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Different SMEs, different focus for SME neobanks

In the UK, the most well known SME neobanks are Starling, which has retail and SME accounts and Tide, which focuses solely on SMEs. Tide provides business current accounts and smart financial admin services through a mobile-first platform, while Starling claims to have launched the UK’s first digital business bank account back in March 2018.

Tide does not charge a monthly or annual account charge or subscription, but they charge for some transactions. However, their fees are lower compared to traditional banks – photo: australianfintech.com.au

Another UK startup is Coconut that focuses on serving freelancers. They’ve developed specific accounting features, including VAT and invoicing that cater to the day-to-day needs of the self-employed.

In France, the top player is Qonto, a neobank for freelancers and SMEs that offers a professional current account, payment cards and easy accounting features.

In Germany, there’s Penta, a SME banking provider acquired by Finleap in April 2019. In the Nordics we have Aprila in Norway, and in Finland, Holvi, aimed to freelancers and solo-preneurs and it became the official banking partner of Estonia’s e-Residency program.

How SME challengers are monetizing their services

In the UK, Starling make money with net interest income – using customer deposits to lend to other customers as overdrafts and loans. Another way is with their treasury income where surplus deposits are held by the Bank of England, and Starling gets small returns via interest.

In Germany, Penta opted for the freemium model – they have a basic free plan that can be upgraded to their advanced and premium monthly subscriptions, with more services added – photo: mobiletransaction.org

Tide does not charge a monthly or annual account charge or subscription, but they charge for some transactions. However, their fees are lower compared to traditional banks.

French SME challenger Qonto, chose to monetize their services offering subscriptions with several pricing plans, ranging from €9 to €299 per month.

In Germany, Penta opted for the freemium model – they have a basic free plan that can be upgraded to their advanced and premium monthly subscriptions, with more services added.

In the end of the day, SMEs can only win in this competition: the more players enter the SME neobanking sector, the more competitive it gets and better pricing and plans will start to pop up.

In our blogpost we sum up the article published by Marcel van Oost in his linkedin feed.

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