Traditional Banks vs Neobanks: Why Both Fail At Modern AP And AR

When people talk about traditional banks vs neobanks, it often sounds like a battle between old and new. On one side, you’ve got banks with history, trust, and size. On the other hand, flashy neobanks with mobile-first design and “free” tools.

But when it comes to accounts payable automation and accounts receivable automation, neither side really wins. Traditional banks move too slowly, and neobanks, while stylish, don’t deliver the depth or automation businesses need.

Why can’t banks deliver accounts payable and accounts receivable automation?

Banks are great at safeguarding money, but they were never designed for AP/AR workflows. They move funds, but they don’t manage the approvals, reconciliations, and forecasting that modern finance teams need.

• Hidden costs that pile up: Wire fees, cross-border charges, FX spreads, and even “maintenance” costs make banking expensive. These charges often show up later, and businesses only realize the true cost when margins get small.
• Reconciliation headaches: Bank statements don’t line up neatly with invoices. Metadata is often incomplete, settlements arrive late, and finance teams are left trying to balance CSV exports and Excel formulas. Over time, reconciliation becomes a full-time burden.
• Outdated systems: Most banks still run on very old core systems. Payments are processed in batches and not in real-time. Hence, settlement can take T+2 or T+3 days, and APIs for integration are very limited. This slows everything down.
• Zero workflow automation: Banks see AP/AR simply as money in and money out. They don’t have invoice approval flows, audit logs, or role-based controls.
• No predictive insight: Banks can just show you your balance. They cannot forecast, don’t late customer payments, highlight vendor discount opportunities, or predict cash shortfalls.
• Security over usability: Their security is great, but the logins are very clunky, and OTPs often slow down AP teams.
• Poor handling of exceptions: In AP/AR, exceptions happen all the time, partial payments, disputed invoices, and vendor bank changes. Banks don’t have structured ways to handle these; you’re left with support tickets and phone calls.
• Cut-off times that kill speed: Many banks still have strict cut-off times (e.g., submit before 2 pm for same-day processing). Miss it, and payments get delayed, hurting vendor relationships.

Why neobanks fail at AP/AR (despite better UX)?

Neobanks entered the market promising faster, smarter banking: real-time alerts, slick design, no monthly fees. For freelancers and small businesses, they’re attractive. But when AP/AR becomes complex, neobanks reveal their limits.

• “Free” isn’t free: Scaling triggers hidden fees, FX markups, or premium charges.
• Wallet-first hurdles: Many neobanks force payments through proprietary wallets instead of company bank accounts, adding friction, reconciliation headaches, and trust issues with vendors who prefer direct bank rails.
• AI promises, workflow gaps: No predictive cash flow, fraud detection, or true AI-driven AP/AR.
• Vendor trust issues: Large suppliers hesitate to use lesser-known neobanks for high-value invoices.
• Transaction caps: Daily transfer limits block mid-market usage.
• Reliability risks: Outages happen due to reliance on partner banks.
• Not built for scale: Startups fit, but mid-market finance teams hit hard limits.

Neobanks solve for design, not depth. They look modern, but they don’t scale or meet compliance for serious AP/AR.

What are the risks of relying on traditional banks and neobanks?

Initially, both traditional banks and neobanks look like safe bets. Banks feel secure because of their legacy. Neobanks feel exciting because of their speed and design. But when it comes to AP/AR, relying on either comes with risks that can quietly snowball into bigger problems.

Compliance and audit headaches

Auditors don’t care how modern your app looks. They care about workflows, who approved a payment, when, and under what rules. Neither banks nor neobanks give you that level of detail. You get transaction history, sure, but not the end-to-end audit trail that keeps regulators and auditors happy. That gap becomes a real risk as your business grows.

Fraud and errors hiding in plain sight

Banks are good at spotting suspicious wire transfers. Neobanks flag unusual spending patterns. But AP/AR fraud is different, with duplicate invoices, fake vendors, or approvals pushed through email chains. Neither system is built to catch those. And when teams are stuck doing manual reconciliations, the chances of fat-finger errors only increase.

Manual workarounds that backfire

Because banks and neobanks don’t offer built-in workflows, finance teams build their own: spreadsheets, email approvals, Slack messages. It works for a while, until someone misses a step, or a critical payment slips through the cracks. What feels “manageable” at first becomes risky and unscalable.

Cash flow blind spots

Both banks and neobanks show balances and past transactions. That’s helpful, but it’s like driving by only looking in the rear-view mirror. You don’t get forecasts, alerts for late payments, or visibility into bottlenecks. That’s how businesses get caught off guard with cash crunches they never saw coming.

What is the business impact of broken AP/AR?

Accounts payable and accounts receivable automation cuts manual touchpoints, improves cash flow, and gives CFOs better control over the forecasts. But poor AP/AR weakens the entire business and doesn’t just mean late payments. Below are some major business impacts that can happen:

Cash flow and working capital under pressure

Slow AP/AR processes trap liquidity in settlement delays and reconciliation backlogs, leaving businesses short on working capital. Hence, rather than using cash for discounts or growth opportunities, companies are forced to go for credit lines.

Vendor and customer experience suffer

Late or inconsistent payments damage vendor trust, because of which suppliers tighten their terms and demand upfront payments. Hence, over time, poor payment discipline can also weaken a company’s negotiation powers. On the customer side, if there are errors like duplicate invoices or unclear statements, they can slow down collections and make AP/AR issues a blow to relationships.

Treasury and CFO blind spots

When cash data is scattered across banks or neobanks, treasurers lose real-time visibility into liquidity across regions or subsidiaries. Without automation, forecasting turns into guesswork, leaving CFOs exposed to sudden cash shocks. And with no consolidated view, it’s nearly impossible to optimize cash pooling or plan debt servicing with confidence.

Broken AP/AR reduces efficiency, weakens financial stability, and erodes partner trust.

What does a modern AP/AR system include?

A truly modern AP/AR system doesn’t just move money; it gives finance teams control, speed, and clarity. Here’s what that looks like in practice:

Bank-agnostic flexibility

Businesses should never be forced to switch banks just to use better AP/AR tools. A modern system connects to multiple banks and accounts, across currencies and regions, while keeping workflows unified. Forwardly already does this; you can keep your existing bank relationships while running all AP/AR through one platform.

Real-time payments without cut-offs

No more waiting for the next business day or missing a 2 pm cut-off. Modern AP/AR runs on instant payment rails where funds move in seconds, even on weekends and holidays. Forwardly, for example, enables payments in 60 seconds or less, including flexible options for speed and timing.

Custom workflows & built-in controls

Every finance team has approval rules. A modern AP/AR system mirrors those, multi-step approvals, thresholds, role-based permissions, and a full audit trail. Forwardly lets you set up tailored approval workflows, so compliance happens by design, not after the fact.

Real-time cash visibility

It’s not enough to know your current balance; CFOs need to see what’s coming. Modern AP/AR shows real-time inflows/outflows and projects future cash positions. Forwardly’s dashboards sync 4-way with QuickBooks and Xero, and 2-way with FreshBooks and Zoho Books, giving a live cash-flow view. A major aspect of payables and accounts receivable automation.

Scalability without stress

Whether you’re processing a few invoices or thousands across subsidiaries, the system should scale easily. Forwardly is designed to support everything from small finance teams to multi-client accounting firms, without breaking workflows as you grow.

Proving the ROI: The measurable impact of automation

• Manual invoice processing costs $12.88 per invoice, vs $3-5 with automation.
• 56% of companies spend 10+ hours a week on manual invoice processing, while automated teams spend less than 1 hour.
• 23% of businesses miss early-payment discounts (1-3% per invoice) due to manual delays.
• Mid-market firms report 30-40% lower labor costs and up to 80% lower processing expenses after automation.
• AR automation cuts bad-debt write-offs by 15%, while 91% of mid-sized firms report stronger cash flow after adopting automation.

The smarter path forward for AP/AR

The debate of traditional banks vs neobanks has been missing the bigger truth that neither solves modern AP/AR. Banks are too slow and costly. Neobanks are sleek but shallow. Both have drawbacks that businesses can’t afford.

The answer is a bank-agnostic AP/AR platform, one that connects to all banks, moves money in real time, automates reconciliation, prevents fraud, and gives CFOs the visibility they need to manage liquidity with confidence.

Still running AP/AR through banks or neobanks? It’s time to step up. Forwardly proves that the future of AP/AR isn’t about choosing between old and new, it’s about adopting systems designed for growth.

Book a 1:1 demo today.