SME Neo-banks - Global Overview | Fintech Fraternity
- 1. Global Overview SME NEO-BANKS Global Players Ecosystem Factors Ownership & License Product Innovation Business Models Indian Opportunity Founder Analysis
- 2. SME neo-banks are new generation digital banks offering value-added business banking services for underserved segments like small businesses, startups, and freelancers Global PlayersSME NEO-BANKS IndiaAmericas United States Latin America # Europe United Kingdom # # European Union # China Mainland China Hong Kong Rest of the world Singapore Australia # Indicates neo-banks having SME & retail operations # # Neo-banks mentioned are representative and not exhaustive Yilian Bank
- 3. Europe & China are two of the more mature SME neo-bank markets with supportive digital banking licensing and tech-savvy small businesses Ecosystem FactorsSME NEO-BANKS India China Europe America Market Maturity (Average Age of Neo-bank) 2.1 years 5.6 years 6.4 years 4.8 years Digital Banking License No Yes Yes No Number of Existing Players Less than 5 5-10 More than 10 5-10 Total Funds Raised* $168 Mn $2.7 Bn $1.8 Bn $33 Mn * Neo-banks with undisclosed funding details have not been considered for total funding
- 4. Chinese neo-banking space is dominated by the TechFins while Europe & Americas have a mix of independent & bank-owned neo-banks. Neo-banks leverage both own & bank-partner license to operate. Ownership & LicenseSME NEO-BANKS India *Deposit account services provided by partner bank China Europe America OwnershipLicensePartner* Independent Ownership Independent Ownership Independent Ownership Independent Ownership Own-License Own-License Own-License Own-License Own-License Own-License Own-License Own-License Yilian Bank Yilian Bank Own-License
- 5. Current account, business loans, corporate cards, accounting & invoicing are common offerings across SME neo-banks globally. Competition is boosted through value-added services. India China Europe America Automated book-keeping API integrations B2B marketplace Loan approval 0.3 seconds 240,000 transactions per second Lending to lower mid- market businesses White-labelled tech platforms to global FIs Streamlined lending through integrations Business banking community Banking APIs Workflow & CRM Payments processing Digital loans - 3 mins to apply, <1 sec to approve, 0 human intervention Point of sale banking Company incorporation Sub-accounts Integrations with accounting, payments & e-commerce providers Product InnovationSME NEO-BANKS
- 6. A freemium subscription-based model is followed by majority of the neo-banks. Transaction fees, interest income and technology outsourcing make up primary revenue streams Business ModelsSME NEO-BANKS India China Europe America Operating model License Bank Partnerships Digital Banking License Digital Banking License/ Bank- Partnerships Bank Partnerships Technology In-house Platforms In-house Platforms In-house Platforms / New-Age Tech providers In-house Platforms / New-Age Tech providers Revenue Model Freemium Subscription Service-based Freemium Subscription Transaction-based Major Revenue Sources 1. Transactions 2. Deposits interest 3. Subscription 4. TPP Commission 1. Loan interest 2. Deposits interest 3. Banking as a Service 1. Transactions 2. Loan interest 3. Deposits interest 4. Subscription 5. TPP Commission 6. Banking as a Service 1. Transactions 2. Deposits interest 3. TPP Commission TPP = Third Party Providers
- 7. Neo-banks have a super-efficient digital-only operating models with a significantly higher customer to employee ratio as compared to traditional banks // WeBank* MyBank k 1000k 2000k 3000k Open RazorpayX* InstantPay* Tide Coconut Penta Starling Bank* CountingUp Holvi Qonto NorthOne 0 100 200 300 400 500 600 700 800 k 50k 100k 150k 200k 250k 300k 350k 400k NumberofEmployees Number of SME Customers India Europe China America * Neo-banks have other business units apart from SME banking as well 100x EfficiencySME NEO-BANKS
- 8. The Opportunity MSME sector contributes 28% to GDP, employing 111 million people 63.38 million MSMEs in India, of which 63 million are micro-enterprises Only 11% MSMEs access formal credit. Overall credit gap in the MSME sector is estimated to be 20 25 trillion. 15+ MSME-supportive government schemes in India Launched - 2017 HQ - Bangalore Services - 400,000+ SMEs & startups Launched - 2018 HQ - Bangalore Services - 5000+ SMEs & large enterprises Launched - 2019 HQ New Delhi Services - 23000+ SMEs & large enterprises Founded 2018 HQ - Gurugram Services - SMEs & large enterprises MSMEs are the new focus of Aatmanirbhar Bharat with a potential to boost the economy to higher levels Source: U K Sinha Committee Report on MSMEs India OpportunitySME NEO-BANKS
- 9. India China* Europe America Neo-bank Avg.Years of Experience 15 11 20 30 - 12 20 21 9 17 29 19 18 13 17 Female Founders 2 - - - - - - - - - - 1 1 - - In which industry did the founders start? Finance Information Technology Consulting Other 66% of SME neo-banks founders are outsiders (i.e. they started from industries other than finance) Founder AnalysisSME NEO-BANKS * CEO of Chinese neo-banks have been considered
- 10. Disclaimer: All views & opinions mentioned are personal and do not represent views of any organisations or institutions. Fintech FraternityTHE TEAM Afshan The designer and food geek with a knack for research. @heycloudwatcher Priyamoni The weaver of words with a curious mind. @PriyamoniD Sanjeev FinTech analyst during the day and a bibliophile by night. @sanjeevk_k