With so much noise about new market entrants in the SMB banking space, it’s easy to think your bank’s missed the boat and has to play catch-up. But that’s not necessarily the case.

Here’s something that everyone knows but everyone forgets – the market is king. It’s simple but sometimes we need a little reminder. Andy Rachleff, Co-Founder and Executive Chairman of Wealthfront said: “when a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins.”

But what happens when a great team meets a saturated market or an empty market?


SMB banking exists in a bizarre state of half-life, both saturated and empty at the same time. Saturated by underwhelming products and devoid of banking services that understand the market.

Starling, Tide, OakNorth and others have been working to change that. They identified pain points for customers and developed services to handle them seamlessly.

There’s a bigger question at play here, how do you define whether there’s a product-market fit? Well, if you’ve done a thorough Jobs to be Done (JTBD) cycle of research then you haven’t just guessed at what the pain points are, you know where customers perceive their biggest issues are as well. In a perfect world, you would simply implement the designs from your JTBD research, approach the market and release your product into the world where it makes a huge impact and lots of money.

The real world is rarely so perfect.


Making sure that a product fits the market is a difficult task. There are many indicators that the fit isn’t quite right: word of mouth isn’t working, customer uptake is slow and a low number of active users, are just a few of them. But the most important one is whether or not people see the value in your product.

Innovation is constantly bumping up against resistance to change, knowing that you have a great product is useless if you can’t convince others of the same thing. Inertia is a difficult barrier to break through and incumbents are a big fan of the old factoid “you’re more likely to get a divorce than change your bank account.” That may be true, but the divorce rate is at 42% (the lowest it’s been for 40 years). So there’s a higher chance than you’d think of a switch.

Overcoming inertia relies on a product being readily absorbed into the market. In SMB banking, new market entrants have a slight edge. No-one other than the customer has to be willing to take on board the technology.

Convincing customers that the SMB banking products offered are a better alternative to what is already available is a challenge. It comes down to delivering an innovative product that treats each business as a unique entity, offers easy onboarding and a smart UX. If a product is changing the space or fulfilling a desperate need then there are no true comparisons to make and the market fit is there for the taking.

With 5.7 million SMBs in the UK alone there’s clearly a market here to be serviced if people can get it right.

If we look at one of the new entrants, we can see the potential to grow in the market. OakNorth tripled its loan book in 2017 to £815.5M and customer deposits doubled to £491M, that’s a clear impact on the SMB banking industry and shows how it’s taken the initiative from banks.

With a large addressable market, that moves money at a considerable volume and increasing velocity, SMBs have been neglected for too long and for no discernible reason. In an era where banks are under ever increasing scrutiny to provide useful banking services it’s surprising that more aren’t actively moving in on the territory.

There’s a primed market for SMB banking products and with the right JTBD research, design, and guidance there’s room for a new product to capture the first-mover advantage at a significant scale and ringfence the market from competitors.

Next time we’ll take a look at how you can take the advantage, what you can do to maintain it, and what not to do.