Don’t Ignore These 6 Mobile Banking Drawbacks as a Digital Nomad
Online-only banks feel like a godsend. Digital banking for digital nomads in the digital future. Makes sense!
But what about using online-only banks for business? Sure, it seems like a digital bank will go wherever you do. It’s digital. Just tap into the app on your mobile device and you’ve got all the banking power you need. Who needs physical bank branches anymore, am I right?
Not so fast.
While online-only banks make it easier to manage your business finances in an expat or fully remote environment, they are not without their problems.
We generally don’t need a physical financial institution to do the things that we want to do, in the world of business many things are difficult to handle online, such as opening a new business account and transferring significant amounts of money. And while banks like N26 are great for personal accounts, they fall short when it comes to more complex financial matters.
Here are some of the disadvantages of mobile banking for business as a digital nomad.
1. KYC Is Less Strict
Here’s the thing, it’s super easy to open an online business bank account from anywhere in the world. But the reason it’s so easy is because Know Your Customer requirements is relaxed.
You’re probably wondering why that’s a bad thing. Of course, it’s great when you want to get an account open really quickly, but there are some drawbacks to it.
The downside is that this can also mean that it’s harder for them to detect fraud, money laundering, and other illegal activity.
2. Support Is Lacking
The whole KYC and AML issue leads straight into customer support—what happens when something’s up with your account?
If you have any issues with an online account, you’ll have to contact your bank directly. This can be difficult if your questions require a human touch and real-time answers, especially if you’re not in the same country as your bank’s headquarters.
Most online banks offer 24/7 live chat support and phone services, but their support staff may not be able to resolve all your issues immediately due to technical limitations (e.g., inability to access your account). It can take days or weeks for an issue to get resolved and this can be frustrating for those who need quick solutions.
3. Frozen Funds Suck
When there’s little support, what do you think happens with the money in question? Frozen!
Online banks are not immune to the deprivations of the banking system. If there’s an issue with your account, you have no recourse but to wait for them to fix it.
As a digital nomad, you’re used to being able to access your money whenever and wherever you need it. This is especially true when you’re traveling abroad, where you might need to make an international payment or cash out your local currency. And if you’re working remotely for a company that pays in bitcoin or other cryptocurrencies, you definitely don’t want any of these issues. Unfortunately, online banks can freeze your funds without warning — even if the freezing is only temporary.
4. Down for Maintenance
One of the biggest problems with using an online-only bank is that they can be unreliable at times. They may have technical issues that keep them from processing transactions on time or at all.
They may also suffer from outages or other events that prevent them from being accessible through their website or apps. If this happens while you’re traveling or living abroad, it could cause major problems for your business and personal finances alike.
So now your account balance isn’t just frozen, it’s sort of non-existent. You can’t touch them, can’t manage your finances, and maybe you can’t even use your card.
A final thought: you will always need an internet connection. That can really suck if you find yourself in a rural area and need to use mobile banking for some kind of financial service like to transfer funds. A mobile banking app is pretty useless if it can’t load.
5. Limited Payment Options
When you’re a digital nomad, you’re on the move. You’re living in different places, working from different places, and moving money around to fit whichever currency and payment type is acceptable in your latest country.
That’s great when it comes to personal internet banking, but business banking online or from your cell phone? Not so great.
First, online banks often limit their payment options. This can be a problem for businesses that need to accept cash or want to use foreign exchange services.
Second, some online banks have limited foreign exchange services. While some do provide these services, others may only be able to offer them via wires and ACH transfers. This can be a problem if your business needs to perform banking transactions overseas on a regular basis.
If you use a US-based online business bank and you live in Portugal, how do you expect to be paid in Euros, let alone deposit that cash? And what about the conversion rate? And ATM withdrawal limits with your debit card? You can’t use a mobile phone to withdraw cash whenever you need it, and not every provider offers free ATM withdraws abroad.
Plus, each region has its own banking system. So your US checking account information and routing number don’t matter at all in an area that relies on IBAN. That’s not very useful when trying to accept foreign payments or make bill payments locally.
6. Online Banking Isn’t as Safe
If you’re working as a digital nomad, you’re most likely using your bank account to pay for things like rent, food, and travel. This means that you have to have access to your money at all times — and online-only banks may not be able to provide that level of service.
I’ve heard countless stories of travelers who have been unable to access their funds because their bank didn’t have the capacity to process international payments. In some cases, it can take weeks or months to receive your money back.
It’s also important to note that many of these banks don’t offer any kind of fraud protection for financial transactions made outside of the United States or Europe. That puts pressure on you to be hyper aware of scams.
Even if you use two-factor authentication (2FA) on all of your accounts — which is highly recommended — any data breach affects every account you hold with that company or service. But 2FA requires a phone number from the country of the bank that can receive SMS. So if you use Bank of America, you need the use of mobile phones with a linked US number. Notifications from banking applications will never be able to verify your identity.
Online wallets and exchanges are also vulnerable because they store sensitive data like passwords and credit card numbers on their servers (instead of just passwords). And if a hacker gets into one of these systems due to poor security or negligence on their part, they can access every other account held by that service or company with one password reset.
Be Smart with Digital Nomad Banking
Convenience isn’t everything. You need financial solutions that actually support who you are, what you do, and where you’re doing it from. Mobile banking services are useful as a travel, but not always as a business. Stay alert and get an account that truly works for you. And keep watching for our upcoming piece on the advantages of mobile banking for digital nomads.