What is the difference between a payment system and a bank?
A payment system (also called a "neobank") and a bank are two important components of today's financial infrastructure. They play a key role in providing safe and convenient financial transactions, but they have differences. Let's take a closer look at the difference between an neobank and a bank.
The main differences between a payment system (neobank) and a bank:
| Traditional bank |
Payment system (neobank) |
| Definition | |
| A traditional bank is a financial institution that provides a wide range of financial services: holding money in the bank, lending, investing and managing clients' assets, placing deposits, using overdrafts. | A payment system (neobank) is an organisation that is licensed to carry out financial transactions. Payment systems mainly provide assistance specifically in making payments. They are often used to carry out transactions related to the purchase and sale of goods for merchants, and currency exchange. |
| The difference in licences | |
| Any financial institution requires a licence to operate. Banks need a banking licence, a payment system — an EMI (Electronic Money Institution) licence. A payment system is regulated by the same state financial regulator in its country of registration as the banking institution. The EMI licence does not allow the use of third party money but it does allow payments. In addition, the payment system has to undergo an audit, during which the regulator checks all the details very thoroughly. It turns out that if you choose a really proven payment system with the appropriate license, your funds will be as safe as in a bank. | |
| Availability of physical offices and client managers | |
| There are physical branches where the staff work. Bank customers can have their own group of bankers and managers with whom they can communicate and solve different problems. | Work in the payment system is done online. Some large payment systems may have assigned customer managers, but in most cases customers are offered a call centre or chat room if they have questions. Employees of such companies work in an office called the Back Office, which is not designed for customer visits. |
| Submission of documents to open an account | |
| A face-to-face meeting is required. | Documents are submitted online. |
| Card issuance option | |
| Both banks and payment systems offer card issuance. Particularly credible are payment systems that have been able to partner with Visa and MasterCard and are able to issue their cards. | |
| Banking and payment services | |
| One of the main differences between payment systems and banks is that payment systems are not in the business of placing deposits or issuing loans. A payment system does not invest in projects or hold money. Its main task is to ensure the fast movement of funds. In addition, payment systems offer favourable conditions for currency conversion, which makes them an attractive choice for international online retailers. | |
| Compliance, customer due diligence | |
| Banks carry out thorough checks on clients to ensure that the declared beneficiary is real and that the origin of the funds with which the client will be dealing is legitimate. As a result, banks require an extensive set of documents and the process of opening an account takes a considerable amount of time. In addition, it is now often necessary for the client to meet in person with a bank manager to open an account. |
Payment systems do not require a face-to-face meeting with customers before opening an account; all necessary documents can be submitted online. Customer verification in payment systems is always quicker and easier. However, this does not mean that payment systems work with everyone without exception - they, like banks, are required to have a licence issued by the financial authorities and can lose it if they violate customer identification requirements. Consequently, the process of opening an account with a payment system is quicker: if all the necessary documents are submitted on time and there are no questions about the company's activities and the origin of the funds, the account can be opened in just a few days. |
As an example, we would like to present the case of opening an account for companies in the UAE.
At the moment, many businesses are faced with the fact that the compliance procedure with banks is very long and complicated, especially if the company has no economic presence in the country of incorporation. From our experience, cases of opening an account with UAE banks can take anywhere from 3 to 6 months.
We have found a solution and helped clients to get out of the situation by opening a corporate account with a payment system licensed by the United Arab Emirates.
The payment system significantly speeds up the account opening process: while opening an account with a UAE bank would require a visit to meet the banker, the account with the payment system is opened remotely. Compliance (compliance with rules and regulations) at a non-bank is easier, no deposit is required.
Additional benefits of the UAE payment system:
- Availability of a personal client manager, including a Russian-speaking specialist.
- Competitive exchange rates for foreign currencies.
- Integration with XERO (accounting system).
- Ability to issue cards.
- Full Internet banking.
- Access to 65+ currencies including US Dollars, Euros, RMB and more.
- Store, exchange and make large payments in over 190 countries.
- No transaction limits.
- Ability to work with a line of credit up to 10 million USD.
- Interest rate varies from 8 to 15% per annum depending on the profile of the borrower and the transaction financed.
Our company has a non-banking partner with whom we have an agreement governing the representation of our clients. Once we have received all the necessary documents we contact our contact person at the non bank partner and apply for an account for our client.
We provide support by helping clients to correctly prepare all the necessary documents and respond to requests from the neobank in a timely manner.
Intelligent Solution Group also offers specialised consultancy services to assist clients in opening corporate accounts and bookkeeping. Our experts have in-depth knowledge of international financial markets and legal regulations, enabling them to provide professional assistance in complex account opening processes. We guide our clients through the compliance control process, which includes checking the client against banking sector rules and regulations and conducting background checks on the origin of funds. These are important steps to ensure legal compliance and prevent financial risks.