Genome Blog / articles / Explaining alternative banking: what is it?
Mar. 3, 2023
If you read Genome’s blog, you likely come across terms such as traditional banking and online banking and understand how they differ. But what about alternative banking – what is this term even about?
Well, today, you have a chance to find out! Our team will explain what alternative financial institutions are and why you may want to use them.
Alternative banking: the definition
Traditional brick-and-mortar banks have been around for decades upon decades. By now, people are aware of them and which services they provide. But the way we function and run our day-to-day errands, and the world, as a whole, change constantly. It is what prompts the emergence of alternative finance companies.
Thus, alternative banking is a term related to any other financial institution considered an alternative to traditional banks. Most commonly, these are online banking and Fintech companies.
What alternative banking options do you have?
Before listing your alternative banking options, let us explain what we mean when discussing traditional banks. Generally, two types of financial institutions are considered to be traditional banks – retail and commercial banks. The former caters to individuals, while the latter – to companies. Such institutions usually operate through bank branches. You can find out more about them here.
Thus, multiple other financial institutions, which do not fall under this umbrella, can often be classified as a part of alternative banking. But there are also other ways to differentiate between traditional and alternative banking:
- Alternative banking options often present themselves in a digital form and don’t have bank branches, contrary to brick-and-mortar banks;
- As a rule, alternative banking solutions are more tech-driven, as they need to come up with fresh, more user-friendly features to compete with old-fashioned banks that have decades of history and reputation;
- Alternative banking institutions are more likely to offer more diverse services, which are not as prevailing among traditional banks.
Here are the types of companies that are commonly regarded as alternative financial solutions:
- Online banks and institutions. This option is the first one that comes to mind regarding alternative banking. For instance, Genome is an electronic money institution offering multiple services for people and companies online!
- Neobanks. Neobanks also operate online but differ from typical online banks. Some of them have to rely on traditional banks to deliver services to customers, as not all of them have the necessary licenses. Find out more about neobanks here.
- Credit unions. Credit unions seem like an old-school type of company, but they still serve as an alternative banking option. Credit unions are not-for-profit financial organizations. People can join these if they share something with other union members.
- P2P lending companies. These companies also often operate online but are more specialized. They focus on lending outside traditional banks, and investors are, in many cases, common individuals that provide loans for those in need of them.
Are you looking for something to substitute your brick-and-mortar bank with? We recommend Genome! Start multiple personal, business, and merchant accounts online, send SEPA, SWIFT, and Faster Payments, order physical and virtual cards, and so much more!
Alternative finance and alternative banking: are they the same?
The alternative finance term refers to financial tools and processes carried out outside of banks and capital markets. Instead, they are made with the help of alternative means such as invoicing, lending for businesses, stock finance, crowdfunding, etc.
Such alternative business financing possibilities can be considered by some businesses which don’t want to go the route of traditional banks. For instance, alternative financing for small businesses means that startups can have financing options, such as small business loans, or even use crowdfunding for their business.
Thus, alternative finance and alternative banking are different, as the first term refers to financial institutions themselves, while the second – refers to financial instruments and methods.
What is an alternative financial system?
Also known as alternative financial solutions, these are financial services provided by companies that present alternatives to traditional banking. Usually, neobanks, fintech companies, and online banking businesses offer alternative financial solutions.
What is the best alternative to a bank?
The best alternative to a simple bank will be an online banking solution. For instance, if you use all the essential services of your traditional bank, such as money transfers, credit cards, etc., you can find the same features inside modern Fintech companies. Not only that, but alternative banking is more user-friendly, allowing you to access these features anytime with the help of your phone.
A simple bank alternative, which is convenient and effective, is Genome! We provide personal, business, and merchant accounts online with all the primary financial services attached!
Why would you use banking alternatives?
There can be a couple of reasons. For one, you may want to go digital and have all your financial services available online or inside the app – alternative banking makes it possible. Or, you may require some non-typical services linked to finances, which traditional banks don’t provide.
Where can I keep my money instead of a bank?
Generally, if you don’t keep your money in a traditional bank, you use alternative banking for such purposes. Otherwise, you save funds in cash or invest in property, stocks, etc.
What are examples of alternative financial services?
Among the alternative banking examples are online financial institutions, neobanks, credit unions, etc. Among neobanks, we can point out Revolut or Monzo. And, of course, our EMI, Genome, is an excellent alternative banking option.
What are alternative banking types?
As mentioned above, they are online banks (digital banks, EMIs, neobanks, e-wallets, etc.), credit unions, and p2p lending companies. All in all, plenty of places to find your alternative bank account!
How is alternative banking different from traditional banking?
Companies representing the alternative banking sphere are usually technologically driven, provide a broader range of services, and operate online.