It’s been nearly 10 years since the first consumer-focused neobanks such as Simple and Moven arrived, touting their desire to upend the financial services industry then reeling from tanking consumer sentiment as a result of the ongoing economic downturn. Now, several small-business-focused neobanks have launched in the U.S. market, joining a growing number of “challenger” banks in Europe and elsewhere. They signal the arrival of a new market in small business banking — freelancers, sole proprietors, and small firms that are less interested in a large branch network and dissatisfied with digital offerings in consumer and small business banking. Neobanks such as Seed, Azlo, and Tide fill the gap by offering services such as electronic payments, transaction categorization, cash-flow analysis, mobile invoicing, in-app card controls and customer service, and more — all with a mobile-first and digital-only approach. This report examines the trends that have given rise to this industry, profiles in detail the key players, and explores why banks serving small businesses should take note.

Key questions discussed in this report:

  • Who are the primary small business neobanks?
  • What gap in the market are they filling?
  • What benefits are they providing to small business owners?
  • What are the key features that differentiate them from each other and from traditional small business banking?
  • Are neobanks destined to fizzle out or take the banking industry by storm — or something in between?

The small business data in this report are based on information collected in a random-sample panel of 1,000 small businesses and microbusinesses in a April 2018 online survey. Javelin defines microbusinesses as those with annual revenue between $100,000 and $1 million and small businesses as those with revenue between $1 million and $10 million.