Our new data shows that over the past few years, neobanks have started to make a significant impact in the business banking market, particularly among new businesses.
Neobanks have capitalised on limitations of traditional bank systems and models and are particularly appealing to business owners of new start-ups
In fact, data taken from our recent Top 100 Most Loved Financial Services Brands report shows that one in ten (10%) start-up businesses say that they currently have their main business current account with a neobank.
A key reason for the rise in popularity of neobanks is their ability to challenge the traditional banking model by offering innovative solutions to customers via digital channels. Savanta’s Rise of Digital in Business Banking report shows how neobanks have capitalised on limitations of traditional bank systems and models and are particularly appealing to business owners of new start-ups – especially those in the younger age groups.
However, neobanks aren’t the only way businesses are engaging with a digital only offering. One in six businesses say they already use a digital-only banking solution – meaning they are interacting only via digital channels or are using a digital-only offering from their banking provider. This includes customers from the likes of Barclays, Lloyds and, to a lesser extent, NatWest and HSBC, as well as the challenger and neobanks.
One in five (21%) businesses say that taking out their primary business bank with a digital-only offering would either be their first choice or they would seriously consider it, and a further 23% say they might consider a digital-only offering. Just under four in ten (38%) are outright rejectors of a digital-only offering.
When asked about reasons for rejecting digital only banking, nearly half of those who do said they want the ability to have face to-face contact if needed – in other words, the comfort of knowing a branch is there even if it isn’t used very often. The second most commonly stated reason was the need to use branches to pay in cash or cheques. Just 7% of rejectors said they ‘don’t trust new/ digital banks’ and 6% said they ‘prefer a traditional bank with history/ a good reputation’.
Reasons for rejecting a digital-only offering are understandable – having face-to-face contact with your bank is important for many business owners.
But how long will these objections be in place? The coronavirus pandemic has changed the business environment. The need for branch services could rapidly diminish with fewer businesses transacting via cash and more using digital payments. In addition, with people becoming more and more comfortable with digital communication methods including Zoom and Teams, will we seek the comfort of the face-to-face backup like we did before?
Three quarters (76%) of SME and medium businesses told us that they feel more comfortable using digital channels to manage banking needs since the coronavirus crisis, and with no sign of life going back to normal any time soon, we could see this number increase into the future too.
Find out more about how Neobanks such as Starling, Revolut and Monzo are making strides into the business banking sector, challenging the traditional banking model and disrupting the status quo, by downloading the full report here.