Editor's Note: Learn from a panel of experts and entrepreneurs who have successfully financed their own ventures and are helping others do it at the Thought Leaders Live 2013 event May 29, in Long Beach, Calif. Event and ticket information can be found here.
Traditional banks are closing the gap with their hip online nonbank rivals when it comes to next-generation small-business banking and online business-banking tools, such as electronic billing, web-based payment options, and mobile support.
Third-party, start-up virtual money-transfer options, such as San Jose, Calif.-based PayPal and Des Moines, Iowa-based Dwolla, have changed the way businesses handle funds. No longer are firms limited to choosing, say, between pricey wire transfers or simple paper checks. Now, these newcomers to business banking make it relatively hassle-free for even tiny firms to electronically transfer funds.
The question is, then, are traditional banks responding to this new group of rivals?
We spent the past several weeks surveying what four big U.S. banks -- Bank of America, JPMorgan Chase, Wells Fargo and Citibank -- offer in next-generation small-business banking services. Overall, we found that the upstarts still lead in terms of features and fees. But traditional banks provide a surprising range of services as they seek to stay relevant in the next wave of small-business e-banking.
What's more, established banks offer a big advantage: They're heavily regulated and you do not have to open your financial details to a third party.
And of course, most banks require traditional commercial checking accounts for access to their online business tools, the cost of which vary by bank and state. And these e-billing products are offered as part of a larger set of business services like payroll and merchant banking tools, most of which you may not need. Expect to invest considerable time with a bank representative to get a firm quote for the total cost net of monthly fees and charges for things like checks, deposits and electronic fund transfers.
What’s offered: Chase has the widest range of web-based payment options for businesses as can be found in the big banks we surveyed. Branded as Chase Online for Business, it can be easily accessed through a well-laid-out online dashboard. Users can schedule regular or one-time electronic automated clearing house payments to vendors or suppliers, as well as schedule ACH collections. Chase also lets users send invoices, which can be paid by recipients online. Chase’s Person-to-Person QuickPay -- a free service included with online invoicing -- lets users send money to any person in the U.S. with an email address and a bank account.
What it costs: Chase Online for Business is free to commercial account holders who want basic services, including online bill payment. But Chase charges $25 for 25 ACH payments per month. Additional ACH transactions cost $0.15 each. And ACH collections are also $25 for 25 ACH payments, but additional transactions cost $.25 each. Online invoicing includes 25 invoices for $25 per month. Additional invoices cost $0.25 each. Domestic wire transfers run $20.
What to bank on: Chase was the clear e-business winner in our search. The overall design and experience was surprisingly solid and filled with attractive, well-priced payment options. If you are looking for a mega bank with top-end virtual payments tools, Chase is the pick.
Bank of America
What’s offered: Bank of America’s Online Business Suite includes services called Express Invoicing and Direct Payments for managing payments on the Web. Express Invoicing lets users send and receive funds for custom invoices online. And Direct Payments enables users to send money to vendors, other businesses or employees. Direct Payments also lets you set up auto payments for recurring expenses.
What it costs: Access to Online Business Suite features is free for the users with business checking accounts for the first three months, after which you’ll have to pay for individual features, such as advanced account management tools, which start at $15 per month. Direct Payments is free for the first three months, after which it’s $10 per month for 20 payments. Additional payments cost $2 for every 5 payments. Next-day payments incur a $10 fee, and same-day wire transfers carry a $20 fee inside the U.S. and up to $40 outside the U.S. Express Invoicing is priced similar to Direct Payments: free for the first three months, $10 for the first 20 invoices and then $2 for every 5 invoices. Online bill payment is free.
What to bank on: BOA offers surprisingly rich options and services. And the pricing is competitive. The free introductory period also makes it easy to test drive the service. Certainly, existing BOA account holders should give it a try.
What’s offered: If you maintain an active Citibank business account, use of the CitiBusiness Online service is free. Through that web portal, Citi offers the full range of e-funds options including domestic and international wire transfers, ACH credits and debits, which take two to three business days to clear. It also offers ebill pay services that can send printed and electronic checks, though those payments can take up to 10 days to go through.
What it costs: Citi prices its services competitively. CitiBusiness Online is free for holders of business accounts which cost, for example, $20 a month in New York state, plus charges for checks, deposits and other items. Expect to pay $.15 per ACH credit or debit transaction. But slower online payments are free. Domestic wire transfers are $12.50. International transfers are $20 (that for example is super cheap)
What to bank on: Citibank probably offers the easiest on-ramp for its existing business customers to go online. Its powerful online features are free or reasonably priced for its account holders. Just don’t expect a rich Web experience. CitiBusiness’s web site is similar in feel to its consumer site, simple text and graphics.
What’s offered: Wells Fargo Online Payment Suite, which is a part of Wells Fargo Business Online, offers online payments features including Direct Pay, which can be used to pay employees or vendors and suppliers. Also something called Business Bill Pay lets users auto-pay bills and invoices for recurring expenses.
What it costs: A Wells Fargo Business Online account is free with a business checking account or credit card. For Direct Pay, access to the service is $10 per month plus $0.50 per payment made using the service. However, payments to other Wells Fargo accounts are free. Payments to business bank accounts are $3 each. Business Bill Pay is $9.95 per month and includes up to 25 payments, plus $0.40 for each additional payment. Fees may be waived for users who maintain at least $25,000 minimum balance in any combination of business and personal checking accounts.
What to bank on: Wells offers basic, low-cost e-funds options that work well in our testing. By all means, existing Wells customers should at least give the service a try. But the overall experience and design is basic, far from the top end in service or features.