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Neobanks — digital-only banks with industry-leading capabilities that don't operate physical branches or rely on legacy back-ends — have exploded onto the global scene in recent years.
While neobanks focused on retail consumers tend to dominate headlines, these players' biggest impact could be in the $850 billion annual SMB banking segment, as incumbent banks have struggled to appropriately serve this industry.
Because they're built on a modern technology stack and lack the costly network of physical branches, neobanks have been able to serve SMBs much more efficiently than legacy players. Key neobank offerings include quick account opening, multitiered — and often fee-free — accounts, and integrations with third-party tools like accounting and bookkeeping software to further streamline SMB business operations.
In The Global SMB Neobanks Report, Business Insider Intelligence explores the key factors driving an explosion of neobank activity in the SMB segment and the strategies these upstarts are leveraging to capture shares of this lucrative banking vertical. First, we examine the conditions that created a fertile environment for neobanks to offer their services to SMBs, including the challenges incumbents have faced when it comes to serving these businesses profitably. We then outline the operational advantages that have enabled neobanks to overcome the challenges faced by their incumbent peers. Finally, we explore the key neobank markets around the world and the players at the forefront of the movement in each geography.
The companies mentioned in the report include: Anna, Azlo, BBVA, BlueVine, bunq, Coconut, Judo Bank, Mercury, MYbank, N26, Nubank, OakNorth, Open, Penta, Qonto, Revolut, Starling, Tide.
Here are some key takeaways from the report:
- Almost all businesses globally fall within the SMB category — with 99% of all companies having fewer than 50 employees — and they play a huge role in their respective domestic economies.
- Banks have struggled to find the optimal balance between efficiently serving SMBs and delivering the customer experience that these companies require, leading many to neglect the segment — especially after the financial crisis, when banks reduced their exposure to risky credit portfolios.
- Europe is home to the most mature neobank ecosystem globally, driven by upstart-friendly regulations — like Open Banking and PSD2 — that have lowered the industry's traditionally high barriers to entry.
- The neobank ecosystem in the Americas has long lagged behind Europe's, due in part to an adverse regulatory landscape, but that's beginning to change.
- The Asia-Pacific region is characterized by hugely varied fortunes in each market when it comes to SMB neobank development.
In full, the report:
- Evaluates the current banking space for SMBs.
- Explores why conventional banks have struggled to appropriately serve this segment, and explains why neobanks are changing the status quo.
- Highlights key players in various global markets — including Europe, North America, Latin America, and Asia Pacific — that are at the forefront of this global movement in terms of features, users, or total funding raised.
- Spotlights some of the smaller players that are beginning to make headway in specific markets.
- Discusses the different business models and strategies used by SMB-focused neobanks across the aforementioned geographies.
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