A Neo-bank is a new type of app-only bank with no branches. In Greek, the root “neo” means “young” and “new” and, as in the realities of the 21st century, to update almost always means to digitise and to evolve to the internet. So neo-banks are conventional banks, but with no physical branches, using only mobile applications and websites to provide their services.

While some companies don’t welcome the evolutionary change and still feel more comfortable with a crisp paper cheque in hand and dealing with people in branches, more and more businesses – especially those hiring tech-savvy millennials – are demanding more efficient, accessible, effective and secure accounts payable (AP) automation from their banks.

Corporate customers are becoming more educated on the advantages of AP automation and are exploring higher-level solutions that can offer lightning speed functionality and accessibility. The technology is already here and it is advancing quickly.

The demand for technology

Many high street banks are starting to invest in technology, recognising that the demand from corporate customers is real and that they would like modern services adopted and delivered as part of a standardised service. There is also the potential to gain a competitive advantage over rival banks.

Global investment in financial technology has exploded in recent years. Fintech (a hybrid of financial technology that describes an emerging financial services sector in the 21st century) now makes up a multi-billion dollar industry. Although it is still a relatively new industry, dominated by start-ups offering technological solutions to financial services and products, FinTech is addressing the ever growing demand for bigger and better AP automation with white-label corporate payment solutions for banks. Read more about Fintech and other technological developments in the financial sector in a recent Talking Finance blog.

Neo-banking services

The list of services offered by neo-banks is fairly traditional, including accounts and transactions on them, credits, asset management, investments and deposits. However, many people are also exploring and using newer formats, for example, P2P-lending, crowd funding platforms, financial robotic consultants and crypto currencies.

Zurich’s latest SME Risk Index survey concluded that: British SMEs are currently waiting for £44.5bn of overdue invoices. Of the 1,000 SME owners and decision makers surveyed, more than one in five (21%) are owed more than £25,000 and almost one in ten (9%) are owed more than £100,000. Nearly two in five (39%) confirmed that late payments have had a significant impact on the cash flow of their business. Automated processes for handling invoices could help manage and combat these difficulties.

Start-ups and business health

Several studies have shown that while Britain encourages start-up businesses, not all of them manage to grow consistently. According to David Southern, Managing Director of Concise Technologies, one explanation is crippling “growing pains”. In the very smallest enterprises and during the start-up period, entrepreneurs can handle the crucial financial management that sits behind the business for themselves and often do so on an ad hoc basis. But as soon as the business grows, it needs to stabilise the foundations of the business and manage risk through introducing professional structures including IT-enabled financial management systems that reinforce every part of the company.

Entrepreneurs and business leaders are so busy dealing with day-to-day operational and commercial issues that they don’t always have the time they need to operate at a more strategic level. One consequence of this is that finance and IT systems can develop organically resulting in inefficiencies and oversights that can affect cash flow, growth and the overall health of the business. This is a common problem for SMEs. FinTech industry leaders and innovators believe that companies which are given the right AP automation tools can reduce their operating costs, simplify account reconciliation, reduce the risk of fraud and optimise their cash flow. In fact, it seems as though there has never been a better time for an SME to leverage IT as the current market is overflowing with user-friendly and cost-effective apps designed to streamline processes and enhance visibility of a business’s financial health.

Entrepreneurs such as George Bevis, founder of Fintech app “Tide”, believe digital banking services can attract customers who want to keep up with modern developments and keep their business ‘current’. While a traditional bank account can take weeks to open, Tide accounts can be set up via a smartphone within three minutes.

Running your own business is a tricky balancing act between work and personal life. Maybe the best finance apps can make it easy for SMEs to keep on top of cash flow, profitability and forecasting.

This post was written by solicitor Gemma Kotak. For further information, please contact:

Sophie Brookes, partner, Corporate

T: 0161 836 7823

E: Sophie.Brookes@gateleyplc.com


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.