The fintech hype makes us believe that neobanks such as Penta, Qonto, Tide, and others swept over Europe, but the numbers don’t add up. Most businesses and startups still bank with traditional financial institutions.
In Germany alone, more than 500,000 new businesses are started every year, with a large chunk of it being growth startups. In comparison with Penta’s 30,000 customers, it seems like many European startups use traditional banks after all. In fact, about 99% of European businesses still bank with incumbent banks.
Finding the right bank can feel like navigating through a jungle. So, let’s dive into the banking options for European entrepreneurs.
1. Pure-play B2B neobanks
🎯 Targeting: Freelancers, Startups, Small Business in local country of operations
✅ Good for: IBAN account operating within Europe or within UK. Built with SME needs in mind. Best for businesses with limited cashflows and, low-frequency payments. Quick signup <48 hours.
⛔ Limitations: More complex finance operations are usually not possible. Regular bulk payments are often not supported or associated with high manual effort. So are ERP integrations and payroll payments. Deposits insurance caps at €100.000 in the European Union or up to £85,000 in the UK. Limited possibilities for lending and yield products. No cashback options.
💸 Pricing: Some offer a free tier with transactions and card issuance fees. Then plans start at €9 (Basic tier), 20–30€ (Standard tier) to €100 (Premium tier) per month. Beware of international payment fees (up to 1% for outgoing and up to 5€ for incoming) and transaction caps. For example, Qonto charges €0,50 per transaction after a cap of 20 transactions.
📝 Takeaway: Solid banking for entrepreneurs and freelancers starting out. Some B2B neobanks also include founder services. ;any growing startups feel limited when scaling.
2. Commercial lines of B2C neobanks
🎯 Targeting: (International) Freelancers, Startups, Small Business
✅ Good for: Consumer-like, mobile-first neobanking. Custom pricing for freelancers. Virtual cards are helpful for businesses with many online transactions. Some have built in spaces for tax accruals.
⛔ Limitations: Mobile-first banking. Limited product focus on B2B products (retail drives most attention usually). Limited for complex finance operations, ERP and payroll integrations, or regular bulk payments. Deposit insurance caps at €100.00. Limited possibilities for lending and yield products.
💸 Pricing: Free tier might include withdrawal fees. Plans start at €5 to €25 (Freelancer accounts) or 5€ to €100 per month (Business accounts). Extra fee for cross-currency payments. Monzo’s accounts are the cheapest of the selection. Wise charges based on transaction volumes and one time bank fees.
📝 Takeaway: Solid for Freelancers. Startups and Small Business also find comparison with the pure-play B2B neobanks. Wise appears to be the best choice for businesses that operate across borders.
3. Incumbent-backed neobanks
🎯 Targeting: Small Businesses
✅ Good for: Small businesses needing basic banking in the local market of the bank. Customer support remains local most times. Fyrst also insures deposits beyond €100.000.
⛔ Limitations: Signups are rarely touchless. We’ve seen the need for a paper-form submission or upload in most onboarding processes. Comes with the legacy burden of incumbent banks.
💸 Pricing: Pricing options are complex. Monthly fees range from 0€–20€ capped at ~10–75 free online transactions. Then come the hidden transactions charges (up to €0,50 per TX), SaaS fees (~7€ monthly), FX fees (up to ~1,50%), withdrawal fees (up to €3), SMS notification fees (up to €0,10 per TX), PIN reset fees (€8,50), debit card feest (up to €2 per month), and replacement card fees (€15) depending on plan.
📝 Takeaway: There can be merit for local SMEs to go with a local banking partner. We recommend to read through the pricing jungle and stay alert of one time fees and transaction fees.
4. Incumbent banks
🎯 Targeting: Small and Large Businesses
✅ Good for: Larger deposit volumes that need insurance beyond €100.000. Strong integration needs with accounting solutions.
⛔ Limitations: Frustrating authorisation and internet banking experiences, time consuming, and costly. Customers face many hidden charges. Aggressive upselling into other finance products when not needed (loans, insurances, assets).
💸 Pricing: As with incumbent-backed neobanks, pricing can be quite complex. €10–30 base fee per month, capped at ~0–75 free online transactions. Online transactions beyond the cap costs between 0,07€ and 0,50€ per transaction. Limited deposits and withdrawals, and card issuances that are subject to extra costs. Beware of any money movement on your account that could result in extra charges (example here).
📝 Takeaway: 99% of businesses still bank with incumbent banks. A reason for that is the strong integration of banks with accounting software. While most B2B neobanks only read data, incumbent banks write transactions into the accounting systems.
This is still the status-quo today. That’s why we’re building Airbank to run on top of businesses’ existing banks. Airbank offers a delightful banking experience while integrating as well with accounting solutions. Even further, users can pay and get instant insights into their cashflows.
If you are a founder or CFO at a small or growing business, sign up to the Airbank waitlist today and we’ll onboard you as soon as we roll out across Europe. We can’t wait to show you around!