Europe’s neobanks search for elusive profit in SMEs and the US
Europe’s online-only challenger banks are still losing money, despite millions of retail clients in their home continent.
Europe’s neobanks are switching their attention to small business banking and expansion in the US, as they strive for global scale and profitability.
Business banking will soon be a bigger revenue earner for UK neobank Revolut than retail clients, which already number about 10 million, according to its head of business Vaidas Adomauskas.
“We are the profit-generating side of the business,” he says, adding that Revolut will increase its number of business clients by four or five times by 2020, reaching well over a million.
Among the other UK-based neobanks, Monzo launched business accounts in March.
Meanwhile, Starling Bank – which has a longer-standing focus on business banking and lending, but targets smaller firms than, say, OakNorth Bank – is also seeing its growth in that segment fare better than in retail since the coronavirus, in part thanks to its launch of television advertising targeting small and medium-sized enterprises (SMEs) in February.
Last year, Starling won a £100 million grant from the Capability and Innovation Fund, a UK government vehicle to reduce Royal Bank of Scotland’s dominant market share in SMEs.