Businesses offered services by digital banking institutions

In the dynamic world of finance, European digital banks are making significant strides, with the growth of ecosystems showing no signs of slowing down. This expansion is largely driven by the open banking movement and the increasing demand for cross-border payments, which have become a commodity capability for digital banks such as Revolut and Starling.

One of the key strategies these digital banks are employing is forming partnerships with incumbent banks. These collaborations could be instrumental in providing necessary services that digital banks might not offer independently. For instance, N26 and Monzo have white-labelled TransferWise for cross-border payments, while Santander's PagoFX has opened up its services to UK sole traders.

German fintech Tangany is another player strengthening partnerships, expanding its digital asset infrastructure across Europe with Raiffeisen Bank International and Baader Bank. Similarly, the German bank DKB is cooperating with fintech Upvest to modernise its securities trading with a fully digital platform by the end of 2026.

The French payment fintech Lemonway serves marketplaces and crowdfunding platforms, processing €10.5M in 2024. Lemonway participated in a Frankfurt-based accelerator connecting fintechs with financial stakeholders, demonstrating the growing synergy between traditional and digital financial institutions.

Offering services like loans or working capital financing can attract profitable customers for digital banks. Smaller companies, in particular, may find essential services in these offerings. However, digital banks in the US, such as Chime and Varo, are lagging behind in adopting cross-border capabilities. The expansion of European digital banks may influence the adoption of cross-border capabilities in the US.

US digital banks might not follow the trend of adopting cross-border capabilities unless European players bring these capabilities along. Companies like TransferMate, Veem, and Bill.com offer solutions for SME payments, combining cross-border payments, data management, and accounting tools.

As digital banks continue to grow and evolve, they are increasing their business offerings through strategic partnerships. For example, N26 has launched a new premium business account. These collaborations could become more common as digital banks seek to offer a comprehensive suite of services to attract and retain customers.

In conclusion, the European digital banking sector is thriving, with cross-border payments and strategic partnerships playing pivotal roles in its growth. As these trends continue to unfold, we can expect to see a more interconnected and innovative financial landscape in the coming months.