Innovation in Commercial Banking Market with focus on Neobanks for Business, ESG Financing, Digital Lending, Embedded Finance, Merchants Acquiring, and Buy Now Pay Later

Innovation in Commercial Banking Market Report Overview

The innovations in commercial banking include neobanks for business, ESG financing, digital lending, embedded finance, and merchant acquiring & BNPL. The pandemic caused an explosion in small business startups and ‘side hustles’ across the world, along with a corresponding surge in fintechs looking to address their banking needs. With the world economy heading to a period of instability, SMEs are looking to their banking partners for timely finance, speedy payments, and the tools to analyze their business.

The innovation in commercial banking market research report provides a roundup of innovations within the commercial banking market, with a particular focus on neobanks for business, ESG-related products, digital lending, finance for merchants operating on ecommerce platforms, and Buy Now Pay Later. This report also provides a snapshot of innovative banking products and services aimed at the SME sector.

Neobanks for Business

The enduring profitability and traction that neobanks have in the SME market, when consumer-focused neobanks struggle for sufficient business volumes, suggests an underserved market quite willing to go through digital channels.

For instance, Judo Bank, which has been listed recently, is the most successful Aussie neobank that focuses on SMEs instead of consumers. It retains a banker-led loan arrangement, with all loans enabled by an integrated cloud-based tech stack that allows for rapid decisioning by bankers.

Preferred Provider of Choice for Contractors, Self-Employed, and Small Business Owners, 2022

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ESG Financing

The primary means for commercial banks to engage with ESG is financing for ESG projects or firms. Additionally, banks are increasingly adding ESG features to products for business. While offering little direct benefit to clients, the features are usually cost-free, giving corporate treasuries useful talking points. Asia-Pacific companies are at the forefront of incorporating ESG principles into long-term investment decisions.

Increase in Investment in the Next Five Years to Meet ESG Goals by Region

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Digital Lending

Banks need to be able to incorporate from third parties or create reliable data with which to prudently digitize much of the relationship/personnel lending of the business bank. Banks that can do this will be able to develop, customize, and more keenly price their loans to ever more discrete sectors and types of firms. For instance, Fintech Waddle focuses on digital lending solutions for SMEs. It was founded to provide automated, flexible, and transparent invoice financing to even the smallest of firms. Furthermore, Geora provides agri-supply chains with simple tools to record, share, and finance agricultural assets on farms and across the value chain.

Top 20 Agricultural Lending Markets, 2020

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Embedded Finance

Using the huge data captured from ecommerce platforms or cloud-based accountancy software to digitally and automatically underwrite previously labor-intensive loan products means that banks can extend loans to smaller firms safely. Markets in Asia-Pacific are world leaders in the digitization of shopping. M-commerce is taking over as the growth engine of eCommerce. However, in Asia-Pacific, New Zealand and Japan are below global averages of m-commerce uptake.

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Merchant Acquiring & BNPL

While consumer credit such as BNPL is not attractive to lenders, these firms’ attractiveness to merchant partners will increase. The increased settlement risk being assumed by BNPL firms, along with quick payment, will be much more valuable to merchants during periods of higher unemployment that typically occur.

Additionally, all BNPL providers aim to act as a marketing and customer acquisition tool for their merchants in addition to offering payment/financing support. Super-app strategies or community-based marketing and promotions are two such means.

BNPL Market Share in the Asia-Pacific

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Innovation in Commercial Banking Market Report Overview

Key Highlights

• Profitability is much more attainable for business-oriented neobanks.
• SMEs can tap into a huge pool of preferential rates and terms for ESG-related projects.
• Lenders are increasingly using transaction data from platforms to economically extend credit to micro-merchants.
• Buy Now Pay Later’s attraction to merchants is more than the ability to extend credit but also the passing of risk.

Reasons to Buy

• Understand key technology, business models, and channel trends being used to reach out to SMEs.
• Access the latest survey data on self-employed and small business owners regarding their evolving channel behavior and provider preferences.
• Identify the leading digital transformation efforts based on cost income and customer satisfaction metrics.
• Access firm-level/case study insights on leading banks and new startups targeting the SME market.