within your finance department to determine what’s best for you.

Traditional banks have long been regarded as secure and reliable, often the default choice for businesses expanding into new markets. However, their reputation doesn't always align with reality. While traditional banks offer a sense of stability, they often adopt a one-size-fits-all approach, providing limited flexibility to SMBs operating in diverse verticals during global expansion efforts.

Despite their reputation, traditional banks are not immune to failures or downtimes, which can disrupt daily operations and impede access to essential financial services. Due to intermediaries involved at every stage of the payment process, traditional banks are also known for slow and expensive international payments. Lack of transparency around fees can have a detrimental effect on cash flow and impact the bottom line. There is also the disadvantage of limited hands-on support and onboarding with traditional banks. Due to the size of their operations, it may be difficult to get the answers and support you need in a straightforward and timely manner.

Furthermore, picking a traditional bank poses limitations for global expansion. Unfortunately, each bank has limited access to different currencies and partners in other countries, which means that with every expansion, you will need to go through compliance and commercial processes, which are not only operationally inefficient but also costly. We saw with some of our clients that it may take up to 90 days to open up a new bank account in a new country.

Another area where traditional banks lag behind is access to innovative financial products and services. Slow to adopt new technologies, traditional banks offer limited access to tools such as APIs, virtual cards, and seamless connectivity with accounting software. This lack of innovation hinders SMBs' ability to streamline their financial operations and stay competitive in the global marketplace.

According to the Edgar and Dunn research mentioned earlier, many SMBs are seeking specific solutions for foreign exchange, payments, multi-currency accounts, and business cards. Fortunately, software providers, such as Fyorin, offer flexible solutions for SMBs.

Firstly, software providers tend to eliminate the need for intermediaries in global payments. This results in faster and more cost-effective payments, as well as access to more currencies. As a result, you can improve not only your bottom line but also your reputation with investors, suppliers, and customers.

Secondly, many software providers have built their technology infrastructure on top of a network of financial institutions, which means that every time you need to receive or send money in a new currency, you will be matched with the right product and provider much easier. Less commercial and compliance processes each time you expand mean less operational burden on the finance team. The same applies to issuing cards for online purchases and employee expenses. Cards can be issued remotely and assigned to individuals, teams or projects and managed online via a dashboard to control spending through top-ups, limits and restrictions.

The majority of software providers offer API connections, so SMBs can connect payment infrastructure directly to their workflows - such as payments, creating cards, etc. Additionally, they provide open banking connection to external banks for complete view of treasury and control, as well as, the connection to accounting tools to automate day to day accounting processes like reconciliation of payables and receivables.

Finally, software providers are also more hands-on with providing support to their client base, more receptive to feedback and faster to market with innovative products to match their clients' needs.

If you are looking to determine whether you should choose a traditional bank or a software provider for your global financial operations, ask yourself the following questions:

Are you planning to expand into new markets - which means accepting and paying in new currencies and getting visibility into all your funds at once?

Due to your financial standing, are you concerned about the cost and speed of transactions?

Do you require cards for online payments and employee expenses?

Are you dealing with a lot of cards (such as marketing agencies, and affiliates) and would prefer to embed the process through an API? Are you a remittance company interested in integrating payment infrastructure into your workflow?

How do you ensure the long-term health and continuity of your business operations by securing and diversifying your funds?

To optimise cash flow, are you concerned about the timeliness of the payments? This may be particularly important for software resellers.

Have you got a small finance team, which is why you need to automate a lot of your financial operations like processing payments, reconciliations, and reports?

If you’ve answered yes to most of the above questions, opting for a software fintech provider may be a better option for your global SMB compared to a traditional bank. At Fyorin, we’re committed to providing SMBs operating internationally with comprehensive financial operations solutions to automate their payments and unify treasury across our network of global financial institutions. Get in touch by booking a demo or emailing us at [email protected]