Small business lending startup BlueVine, which was founded in 2013 to provide working capital to small- and medium-sized businesses (SMBs), is launching digital banking services with the introduction of BlueVine Business Banking, according to Business Insider.
The platform includes online account opening, a 1% interest checking account on balances above $1,000, and a corporate debit card for SMBs like restaurants and manufacturers. The offering is fee-free: BlueVine doesn’t charge for minimum balances, in-network ATM withdrawals, insufficient funds, or minimum deposits.
Customers will also be able to see balances, make payments, transfer funds, and make remote deposits to checking accounts through the mobile app. BlueVine is partnering with The Bancorp Bank to offer banking services — the sponsor bank behind other neobanks like Varo.
BlueVine is joining other neobanks and fintechs filling the gaps where incumbents fall short:
- Incumbent financial institutions don’t meet SMBs’ lending needs. Incumbent lenders don’t have tailored risk models for SMBs, meaning smaller companies have to go through the same rigorous vetting processes as large companies despite asking for much lower loans. As a result, the process of obtaining a loan can be laborious for SMBs, who spend up to 30 hours filling out one loan application, for example. BlueVine CEO Eyal Lifshitz told Business Insider that this friction is driving many SMBs to use third-party providers, like neobanks.
- To address those needs, SMB banking-focused fintechs have been emerging globally. US SMB digital banking providers include California-based neobank Mercury, which focuses on startups and recently raised $20 million to expand and add new products; Novo, a US neobank for SMBs and freelancers; and newly launched US-based fintech Rho, which developed a digital banking system for early stage and high-growth startups. And in Europe, there are over 21 SMB banking providers, including UK-based neobank Starling, which recently raised £30 million ($38.5 million) to boost investment in its consumer and SMB bank accounts. In the UK, specifically, alternative financial providers only accounted for 2% of £11.5 billion ($14.8 billion) of the UK SMB lending market in 2018, for example, but their share is projected to surge to 9.1%, worth £52.6 billion ($67.6 billion), by 2021.
- Despite there being several SMB-focused fintechs, there’s still a long runway for growth in the space. The opportunity to reach SMBs is especially big as this segment is largely unsatisfied with their major banks: Just 32% of SMB banking customers feel their banks understand their business, according to a J.D. Power study. BlueVine can use its offering to foster relationships with SMBs as they’re getting off the ground. And SMB banking can be a lucrative segment: UK-based neobank OakNorth, which also focuses on SMBs, became profitable during its first year operating.
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