U.K Fintech Startups Lure Thousands of Small Businesses Away From Banks

Two startups, Revolut and TransferWise, have reportedly signed up thousands of small businesses over the last few months, snapping up customers away from banks in a new drive pegged on foreign exchange payments.

The two U.K-based startups are luring these businesses with a promise of slicker services and significantly lower fees, in a move that has seen banks take notice in a sector reported to be worth an annual $7 trillion.

Revolut and TransferWise have been expanding rapidly as they venture into the retail market, offering access to faster and cheaper cash transfer options.

However, the lion’s share of business in this lucrative sector is a market provided by small and medium-sized businesses. The vast majority of these overwhelmingly rely on banks, but which the small firms continue to accuse as being too slow, use outdated technology and charge characteristically high fees- normally as high as what these banks charge major retail clients.

TransferWise has in 2019 signed up nearly 10,000 new businesses every month, almost twice the numbers registered in December 2018. The startup expects such small businesses will, in the next few years, account for about 25% of its $3.9 billion monthly flows.

The $4 billion company has also looked to sell its services to financial firms and currently has Monzo, a British digital bank and Bunq from the Netherlands on its books.

Revolut is yet another U.K-based fintech “unicorn” currently valued at more than $1 billion. The firm expects its monthly transaction volumes driven by the small businesses to reach $1 billion by the end of this May.

Notably, Revolut registered $218 million worth of transaction from this sector in June last year.

So far, the fintech firm has lured over 100,000 businesses, double the 33,000 it had attracted by June 2018.  The firm says it continues to attract even more, with 3,000 to 6,000 new customers seeking its services every month.

In the wake of this rapid expansion by fintech startups, traditional banks have reportedly acknowledged the need to overhaul existing systems in order to provide cheaper, faster, easy-to-use services. According to consultancy firm McKinsey, small businesses moved somewhere between $6 trillion and $7 trillion in cross-border flows worldwide in 2017.