The Rise of Neobanks and Alternative Lending

In 2023, a significant number of small businesses, around 150,000, experienced account closures. This presents a challenge for entrepreneurs navigating the financial landscape today.

The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

At the start of 2023, small businesses in the UK numbered 5.5 million, constituting 99.9 per cent of the business landscape, according to the Federation of Small Businesses.

In response to the challenges faced by small businesses, an increasing number are turning to mobile-friendly online neobanks and alternative lending platforms. These fintech companies provide non-traditional banking services digitally.

Neobanks distinguish themselves by operating exclusively through mobile platforms without any physical branches, setting them apart from digital banks which are essentially the digital extension of traditional banks with physical locations. Unlike neobanks, digital banks maintain a hybrid approach.

Instead of targeting traditional banking customers, many neobanks direct their marketing efforts towards the unbanked demographic – individuals who have not utilised banking services, often due to the inability to afford high fees or reluctance stemming from complex onboarding procedures. Neobanks aim to cater to the unbanked by providing them with affordable interest rates and service fees, while also simplifying paperwork and streamlining the onboarding process to make banking more accessible.

In recognising the need for comprehensive financial solutions, including lending options, neobanks are increasingly forming partnerships with alternative lenders. This collaboration allows neobanks to leverage the strengths of alternative lending platforms, characterised by their agility, technological prowess, and customer-centric approach. By integrating alternative lending into their digital ecosystem, neobanks extend their service offerings beyond mere transactional capabilities.

Exploring Alternative Lending

The essential ingredient for every small business is capital — necessary for growth, managing cash flow, and meeting short-term expenses.

Lenders like Cubefunder understand the importance of flexibility and offer tailored loan products to support entrepreneurs in overcoming unexpected challenges. With term lengths of three to 12 months, no early repayment fees, and daily or weekly repayment schedules, Cubefunder aims to provide entrepreneurs with the resources they need to thrive, especially during unexpected hurdles.

The Future of Finance

In summary, the rise of neobanks and alternative lending marks a transformative shift in financing, providing businesses with a flexible and efficient alternative to traditional lending.

While challenges exist in the financial landscape, alternative lending platforms are committed to providing a transparent and customer-focused approach to lending. They believe in fostering strong relationships with their customers, understanding that the success of their business goes beyond numbers. This people-centric philosophy is integral to their decision-making process, where they assess each business comprehensively.

With sustained market growth, heightened competition, and ongoing technological advancements, alternative lending is poised to further solidify its status as a credible choice for businesses seeking financing.