Banking Archives - Page 2 of 11

There are now 14 million people in the UK who have a digital-only bank account. 76% of citizens have also used an online banking service in the last 12 months. But, do you know what these services are?

Both digital and online banking have some major differences. Read on as we answer the question “What is digital banking?”

What Is a Digital Bank?

A digital bank is a financial institution that has all of its operations online. Services that were previously available at physical branches can be undertaken in browsers, mobile applications and digital environments.

They do not have brick-and-mortar premises but exist solely through digital means.

What Is Digital Banking?

Digital banking involves transforming all activities, processes and banking products into digital transactions. This allows them to be done anywhere with internet access, making banking much easier for the consumer. Most services are 24 hours and do not require a staff member to be present in a bank.

Obtaining Records and Statements

Transferring Funds

Withdrawing Cash

Bill Payments

Account Management

Monitoring of Transactions

There are also many advantages for the bank itself. As many processes can be automated, it reduces human error and the labour required for repetitive tasks.

What Is the Difference Between Digital and Online Banking?

These two terms may seem interchangeable. However, there are two key differences between them.

Online banking works through internet access. It has several basic banking products and functions. However, the system has limitations and it can not expand to add further services to consumers.

You would find this in use with traditional institutions that have added internet banking as an additional service. It works alongside their other operations.

Digital banking is more in-depth and flexible. It has API, automation and web-based service at its core. This means it can provide more security and cost-efficiency.

A digital bank exists solely online. You don’t have branches you can walk into to make deposits and consult staff face to face.

If you want the ability to expand and add extra features, then digital banking is key. Metrics and analytics taken from it can help improve the customer journey.

There is a third option: Mobile Banking. This is when banks create a designated application so that customers can perform services on their mobile devices.

Benefits of Digital Banking

Digital banking has several benefits. It is changing at a rapid rate bringing advantages for consumers, business owners and the banks themselves.

Increased Accessibility

Digital banking means residential customers, businesses and their employees can access banking anytime. All they need is a device and internet access. They can approve expenses, make purchases and transfer balances.

This can take place anywhere. It may be in the office, on a commute or on a business trip. With the addition of mobile banking, it becomes even easier.

Improved Customer Experience

A well designed digital banking system also creates a better user experience. Chatbots are often available to assist customers with any problems or queries. This improves customer service while minimizing the workload of staff in the bank themselves.

Not only can tasks like scheduled bill payments be set up, but tools for financial management are also provided. Statistics on spending and saving along with financial planning are available.

Central Account Management

With digital banking, all departments can be accessed from one location. This means you don’t have to deal with different representatives. With mobile banking, you can even download multiple apps to represent your different accounts.

Lower Costs

Fully digital banks operate with lower overheads as they have less staff and no physical premises to operate from. They can offer higher yields on savings, lower interest rates on loans and reduced fees as a result. This is often done to attract customers who may normally get put off by the absence of a physical store.

Benefits to Employees

From small businesses to large corporations, digital banking can provide a huge opportunity for employees. With digital banking for businesses, you can assign several corporate cards to employees who may need access to faster means of purchasing to do their job.

With real-time metrics and analytics monitoring, business spending also becomes easier. Reviewing spending by category and approving purchases or expenses instantly is an advantage. Policies can be created and individual thresholds set for individual employees on spending.

By providing financial autonomy, you empower your individuals. At the same time, you also retain control over the finances of the business.

Limits of Digital Banking

While it has many advantages, digital banking should be viewed as a bridge. It can never replace the interaction you get at a branch and some transactions, such as deposits of cash and withdrawals, can not be performed.

To get around this, digital banks usually allow cash deposits in designated partner retail outlets. However, this can often incur a larger fee.

Future of Digital Banking

Digital banking provides flexibility, but customer needs are bound to change. This means a modular infrastructure needs to change with them. What works now may not do in one or two years.

Many banks are now starting to adapt and incorporate digital asset transactions and management into their infrastructure. This includes digital payment wallets and transfers. All of this is provided alongside the standard services for fiat currencies that people need.

Starting with Digital Banking

Now you can answer the question “What is digital banking?”, you just need to find the services that fit your needs. Not all banks will have the same offers. Make sure you look to see what you need and who can make the best provisions.

If you found this article helpful, CFI.CO blog has many more to help. From banking to finance, we can get the most from your money. Click here to see all our business articles and let us help your business boom in the coming year.

Banking

Banking Tips :7 Reasons to Open a Bank Account For Your Small Business

ByCFI.co

Did you know that over 20% of small businesses in the U.K. don’t make it past the first year? One of the biggest contributors to this is using the same account for their business and personal finances.

When you’re just starting as an entrepreneur, it can be tough to figure out the best way to manage your finances. Do you keep everything separate? Do you combine your personal and business money?

While there’s no one right answer, most small business owners find it best to open a bank account specifically for their business. This is one of the most essential business banking tips to consider.

Here are seven reasons why you should consider doing the same:

1. Makes Tax Preparation Easier HMRC

Separating your business and personal accounting makes tax preparation easier because it helps you differentiate what is and isn’t taxable income. This can save you a lot of time and money when it comes time to file your taxes.

It also helps you automate your tax preparation process. With separate finances, it’s easier for your accountant to link all business-related transactions on your account to your tax preparation software.

With a separate account, you don’t have to spend countless hours sorting through different expenses, trying to figure out which are personal and business-related. This makes it easier to determine deductions come tax season.

And a bonus benefit is that it minimizes your risk of being audited. The HMRC is more likely to audit business owners who mix their personal and business finances.

2. Automates Your Bookkeeping

Keeping track of your business finances can be a daunting task. But when everything is in one place, and all transactions are automatically recorded, it makes the process of bookkeeping much simpler.

Bookkeeping automation also means you have a more accurate record of your business finances. This information can help you make informed business decisions to improve your financial health.

3. It’s Easier to Get Business Loans

When you have a business bank account, lenders know that you’re serious about your business. It also shows that you’re taking the necessary steps to protect your finances. This makes it easier to get a business loan to expand or grow your business.

Having a business bank account also shows that you’re able to handle money responsibly. This is an important trait for any business owner looking for additional financing. The last thing a lender wants is to risk their money on a business that may not be able to repay the loan.

4. Helps You Manage Your Expenses

When you have a business account, all your business transactions will be organized in one place. This makes it simpler to keep track of your spending. It can also help you stay on budget and make informed business decisions.

When you have a business bank account, you’re also able to receive payments from customers. This makes it easy for them to pay and reduces the chances of them forgetting. It’s also a great way to build customer loyalty.

When you’re looking for a business bank account, it’s important to find one that fits your needs. Make sure to compare interest rates, fees and other features. Don’t forget to ask about the bank’s lending capabilities.

5. Protect Yourself from Business Debt Liability

When running a company, it’s important to protect yourself from business debt liability. By opening a business bank account, you can help ensure that your personal finances are not liable for any business debts.

Business debt liability is the legal responsibility of a business owner for the debts of their company. This can include personal credit cards, lines of credit, and loans taken out in the name of the business.

If the business goes bankrupt or defaults on its payments, the creditors can go after the business owner’s personal assets to cover the debt.

A business bank account helps to protect your personal assets by keeping your business and personal finances separate. This way, if the business goes bankrupt, the creditors can only go after the assets of the company, not your personal belongings.

6. Show the HMRC That Your Business Is Not a Hobby

A business bank account provides a clear separation between your personal and business finances, making it easier to track your business expenses and income. When you file your taxes, having a business bank account can help prove that your company is a legitimate business and not just a hobby.

If you are self-employed, it’s important to have a business bank account to track your business income and expenses. A business bank account can also help you save money on taxes.

By deducting your business expenses from your business income, you can lower your taxable income.

7. Helps You Establish Business Credibility

When you’re starting a small business, it’s important to establish credibility with your customers and vendors. One way to do that is by having a business bank account. A commercial bank will take you more seriously when you’re doing transactions and may be more likely to give you a loan if you need one.

Having a business banking relationship also shows that you’re a professional and are serious about your business. Additionally, a business bank account helps you look more professional.

It looks much more professional to have all of your transactions taking place through a dedicated business bank account instead of mixing your personal and professional finances together.

Follow the Above Banking Tips

When launching your first business, it can be tempting to mix your personal and business finances. After all, starting a business is a lot of work and opening a business account isn’t a priority for many.

Unfortunately, this mistake could cost you dearly down the road. By opening a business bank account, you can protect yourself from business debt liability, show the HMRC that your business is legitimate, and establish credibility with your customers and vendors.

For more business finance and banking tips, subscribe to our CFI.co Print Magazine.

Investment Banking

Investment Banking vs. Retail Banking? What’s the Difference

ByCFI.co

Whether you prefer to bank online or at a physical location, there are a few differences between retail and investment banking. The investment banking world deals with high prices and high levels of competition. Retail banks are generally volume-driven.

In fact, the investment banking market is expected to reach just south of $140 billion in the next few years.

Regardless of the amount, both provide necessary financial services for customers big and small. Curious to know more about the differences between the two? Continue reading for an overview of the key differences between them.

Retail Banking

When you picture a physical bank, you’re most likely picturing a retail bank. These retail banks provide a way for the general public to conduct their everyday banking needs onsite. Some of the basic services offered at a retail bank include:

Checking accounts
Savings accounts
Certificates of deposit
Personal lines of credit
Mortgages
Auto loans
Credit cards

The main services utilized at a retail bank generally relate to checking and savings accounts to deposit and withdraw funds. Retail banks also allow consumers to build their credit via credit cards or auto loans.

While physical branches do exist, more and more retail banks are moving online.

Investment Banking

Investment banking falls under the corporate banking umbrella. It generally serves a different clientele. They focus on an institutional client base as opposed to individuals.

Investment banks serve institutional needs and provide advisory services related to capital markets. Some of these areas include:

Equity markets
Bond markets
Portfolio management
Mergers and acquisitions
Equipment lending
Syndicated loans

Investment bank services operate on a larger scale in terms of complex transactions.

Main Differences Between Them

In terms of financial services offered, some of the main differences between the two can be broken down as follows. A few differences relating to retail banks include:

Catering more toward the general public
Managing lesser sums of money
Granting access to individual services

A few services for investment banks include:

Catering to larger institutions
Handling complex sums of money
Providing corporate services

These may be overly simplified summations. However, both types of banking handle a variety of finance-related transactions. Some are at the consumer level, and some are at the corporate level.

When to Choose an Investment Bank

For corporate mergers or startup company IPO launch preparation, investment banks and bankers are heavily involved.

Whether it’s a public company or a private one, choosing the best investment bank can make all the difference. This helps to obtain a successful financing deal, valuation, or initial public offering.

Having the right team behind a transaction will help. First and foremost, it helps determine whether a deal gets completed. Investment banking teams exist to help companies navigate through the complex and often unwieldy process of something like an IPO. They are trained to manage complex projects with transparency and efficiency.

The operations of a team of investment bankers could be divided into three functions:

Financial advisors
Mergers and acquisitions
Research

Operations of Investment Banking

A normal bank facilitates transactions at an individual customer level. Investment banks facilitate transactions for businesses and institutions. The transactions themselves are more unique when it comes to investment banking, thus bringing in the need for specific teams to complete said transactions.

Financial advisors provide a strategic outline of short-term and long-term business goals. They also provide a thorough understanding of industry trends and global markets.

Investment banks also facilitate mergers and acquisitions, which involve estimating a company’s valuation. The process ultimately ends in price negotiation and facilitation of the acquisition itself.

The Role of Research

Investment banks also have research divisions that provide investment advice for clients. The research branch is able to advise clients by keeping on top of knowledge in areas such as:

Credit research
Fixed income research
Macroeconomic research
Quantitative analysis

Research teams are highly knowledgeable. A good research team is well-sought after by companies during the process of financing a deal.

To Summarize

There are many differences between the operations of retail banking and investment banking. One of the key differences to remember is the type of client to which services are offered.

Retail banking, in general, exists to offer financial services to individuals. Investment banking is geared toward commercial or corporate use.

Investment banks exist to expand products offerings and increase market shares. They work as intermediaries between financial markets and organizations. Responsibilities also include:

Helping issue shares of stock
Counsel during the pre-underwriting stage
Counsel during securities distribution stage
Examination of financial statements
Organizing prospectus information for potential investors

Retail banks provide customer service and financial advice on a more individualized level. Retail banks also provide underwriting services for products such as home mortgages and auto loans. Retail banks provide a way for the average customer to deposit cash, withdraw funds, and extend credit.

An Investment in Banking

From mergers to everyday cash deposits, banking systems today accommodate a wide range of clients and services. The world of banking saw many changes as a result of the global pandemic. Markets shifted from previous patterns. Previously in-person transactions moved online.

However, both investment banking and retail banking do have one commonality that remains the same. They exist to serve their clients and their clients’ success.

If you found any of the above information helpful, be sure to check out any of the additional articles we have listed in our Banking dropdown. We offer plenty of resources for businesses and individuals alike.

Banking

Here’s What to Do to Keep Your Retail Bank’s Customers Happy

ByCFI.co Blogger

Many of today’s average retail banking customers are considered “digital natives,” or people who have grown up and gotten acclimatized to the ubiquitous presence of technology. It is now like second nature for many customers to use their bank’s core technologies to pay their household bills, settle their loan payments, or transfer for personal and business purposes—all in just minutes, using only a computer or a mobile phone.

retail banking

Banks have taken notice, and many have gone the extra mile and shifted into more digitally driven retail banking models. This likely holds true for your own bank and its retail banking program. However, the fight to hold on to your market share won’t be an easy one. There’s no guarantee that you’ll keep all your retail banking customers loyal to your brand, or that you’ll attract as many new customers as you hope to, just because you’ve undergone a digital transformation. Like-minded financial institutions have attempted to do the same, which makes it a pretty tight race to the top of the retail banking industry.

Knowing just how stiff the competition is, what can you do to satisfy your current retail banking customers—and better yet, how can you get them to recommend your bank to others? To answer that question, here are five useful tips to strengthen your retail banking efforts.

Open Up Different Touchpoints for Retail Banking

Some of your retail customers may still choose to go the traditional route and settle their banking transactions over the counter. However, a large chunk of them will want multiple touchpoints with your banking ecosystem, for example through their smartphones, tablets, laptops, and even wearables. One way that you can keep them satisfied is to invest in technology that makes instant, round-the-clock omnichannel banking easy for you to handle. Consider onboarding a digital banking platform that will allow you full dexterity when managing your retail customers’ banking journeys across multiple channels.

Make It a Breeze to Open New Retail Banking Accounts

How do you win over a new crop of retail banking customers who are deciding between your brand and another brand? The answer lies in making sure that their first experience with your bank—i.e., opening an account—is a simple and pleasant one. Revisit your current customer enrollment processes to streamline them and remove redundancies, without compromising on your know your customer (KYC) and customer due diligence (CDD) standards.

Deliver Innovative New Products That Fit Your Customers’ Life Stages

Next, look for ways to bolster your bank’s product development for its retail banking offerings. Sticking with the same lineup of generic-looking account offerings, and failing to communicate what kind of customer they’re actually for, will result in the stagnation of your retail banking program. Try innovating your roster of products to include distinct perks, for example rewards points for thrifty customers. You can also enter into a bancassurance agreement with an insurance carrier to give young, health-conscious, or especially pragmatic customers additional insurance benefits with their account. If your products can truly resonate with your retail customers’ needs and values at specific stages in their life, you’ll have an edge over your competitors.

Improve the User-Friendliness of Your Retail Banking Platforms’ Interfaces

Given how often retail banking customers turn to their banking apps and websites, it helps for a bank to invest in enhanced user experience (UX) for these channels. When you do this for your own retail banking channels, aim for simple, streamlined, and intuitive UX that makes it a pleasure to transact through your bank’s system. Your customers may consider leaving your bank if your interfaces are confusing, tiresome, and difficult to navigate. The opposite also applies: you’ll cultivate a loyal following among your retail customers if they can associate your brand with great UX.

Offer Multiple Options for Customer Care and Engagement

Gone are the days of relying only on telephone hotlines to address customer service concerns. You should expect your customers to want to reach out to you through multiple mediums, for example through email, chat, and even social media. You’ll be able to decongest the high volume of retail banking requests and increase the efficiency of your customer care by employing technologies like automation and artificial intelligence. Automate and use chatbots for relatively simple process flows while letting your customer care team resolve more complex problems. If you can already anticipate that your customers want speed, accuracy, and thoroughness in the resolution of their concerns, be proactive when it comes to strengthening your customer care.

Final Words: Customer Satisfaction Plays a Big Role in the Success of Your Retail Banking Program

Your retail customers account for a huge part of your bank’s existing clientele. The happiest of them will serve as effective brand ambassadors for your bank, especially to new customers who are still deciding on a provider. Make it a priority to improve upon your retail customers’ satisfaction, and you’ll be able to take your retail banking program to new heights.

Banking

How Does a Mortgage Work? The Ultimate Guide

ByCFI.co

Between the different types of mortgages and the seemingly endless amounts of mortgage paperwork, buying a home may seem overwhelming. But how does a mortgage work exactly? We have all the answers to that mystery and more.

No home or homeowner is the same, which is why it’s so crucial to understand how to get the best mortgage for you. From how the mortgage process works to some qualification tips, we’ve rounded up all the key mortgage basics. Let’s get started and get you one step closer to your new home.

How Does a Mortgage Work?

A mortgage is essentially a loan taken out from a bank or financial institution to give you funding for a home. You can choose to finance almost the entire home or do a combination of financing and money down.

Whatever money you put down on the purchase comes from your own cash reserves. Money down reduces the amount you have left to pay on the home through your mortgage loan. Your mortgage loan is given with interest rates that may vary or be fixed each month

A mortgage is also considered an instalment loan. This means the payments are paid monthly or bi-weekly in instalments. You’ll pay your principal balance as well as the interest, fees associated with the loan, taxes, and insurance. You may have a mortgage for 30-years, 15-years, or less if you choose.

As the years go by, your mortgage is paid down each month. Once your home is paid off, you’ll no longer have a mortgage and you’ll fully own your home. In the event that you sell your home before it’s paid off, you will need to pay off the loan at the time of the sale.

Failure to pay your mortgage could have serious consequences such as foreclosure. This is why the mortgage qualification process is put in place to ensure you’re in a loan and a home you can comfortably afford. This makes your mortgage less risky for you and your lender.

How to Qualify for a Mortgage

While qualifying for a mortgage may seem overwhelming, it doesn’t have to be. There are a few easy things you can do before you apply to help make the process easier. Creating a budget is a great starting point.

Your budget will help you and your lender determine what loan amount you’re most comfortable with. Start by laying out your expenses and income. Take a look at your down payment amount to see how much you’re comfortable putting down as well.

Next, it’s time to look at your credit and try to reduce any other debt you may have. This is where your budget can help you make a plan for paying off credit cards and reducing your spending. Your credit score will affect everything from your loan terms to your interest rate.

The higher your credit score, the better your interest rate will be. A lower interest rate allows you to pay more of your principal balance. This means more money is spent on interest each month.

Key Considerations When Shopping for a Mortgage

Another key consideration when shopping for a mortgage is how much you’re budgeting for a home. The type of home is also a factor.

A condominium, for example, may have an association fee you pay each month for amenities. This will get factored into your qualification, as it’s a fixed expense you’re responsible for.

If you’re purchasing new construction or a fixer-upper, your loan options may differ as well. When you have a home that needs a lot of work, you may choose to put less down on your home. This will allow you more cash for renovations and repairs.

As you’re going through the application process, look over all the loan options you qualify for. Your bank will need to know your budget, down payment, income, and other factors to help you find the best mortgage for you and your family.

Home Buying Tips

Before you apply for a mortgage, it can be helpful to take a look at your local real estate market. This will help you come up with your ideal home and budget.

You may find your budget gets you more than you think. You may also realize you need to prioritize your wish list.

This is a great time to make a list of what is most important to you in a home. For some, it’s the proximity to a certain school. To others, it’s the commute to work or the number of bedrooms. Your wish list will help you come up with a budget and a target price range as you start to house hunt.

As you start to look at homes, it’s also helpful to get a mortgage pre-qualification. This will allow you to make an offer on a home while knowing what you’re approved for. This helps you know where you stand while also making your offer stronger as a potential buyer.

Getting a Mortgage 101

Wondering how does a mortgage work? You’ve come to the right place. We have wealth management, mortgage, investment, and financial resources to help you make an informed decision.

Your home is likely one of your biggest assets. Read up on mortgage rates, the economy, and the housing market in our wealth management section.

Investment Banking

How Much Do You Need To Invest in Real Estate?

ByCFI.co

In an overwhelming majority of countries, real estate costs continue to rise due to low-interest rates and supply chain disruptions.

Yet, while housing prices are sky-high, investing in real estate has never been easier. You might think buying real estate is only for the wealthy, but you would be wrong.

The truth is, you can start buying real estate investments for as little as $1,000. Don’t believe me?

Then keep reading as we explore the question, “How much do you need to invest in real estate?” We guarantee it’s feasible for you. Besides, one of the best investing tips is to diversify your portfolio, which real estate will help you do.

Real Estate Investment Trust (REIT)

The cheapest way to invest in real estate is through a REIT. They allow you to invest in real estate without the actual real estate.

What does that mean?

REITs are similar to mutual funds as in they are securities. Investors trade REITs on major exchanges like stocks. REITs own commercial real estate like:

Apartments
Hotels
Office buildings
Retail spaces
Shopping malls

Most REITs specialise in a particular type of real estate or specific region.

REITs offer a high dividend and a liquid way to invest in real estate. In addition, it’s easy to reinvest dividends to grow your investment further.

When investing in REITs, experts say to stick with publicly-traded REITs, which you can buy from brokerage firms.

As mentioned, you can invest in REITs for $1,000!

Real Estate Investment Group (REIG)

If you’re an investor who wants to own physical real estate rather than shares of a company, then you may want to consider an REIG.

An REIG allows you to buy one or more units in an apartment or condo building via an operating company. The operating company manages and markets the units. Then, the operating company takes a percentage of the monthly rent.

REIGS are a cost-effective way to invest in real estate because you don’t have to succumb to the management work.

Some partnerships accept investments as low as $5,000 or up to $50,000. So while it’s not enough to purchase a property, when several investors come together, they can co-own property and make a profit.

If you want to invest in an REIG, you want to look for one that pays a monthly cash return on your investment.

Crowdfunding

Similar to REIGs, crowdfunding is becoming more popular in real estate investing. It allows you to pool your money with other investors to fund commercial real estate investments.

For example, a developer wants to buy an apartment complex for $3mn, make $1mn worth of renovations, and resell the complex for $6mn.

The developer can borrow $2mn from the bank and contribute $500,000 of their own money, but they still need $1.5mn for the project.

They can raise the rest of the capital via crowdfunding. Those who invest will share the profits. You could be one of those investors. Each crowdfunding project has its own minimum contribution.

A typical contribution amount is $25,000, far less than outright buying a property.

Buy Property

Of course, you can also buy property as a way to invest in real estate. In general, this will require more money upfront. However, you can buy a property with as little as 3-5% down, depending on the location and lender.

If you choose to invest in property by buying directly, know that it is time-consuming but can see considerable returns. You can profit from purchasing property in two main ways: becoming a landlord or flipping.

Rental Properties

Becoming a landlord can offer long-term income and capital growth. But it’s also a lot of work. You need to find and vet tenants, keep up with property maintenance and continue paying the expenses.

It’s a good investment if you have the time and money to manage the property. It’s even better if you can afford to hire a property management company so you can focus your time on other investing projects.

Fix and Flip

If HGTV is famous for anything, it’s flipping houses. When flipping, you buy a property, revamp it, then resell it.

The best way to flip properties is to find the unvalued ones. This means looking for foreclosed homes, short sales, and abandoned properties. This is because you want to pay the least amount possible for a property to maximise your return after remodelling.

When flipping, you go through a different loan process. It’s best to pay cash, but if you need financing, you’ll want to have some wiggle room. Every property has different funding requirements based on its current condition.

If you have enough money to pay cash or put down a large downpayment comfortably, it’s a good investment option.

Fees When Buying

While purchasing a property with 3-5% down is possible, it’s not always the best financial decision. You could be left with a higher interest rate, and your mortgage payments will be bigger.

If you’re able to put 15-20% down, it’s a better choice to do so. Going into debt to make money requires balance and strategy. Borrow too much money, and you may fail to pay it all back.

Additionally, when buying a property, you have to remember you’ll be responsible for paying all the fees, not just the mortgage. This includes:

Closing costs
Property taxes
Homeowners insurance
HOA fees
Maintenance and repairs

If you rent out the property, these fees will remain your responsibility. However, if you sell the property, you won’t have to continue paying them once you sell.

But, you must factor these costs into your budget because you need to pay them as long as you’re the owner.

How Much Do You Need To Invest in Real Estate, Explained

To invest in real estate, you don’t need a lot of money. A few thousand dollars can help you generate wealth and move on to bigger and better-investing projects.

Rather than pondering the question, “How much do you need to invest in real estate?” take the money you have and find a viable investment.

If you’re still unsure about getting started, check out our real estate investing for beginners article to help you.

Banking

Opening a Savings Account: A Guide for Young Adults

ByCFI.co

Did you want to start planning for your financial future? One of the best ways to ensure you’ll stay financially stable is to open a savings account. Savings accounts give you the flexibility to undergo unexpected financial hardships. They also help you plan for major life events, such as buying a house or car. It’s best to start saving as young as possible. As such, young adults should open a savings account as soon as they can.

Below, we’ll get into the basics of opening a savings account. Keep reading to start planning for your financial future today!

Compare Financial Institutions

Before you open your first savings account, you need to compare financial institutions. Many different banks offer savings accounts, but they’re not all created equal. Some savings accounts put you in a much better financial position than others.

Young adults often get trapped in these poor financial situations because they don’t know which things to look for when they open a savings account. You should compare a few different aspects before you decide on a financial institution.

Interest Rates

First, compare interest rates. When you place your money in a savings account, it will accrue more money over time. As such, you can actually gain more money by leaving your cash in a savings account.

Yet, not all interest rates are the same. In fact, banks often offer low interest rates. Sometimes, they’re even as low as 0.01%! So, you should look at the interest rate before you decide to open a savings account with a certain bank.

If you want to grow your wealth faster, you should invest and save at the same time. Buying reliable will help your wealth bloom. Still, you need to make sure your stocks don’t have a high level of risk. Investing in the wrong stocks can cause you to lose money as the market fluctuates.

The Minimum Requirement

Some savings accounts require you to have a minimum amount in them. If you don’t keep the minimum amount in the account, you may incur fees and penalties.

Some savings accounts don’t have a minimum amount. This is ideal since you’ll have the ability to take out as much money as you need.

Don’t worry if your best savings account option will have a minimum amount. But you should make sure it isn’t high.

No Monthly Fee

Even though banks have low interest rates, they might also have monthly fees.

These might be as low as $5, but they can pile up over time. Usually, you get charged this amount when you don’t have a certain balance in your savings account.

So, if there is a monthly fee, you should figure out how easy it will be for you to avoid.

The Opening Deposit

When you open a savings account, you might have to pay an opening deposit.

Sometimes, this is as little as $25. Yet, some people want their first deposit to be smaller. You’ll need to make sure you can afford to put the minimum savings amount in your account. So, take stock of your financial situation first. Then, decide which account allows you to make the first deposit that best meets your needs.

Look for Automated Transfers

Saving money is easy to talk about and much harder to do. If you have to manually put money in your account, you might forget to do it. You might also struggle to want to put your money in a savings account on a regular basis.

To get around this, many banks offer automated transfers. You’ll get to pick a date and a certain amount of money. Then, the bank will draw money out of your account every month on the specified day.

When you choose your date, you should think about when you need to pay your monthly expenses. Many people choose a date after their payday. Others pick a day after they pay for other necessities, like rent.

Once you know how much will go into savings, work it into your monthly budget. Consider it a necessary expense so you ensure you make enough money to keep it up.

Get Your Required Documents Together

Banks often require people to present a few documents in order to open a bank account. This is to prevent identity theft and fraud.

You’ll need your social security number, your address, and a valid ID. Your ID should be a government-issued one, such as a passport or driver’s license. You may also need a document that proves your address. You will also need to provide your date of birth and contact information.

Make sure you contact the bank before you open the account. Ask them what you will need to give them so you can prepare the documents in advance.

Fill Out the Application

Next, fill out your bank’s application. Make sure you know how to contact your financial institution if you have questions.

At this point, the bank will require you to know whether you want an individual or joint account. An individual account is best for unmarried people or those who don’t want to merge their finances. A joint account allows two people to easily access your finances.

This makes it best for married people or those who want to share the account with another person.

Ready to Open a Savings Account with Young Adults?

Now that you’ve read this guide, you’re ready to open a savings account for young adults.

To make the most out of your savings, you should talk to a financial adviser. This person will help you plan for your life goals and big expenses. That way, you’ll be able to meet your objectives quicker.

Want more great advice? Check out more of our articles today!

Banking

The Future of Banking: Trends for 2022

ByCFI.co

As of 2022, the commercial banking market in the US is valued at $862.4 billion. As the world changes and technology advances, so does banking. There are several new trends that will affect the future of banking in the coming years. Keeping up with these changes is crucial to understanding how banks will continue to evolve.

For a rundown of the top banking trends in 2022, keep reading.

Embedded Banking

Embedded banking is a new type of banking that doesn’t use a bank, website, or mobile app. The most common example of this is buy now, pay later options presented by retailers.

Non-financial institutions can utilize financial services through APIs, giving consumers more options when it comes to transactions.

Another popular example is Shopify’s e-commerce software that merchants use. It contains payment services that would have previously been merchant-acquiring business for banks.

Embedded banking can be used by any company, and takes out the banks that act as a middle man between the business and the customer. This is also applicable for B2B activity.

Payments aren’t the only applications of embedded banking. Lending, insurance, and investment can all be processed this way.

As technology advances, so does the capabilities of embedded banking. Automation is more accessible and faster which is very appealing to customers.

Improved Personal Insights

One thing that customers regard very highly is personalization, which is likely to be one of the biggest baking trends in 2022. Banks are focussing on this in a number of ways to increase customer satisfaction.

Improved artificial intelligence and machine learning will make this easier moving forward. Banks will be able to use customers’ personal information to tailor experiences to peoples’ specific needs.

A typical example could be using data from previous transactions to give customers alerts if there is potential for shortfalls in their accounts.

This has already been implemented by some banks in the form of tips to help customers understand and improve their personal credit scores. Wells Fargo also has plans to add a virtual assistant to their app giving tailored insights to customers in real-time.

Facial Recognition

Security has always been one of the most important aspects of banking, and people are always happy if it can be combined with convenience. A lot of mobile devices and computers have facial recognition capabilities to unlock them, and this is starting to move over to banking.

A number of financial institutions in the US are already making use of facial recognition, along with document verification, for mobile and online banking services. Fingerprint scanning technology has also increased in use in recent years for similar applications.

One noted risk with this is the use of “deep fake” technology to make fraud attempts. This could allow fraudsters to create a false image of someone’s face to fool facial recognition systems or even other people.

This is one of the main reasons facial recognition still faces a lot of opposition, as well as the potential for certain biases such as race or sex to affect people.

Such opposition may slow the movement, but it is still currently happening, so it’s not something to ignore.

In-Person Digital Interactions

Virtual branches are a perfect example of how banking is changing. Communication tools are used to simulate a typical conversation that would take place in a physical bank. Some of these tools include:

Webchat
Mobile chat
Video chat
Co-browsing
Document sharing

Some banks across the US have already begun implementing this, helping people still bank efficiently as in-person branch visits have declined.

An example of an app that is already being used for this is Arvest Banker Connect. Customers can read banker profiles to find one that appeals to them and then message that banker directly. A running history of the communication is logged for reference.

Cryptocurrencies

Cryptocurrencies have exploded in recent years and they are unlikely to disappear anytime soon. Many banks have started to move towards cryptocurrencies, and more will do so in the near future.

Some banks already have functionality in their apps to allow their customers to buy and sell cryptocurrencies. A lot of people are still cautious as they are not very well understood, but as they grow in use so will people’s trust.

It is safe to say there will be a lot of growth in the use of cryptocurrencies in banking in 2022.

Matchmakers

The purpose of matchmakers is to form a connection between banks and fintechs. This is done by core-software providers, venture capital funds, and other entities, helping banks to improve their technological capabilities and enabling fintechs to adopt services used by banks.

This is of more interest to regional and community banks as well as credit unions as they often don’t have the resources to source these technologies themselves.

Banks that have formed relationships with fintechs have begun growing faster, which is encouraging other banks to quickly follow suit.

Hybrid-Work Technologies

Over the last couple of years, hybrid work has become significantly more common. As some employers work from home while others are in the office they must be able to communicate and collaborate effectively.

The consensus is that those working from home are at a bit of a disadvantage to those in the office, so banks (and other institutions) are constantly working on solutions to this.

Ally Financial finished a new building earlier this year that has “Zoom Rooms” specifically designed to improve video conferencing. These rooms have a touch panel for employees to sign in and a dedicated screen where participants will appear and can share content.

Keeping up With the Future of Banking

More trends are always appearing, so to best understand the future of banking you need to stay up to date.

CFI is always on top of the latest finance and banking trends, so if you have any questions feel free to contact us by clicking here.

If you want to stay up to date you can also subscribe to our newsletter at the bottom of this page.

Banking

7 Financial Planning Tips for Your Small Business

ByCFI.co

Small businesses are expansive. Small businesses are responsible for creating over 66% of net new jobs. Every business in America needs to have good business practices to reel in from last year’s losses. If you want to recover from the pandemic’s impact you need to adapt to the new standards. Coincidentally, you will also learn new effective methods to help your incoming customers. But, what exactly do you need to know to build your business? These 7 helpful financial planning tips will help reevaluate your business’s finances.

1. Controlling Your Invoices

When developing an invoice, you can attach your terms and conditions to the payment. Learn how to create a system that can streamline creating an invoice.

Understand how to negotiate these terms with clients. Make it clear that your invoice has a set due date and payment itemization.

Communicate these terms to your clients and business partners. If you complete the work, it’s not an issue to demand that clients comply with those terms.

When it comes to small business finances, a non-payment can make or break your workflow. It’s your responsibility to make sure payments are complete on-time.

In addition, if a company does not comply, a policy can allow you to add interest on late-payments. Sometimes, accidents happen. So, sometimes these circumstances aren’t malicious.

But, you deserve your money for the hard work you put into projects. Despite this, never feel insecure about demanding a client to comply with your invoice’s set terms and conditions.

2. VAT and Tax Accounts

International business transactions are implementing VAT and various tax accounts in their regions. Small businesses should separate their bank accounts, if possible.

This means having a tax account, a VAT account, and a current account. Make sure to verify whether you can move money between these accounts. This is a great tip for startups.

You should delineate a portion of each check you receive into a VAT account to manage your V8.0. This can allow you to pay the VAT bill with ease without mismanaging your funds.

You should implement the same method for taxable accounts. You want to make sure you always have enough set aside to take care of tax expenses.

3. Reviewing Bank Accounts

With that said, it’s also important to create a regular workflow when checking bank accounts. This includes reviewing bank statements to track your money management.

While managing money, accounts and transactions are prone to human error. It is vital to prevent vulnerabilities and understand your small business finances as a whole.

Build a routine when checking your savings account. It’s important to hold a rainy day fund for when things get hectic. You may depend on it when business is slow for a few months.

4. Cash Flow Management

Your business should allow a two-month buffer for easy cash flow. Many companies and clients can make it difficult to make on time payments.

Certain independent clients will implement a net-30 or even a net-60 into their payroll system. This is due to payments or fees implemented into their own invoice processing.

With this in mind, make sure you have a clear forecast of how you’ll complete upcoming invoices.

It’s never too late to plan for a delay or a disruption in the payment processing. A 60-day buffer is great to give yourself a future ground plan.

You can create these formulas in excel is An invoice needs time to work through different payment systems, so give a clean 60-days notice. Excel is a great application that can help manage these timetables.

5. Bank Management Relationships

Building a repertoire with your bank management staff will prove beneficial for while you manage finances. A personal relationship with a bank manager can help in a difficult time.

They can help you beyond dileneating numbers and figures. They can notify you of changes within the branch and give you financial advice.

Bank managers can help you navigate and organize and manage finances. They can also give you advice on which savings accounts are most beneficial for your small business.

6. Setting Up Direct Deposit & More

An extra trip to the bank to cash a check or manage payments can take time. Building up a series of direct deposits or standing orders in other countries can streamline this process.

The influx of digital banking is allowing this to become an easier process. This can also prevent the added human error of paper transactions.

When you’re working with troublesome clients, they can use any excuse to not pay.

Setting up an automatic online transaction can help secure these payments. Banks and corporations work through a series of verification processes to break down the payments.

At times, interconnectivity between clients and direct deposits is a precarious process. This might become an issue for certain businesses that don’t have access to these accounts.

But, if you can, routing payments to your account on the first of the month can manage finances and bills.

7. Spreading Your Payments

When your business is dealing with large projects with several profiles, payments may turn tricky. If a project is requiring thousands of dollars to complete, try to even out the payments.

This can consist of scheduling payments across a number of months. These deadlines will hit faster than you expect.

Collect your budget and review the point of sale terminals. You must also account for surcharges of banking fees when predicting these payments.

Financial Planning Tips

If you have the initiative and management skills to run a small business, then start today! These effective financial planning tips can help manage your business and keep you on track.

It’s all about money management and making sure your business is in a good position. Understanding how to have a good grasp on money management can ensure your business is stable.

Click here for more information on how to build your business and manage your finances.

Banking

How to Choose a Bank for Your Small Business

ByCFI.co

600,000 businesses close each year. One of the main reasons why businesses struggle is that they are unable to stay on top of their finances or they have a lack of funding.

One thing that can help your business stay on top of changes and meet financial goals is by choosing the right small business banking company.

Do you want to learn more about company banking options? Keep reading these top tips to choose a bank for your small business.

Evaluate Your Needs & Business Goals

The first step to finding the best bank for your small business is evaluating your business needs and goals. Because each company requires different types of financing and services, you must find a bank that can help you meet your goals.

For example, if your main goal is to grow your business, you may need access to different types of funding from your bank. In this case, you should choose a bank that has a variety of lending options for businesses.

Consider both your short-term and long-term needs and make sure you find the right bank to help your business operate.

What Types of Financial Products and Services Are Offered?

Each bank typically offers the same services. However, there may be some banks that offer specialized financial products that would benefit your business. Before you choose a bank, you must ask them about their financial products and services for small businesses.

Some common products include business checking accounts, business insurance. loan option, and more.

Consider Bank Availability & Convenience

When it comes to services for your business, you need to find options that are easily accessible and convenient. For banking, you may want to find a bank that offers online or mobile banking services.

This makes it easier to pay bills, monitor business activity, and more. Something else to consider is whether or not your bank has multiple locations. While smaller banks may be able to provide you with great service, you may prefer to have a bank with several locations.

This way, you will have easy access to your business funds when you are travelling, no matter where you are.

Ask About Rates and Fees

Different banks have different fee structures, so you must ask your bank representative about their rates and fees.

For example, some accounts may provide you with more interest on your deposits. Choosing a bank with the best interest rates will give you more money from your savings. Other banks may charge you monthly fees, fees for transactions, and charge you for other transactions.

To avoid these annoying fees, you may want to find a company that will help you maximize your savings without increasing your costs.

Small Bank vs. Big Bank

Next, you should consider the network size of your bank. Most banks and credit unions offer the same services, so it may be down to your personal preferences when you choose between a small bank or a big bank.

If you are a local business, it may be best to choose a small bank that has local expertise. These smaller banks will be more likely to cater to your business and focus on good customer service.

However, big banks have more funds and account options, so this may be a big advantage for your company. As was mentioned before, big banks have more branches, so it will be easy to access your accounts while you are travelling. Big banks also often have digital banking services to make it even easier to access your funds.

Similarly, you need to find a bank that can provide scalability for your future needs. While your business starts small, you may grow exponentially in the coming years. You must find a bank that will accommodate your growth and will be able to work with your growing business.

This scalability is important when it comes to loan options as well. If your business is growing significantly, you need a bank that will be able to offer you enough funding in the future.

Look For Industry Experience

When you are looking for a bank for your small business, it is not a one-size-fits-all solution. Different companies have different needs, so you must choose a bank that has experience in our industry.

Banks with industry experience will have specialized products and services that are meant to help your specific pain points as a business owner in the industry. For example, banks that specialize in the real estate industry can help a real estate agent manage real estate finances and offer investment property loans.

Do They Provide Lending?

Finally, you must learn whether your bank provides lending options. As was mentioned before, many companies close due to a lack of funding or capital. To help your business stay afloat during tough times, you need to choose a bank that offers lending options.

Learn more about a bank’s requirements for securing funding and make sure they offer good interest rates for business loans. You can also find a bank that participates in a preferred lender program if you want to apply for a Small Business Administration loan at some point.

Learn More About How To Choose a Bank Today

Choosing a bank for your company banking is vital to meeting your financial goals and getting the lending that you need to grow. To find a bank that fits all of your needs, you must take each of these factors into consideration!

Do you want help learning how to choose a bank? CFI.co can help! Our website features articles about business, finance, and more.

Check out our articles today for more financial tips for your business!