As the commercialization of the internet evolved in the early 1990s, traditional brick-and-mortar banks began to investigate ways of delivering online services. Though limited at first, the success of these early efforts led many banks to expand their internet presence through improved websites that featured the ability to open new accounts, download forms, and process loan applications.
Soon enough, however, internet-only banks arose, offering online banking and other financial services without a network of branch offices. The first fully-functional direct bank insured by the FDIC was the Security First Network Bank, which began operations on October 18, 1995. With lower costs due to the lack of overhead, Security First and the competitors that followed it were able to offer higher interest rates on deposit accounts and reduced service fees.
As the choice in virtual banks grew, so did customers' enthusiasm for banking online. More than 60% of account holders do at least some of their banking on the internet, according to the latest (2017-18) report on banking behavior from the FDIC.
Account Management: Online banking can facilitate business account management. Depending on the bank you choose, you may be able to tie you account information to accounting software programs. This can help you view financial statements instantly, providing you with current information about your business's financial status. You'll also have much of the information you need at your fingertips at tax time.
Organization: Online banking can help you organize your business finances, which helps you avoid late payments that can harm your credit. For example, using features like automatic bill payment allows you to schedule reoccurring fixed payments, such as rent. According to the Union Bank website, online banking systems automatically deduct payments from your account at the same time each month, eliminating missed or late payments.
Transferring Funds: You may need to open a number of different accounts to manage your business transactions, or you may operate more than one business, requiring the need for several accounts. If so, you could face situations in which you need to transfer funds quickly from one account to another to cover payments or meet a payroll. With online banking, you can transfer funds between your accounts immediately, if necessary.
One important aspect to operating a small business is the method you choose for managing your money. In the age of the Internet, online banking offers business owners the option of doing some or all banking from a home or office computer. Online banking features a number of possible advantages for small business owners, such as convenience, speed and ease of account management.
Convenience: Online banking allows you to process transactions at any time, according to the Financial Web website. As a business owner, this means you won't have to interrupt your work schedule to make a trip to the bank. If your business requires you to travel, you can still do your banking when you're on the road via laptop or hotel computer.
Speed: Online banking processes transactions virtually instantaneously. This is beneficial when you need money quickly, such as buying a specially priced piece of equipment for your business that's on sale online for a limited time. If your suppliers also use online banking, you can improve cash flow by waiting until the last possible minute to pay them instead of paying by mail.