Small and medium-sized enterprises (SMEs) form the backbone of the European economy, accounting for 99% of all European businesses, and providing jobs to more than 85 million European citizen.

And yet, they still face barriers to accessing financial services and credit. In response to this, a new wave of digital challenger banks is emerging to close these gaps and better serve the unique needs of this segment.

Services tailored to SMEs

In Europe, institutions like Allica Bank and OakNorth Bank exemplify this trend. These companies provide tailored financial services that cater specifically to the SME sector.​

Allica Bank, founded in 2019 in the UK, delivers a comprehensive suite of SME-specific products. It specializes in SME financing, leveraging proprietary technology and a cloud-native platform to streamline the lending process.

Allica Bank is one of the fastest-growing fintech companies in Europe. In 2024, the bank nearly doubled its profits to GBP 29.9 million, grew its loan book to over GBP 3 billion, and attracted more than GBP 4 billion in customer deposits.

Similarly, OakNorth focuses on scaling businesses, offering current accounts, savings accounts, loans, foreign exchange (FX) and payments, in addition to retail savings accounts. Since its inception, OakNorth has lent about US$16 billion, contributing to the creation of 56,000 jobs and over 34,000 new homes across the UK and the US.

OakNorth is one of the few profitable fintech unicorns in Europe. In 2024, the company reported pre-tax profits of GBP 214.8 million (US$271.6 million). That year, it provided over GBP 2.1 billion (US$2.6 billion) in new lending.

An all-in-one financial platform for SMEs

European SME-focused digital banks are not just competing for deposits. They’re building full-stack financial platforms designed to power the day-to-day operations of small businesses.

In France, Qonto stands out as a leading provider, focusing on simplifying day-to-day banking for SMEs and freelancers. Its offering goes well beyond an online business account, combining essential financial tools like invoicing, bookkeeping, and expense management into a seamless platform.

Qonto serves more than 500,000 SMEs and freelancers across France, Germany, Italy, Spain, Belgium, Austria, the Netherlands and Portugal, underscoring its rapid growth and expanding regional footprint.

Most recently, the company launched its first in-house financing solution. Pay Later is a short-term financing offer that gives eligible customers instant access to funds of up to EUR 10,000, directly from the Qonto app.

The launch marked a significant milestone for Qonto, which had previously relied on strategic partnerships for customer financing.

Consumer banks enter the SME space

Beyond specialist SME banks, Europe is also witnessing a strategic push by consumer-focused digital banks into the SME segment. These players are leveraging their tech infrastructure, brand recognition, and large customer bases to scale up in business banking.

Digital banks like Revolut and N26 have introduced business offerings to diversify their revenue stream and tap into the underserved market of freelancers and small businesses. These companies rely on tiered subscription models to cater to various business sizes and needs, and ensure predictable recurring revenue.

Revolut Business, launched in 2017 across the UK and Europe, allows companies to open multi-currency accounts, transfer money at interbank exchange rates, and issue corporate cards for global fee-free spending. The service claims US$500 million in global annualized revenues, and is onboarding over 20,000 new companies per month, with more than 500,000 active business customers worldwide.

In Switzerland, where Revolut recently hit the 1 million user milestone, the company is ramping up its business offering, launching just this week access to flexible money market funds in foreign currencies and virtual Swiss IBANs. These offerings, which are typically reserved for large corporations, aim to help SMEs grow their capital with daily yield payouts and efficient fund management.

N26, based in Germany, entered business banking in 2016 with N26 Business, a mobile-only account tailored for freelancers and the self-employed. This product lime has since grown to include premium tiers, including N26 Business Black and N26 Business Metal to offer enhanced features and benefits beyond the standard N26 Business account. These tiers target freelancers and self-employed professionals who need more robust services.

In Q3 2024, N26 reported its first ever quarterly profit. The company registered a more than 110% uptake in average monthly customer sign ups between fiscal 2023 and October 2024, with more than 200,000 customers currently signing up to N26 per month.

N26 expects to reach 4.8 million revenue-relevant customers by the end of 2024. This year, it plans to offer digital banking for businesses in 2025.

Expanding through ecosystems

Unlike banks offering standalone accounts, Wise, formerly TransferWise, has expanded from cross-border payments to offering deposits to create a more comprehensive financial service solution for its customer base, further enhancing its value proposition.

In 2016, Wise introduced Wise Business, providing companies with multi-currency accounts, alongside low-cost, transparent international money transfer solutions. The service enables businesses to send, receive, and hold funds in various currencies, addressing the complexities of global transactions.

Over time, Wise Business expanded its offerings to include local bank details for specific currencies and debit cards, providing businesses with more flexibility and a complete financial ecosystem for managing cross-border operations seamlessly.

Wise’s growth strategy also heavily relies on platform partnerships and embedded finance. For business users, Wise integrates with accounting tools like Xero and QuickBooks, to streamline financial management for businesses. This also allows Wise to embed itself deeper into the financial workflows of businesses and become a core part of their financial infrastructure, strengthening customer stickiness and creating a network effect.

As of fiscal year 2025, Wise reported 600,000 active business customers, with business products accounting for 23% of total revenue, according to a FXC Intelligence analysis. In the business segment, the company mostly serves micro, small and medium-sized enterprises (MSMEs) but plans to make more investments to attract larger businesses over time.

Featured image credit: edited from freepik