Myths, misconceptions and misinformation surround all aspects of the financial industry. While most consumers understand the threat of not knowing how the complicated financial sector works, myths and misunderstandings also hurt the bigger players: Financial firms, organisations and digital banking institutions.
In the midst of these misunderstandings, Mark Hartley, CEO of business technology fintech BankiFi, has launched a new ‘myth-busting’ campaign centred around digital-only neobanks, and publicly denouncing a number of misleading claims.
BankiFi is a technology platform designed to help banks and other legacy financial institutions improve their service to small-to-medium enterprises (SMEs) by providing a set of integrated services, such as accounting, invoicing and payments.
As part of these efforts to highlight issues faced by small-to-medium-sized enterprises (SMEs), BankiFi is shining a spotlight on the benefits on offer to SMEs when they choose to work with banks that prioritise customer-centric approaches.
The biggest myths of neobanking
Hartley outlined the three of the biggest myths that remain in the space:
The first myth: that digital-only banks have already successfully captured the SME market.
Many believe that both Monzo and Starling have each achieved over eight per cent of market share after meeting their Banking Competition Remedies (BCR) commitments.
Monzo has publically stated that it has over 250,000 business current account holders, while Starling revealed it also has 520,000 small business accounts. Despite these impressive numbers, it remains unclear whether these accounts are SMEs’ primary or secondary accounts.
BankiFi has suggested that, currently, digital-only challenger bank and fintech solutions are often utilised by SMEs to supplement the services provided by larger companies providing both physical and digital experiences.
Ultimately, the staying power of institutions of this nature has been much greater than many people expected, and it remains where SMEs feel comfortable depositing, sending, and saving money – despite the efforts of the BCR to expand competition among providers of financial services to SMEs.
The second myth: Regulation has stifled digital-only neobank growth
2022 saw an all-party parliamentary group suggest the ‘one-size-fits-all’ approach to banking regulation was slowing down neobank growth. Since then, the sector has seen a lot of turbulence, reaffirming the importance of the regulator’s role in protecting consumer and business finances.
BankiFi reiterates that the UK’s regulatory framework is among the best in the world and should not be weakened just to enable a more competitive field. Lighter regulation is not the right way forward if it causes a risk to people’s businesses and livelihoods.
The third and final myth: SMEs all want completely different things from neobanks
While SMEs come in all different shapes and sizes, they struggle primarily with the same issues. A large number of SMEs want banking solutions that help them to pay and get paid to alleviate issues around late payments.
In the UK, SMEs are owed an average of £250,000 in late payments according to Time Finance. QuickBooks has also found that SMEs in the US are owed $304,066 in late payments. The challenges of this fact are compounded by JPMorgan Chase Institute research, which shows that 50 per cent of SMEs are surviving with fewer than 15 cash buffer days.
“One of the best ways to address cashflow concerns is to give people access to tools that help them to get paid more quickly. Moving forward, this must be a huge priority for business banking partners working with SMEs,” Hartley explained.
