Neobanks offering banking products specifically catered towards SMEs and businesses are referred to as SME Neobanks.
Over the last few years, Neobank market has gone through major changes and a new segment of neobanking market has arisen out of a mission to better serve small and medium businesses and enterprises .
These SME Neobanks as compare to traditional banks, are more digitally focused. They offer built-in merchant services and other important tax and financial tools that small businesses use. In todays ever shifting business markets SMEs need access to financial products and services to make better and informed decisions. These neobanks for businesses are at the forefront of the movement to meet this business customer demand.
There are more than 400 million SMEs globally as researched by World Bank in 2017. An estimated 68% of businesses in low income countries are underserved by traditional financial institutions. This number is around 16% for developed economies. Consequently, these under banked SMEs lack access to other financial products like credit facilities and business insurances. These new neobanks promise to differentiate themselves from traditional banks by competitive pricing. Offering much faster and simpler servicing process when compared to traditional banks. Providing exceptionally simple administration that will be guaranteed by a modern IT platform and a mobile app.
For most of traditional banks, SME lending forms the core of their business. Despite this, the SME lending sector suffers owing to the untimely and complex credit-seeking process. For banks too, credit underwriting and identifying SMEs with reliable credit history is a time-consuming process, which in turn has led to a situation where the relationship between banks and SMEs have started dwindling. This huge gap in the market has given birth to a new breed of fintech firms who specialise in NEO lending by providing a structure to their credit flows, enabling them to seek credit faster. Most popular of them are the digital-only banks or specilased SME Neobanks.
Neobanks for businesses
These Neobanks for business also provide an opportunity to access cheaper financial resources for new clients and market segments. These SME neobanks offer competitive prices for the services to business clients.As these fintech startups seek to differentiate themselves, the biggest opportunities lie in international expansion, obtaining a banking license for different regions and targeting niche sub-segments of business market.
Some of these SME and business neobanks are also experimenting with DeFI (decentralised finance) protocols and trying to build their banking products and services on its principles. DeFi takes banking to its culmination by cutting out the middlemen completely relying completely on decentralized peer to peer networks. These DeFi neobanks are building a multi-faceted financial system that improves upon, the legacy financial system. These DeFi neobanks will play a pivotal role to successfully bridge the gap present in legacy financial system.
Due to current pandemic conditions and lockdown enforcements, market is already shifting towards these new digital trends like Neobanks for Teenagers and neobank for students. Revolut Business has recently announced that it is launching in USA. We have already witnessed the first fintechs obtaining their banking licenses for Varo and Square. However, amidst this new developments, these new SME neobanks have to remember that providing the best user experience and serving the customer’s needs always comes first.