Is it easy to open a Company bank account with a virtual bank?
“Easy to set up a company, but difficult to open a bank account” is the dilemma faced by many entrepreneurs, who find the process of submitting documents and waiting for approval at traditional banks to be time-consuming and stressful.
Virtual banks have lower requirements for opening accounts compared to traditional banks, and many business owners have turned to virtual banks for this reason. Virtual banks do not have physical branches and mainly provide services to customers through the internet and mobile apps. Although the services provided by both types of banks are similar, there are significant differences in their offerings, which should be considered before opening an account.
● Three key considerations:
- Service offerings
Using virtual bank services, everything from account opening applications and approvals to daily communication can be done online, saving time compared to having to go to a physical bank branch. The account opening requirements are also generally lower than those of traditional banks, as basic information and documentation are sufficient for most Hong Kong registered companies. For small and medium-sized enterprises without a financial background, this approach is more convenient.
Traditional banks require a minimum account balance to be maintained in order to waive transaction fees or annual fees. Virtual banks charge lower transaction fees and even offer free basic services such as deposits, fixed deposits, or transfers upon account opening, with additional fees charged or more advanced features. However, virtual banks do not offer traditional banking services such as cheque payment, auto-pay, mortgages, investments, and insurance, which should be taken into consideration if required.
Regarding daily transactions, virtual banks do not accept cash or cheque deposits. Although electronic payments are prevalent nowadays, cheques and cash are still widely used. If your business frequently uses these payment methods, it could be a limitation.
2. Managing the risk of liquidity
Seasoned business people may have encountered a situation where a payment has gone missing. The customer or partner claims to have made the payment and provides proof, but the recipient has not received it. This could be due to the bank suspecting the source of funds or incorrect payment information. For security reasons, the bank may not deposit the funds as instructed. To avoid losing customers or delaying the delivery deadline, the issue must be resolved as soon as possible.
Companies that use traditional bank accounts usually visit the branch in person and provide evidence of the payment, face-to-face with a bank representative. By providing the necessary information, the bank can release the payment in 99% of cases. Conversely, since virtual banks do not have physical branches, customers can only contact representatives through hotlines, email, or applications. Online customer service mainly involves text communication, which is not as effective as face-to-face communication for resolving issues. Even if representatives are unable to resolve the issue, the funds may be trapped in the system, making it difficult for customers to retrieve them and affecting business operations.
3. Time cost of managing accounts and taxation
In Hong Kong, companies must fulfill their tax obligations and undergo an annual audit, which involves submitting financial statements and tax returns. Companies must gather information such as bank statements, income and expenditure receipts, sales invoices, or sales records for professional accountants to audit. Virtual bank services mainly rely on mobile applications to record and view transaction information. Companies must frequently take screenshots and properly categorize and store them, which increases the time cost of managing accounts and is prone to errors. In contrast, traditional bank statements clearly display all records of income and expenditure, making it easier to manage accounts and saving time.
Ask your accountant in advance, make the right decision.
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