Challenger Banks Business Banking
Over the past decade, challenger banks have moved from niche entrants to full-scale financial institutions.
Their rise has followed a clear trajectory.
They first built relevance with younger customers – often becoming the first account a teenager or student ever opened. Next, they established themselves as the easiest way to spend and transfer money abroad. From there, they expanded into broader everyday banking relationships.
For a growing share of consumers, these banks have become the primary app for:
- Holiday spending in foreign currencies
- International transfers
- Everyday card payments outside the home market
These are high frequency use cases. They build trust through repetition and create lasting habits.
As a result, challenger banks now sit at the center of large volumes of everyday money movement. This scale is clearly visible in their market valuations.
Several are now worth more than long established incumbents – a reflection not of expectation, but of reality. They already manage significant transaction flows and customer balances.
Challenger banks are no longer niche alternatives. They are large retail institutions built on different operating models. And that difference is now becoming directly relevant to business banking.
1. From Retail to Business Banking
Several challenger banks have already expanded into SME banking using the same logic that powered their growth in retail.
They didn’t try to replicate the full range of traditional business banking from day one. Instead, they entered through areas where friction is highest, and incumbent processes are most cumbersome.
In retail, the natural entry points were international transfers, FX pricing, and everyday payments. In SME banking, the operational pain points are even more visible: slow account opening, complex cross-border payments, opaque FX rates, and limited visibility across multiple cash positions.
For many small and midsized businesses, these challenges sit at the core of daily operations. Paying suppliers, receiving funds, managing currencies, and tracking cash are repetitive, high-frequency activities. When these processes are slow or unclear, the impact is felt immediately.
Challenger banks have approached business banking from this operational reality. They lead with accounts built around payments, FX, multi-currency functionality, and real-time visibility. Lending and more advanced services follow once trust and engagement are established.
The sequence mirrors what worked in retail: solve high-frequency problems first, become part of daily routines, and expand from there.
The outcome is that a growing number of SMEs now use challenger banks not as secondary accounts but as their primary platform for moving and managing money.
This is how challenger banks are already competing in business banking: not by matching incumbents’ product ranges, but by redefining where and how the customer relationship starts.
2. Challengers’ new operating model
The edge challenger banks are building in business banking does not come from offering a wider range of products.
It comes from delivering a fundamentally better operating experience in a few areas that define how money moves day to day.
Four areas stand out.
1. Transparent, Predictable FX
Challenger banks have rebuilt foreign exchange around transparency and instant execution.
Rates are visible before execution, spreads are consistent, and conversions happen instantly. Businesses know exactly what they will pay and receive. By contrast, in many established banks, FX remains embedded in legacy workflows: pricing is opaque, confirmation can lag, and total costs aren’t always clear upfront. For SMEs that trade or pay across borders, this uncertainty becomes daily friction. Challenger models remove it by making FX behave like a simple, always on utility rather than a specialist service.
2. Real-Time Settlement and Balances
Challenger platforms are built around near realtime processing. When a payment is made or received, the balance updates immediately and becomes usable. Businesses operate from actual cash positions, not estimates. Many incumbents still rely on batch processing, where payments settle but balances refresh later – forcing companies to keep buffers or run manual reconciliations. The operational impact is material: realtime visibility enables tighter cash control, faster decisions, and fewer workarounds.
3. Multi-Currency as a Native Capability
In challenger banks, opening and using additional currency accounts is a simple selfservice action.
Businesses can receive, hold, and pay in multiple currencies within the same platform, without extra onboarding or separate documentation.
On the other hand, with most incumbents each new currency account means another process, approval chain, and set of manual steps – creating unnecessary complexity and limiting flexibility.
For challenger banks, multi-currency support is embedded into the account structure rather than offered as a separate product.
4. Self-Service by Default
Challenger banks are designed so that customers handle routine tasks directly.
Adding users, setting permissions, issuing cards, downloading statements, and managing limits can all be done instantly inside the platform.
In many incumbent setups, these actions still depend on forms, emails, or support tickets.
Beyond cost efficiency, the difference is cultural: selfservice design gives businesses ownership and control over their own operations.
What SMEs actually use these platforms for:
- Multi-currency accounts with local rails
Businesses can hold and receive funds in multiple currencies with local account details, allowing them to operate as if they were domestic players across markets and avoid unnecessary cross-border friction.
- Integrated FX and payments
Currency conversion and payments happen in a single flow, with pricing visible upfront and execution happening instantly.
- Bulk and programmable payments
Batch payments for payroll, suppliers, and freelancers are built in, alongside APIs that allow payments to be embedded directly into business workflows.
- Embedded finance operations
Invoicing, pay-by-card, reconciliation, and accounting integrations are part of the core product, not add-ons.
- Card-based spend control
Virtual and physical cards can be issued instantly, with real-time controls and visibility over company spend.
None of these capabilities are individually new. The difference is that they are delivered as one integrated system rather than separate products.
3. The gap
The gap between challenger and incumbent banks in business banking isn’t primarily about capability.
It’s structural.
Most incumbents built their business banking infrastructure over decades. Payments, FX, liquidity, and lending evolved as separate product lines – each with its own systems, teams, and economics.
That approach worked when products were sold individually and operational complexity stayed behind the scenes.
It fits less well in a world where customers expect a single, real-time experience.
Three structural constraints stand out.
1. Fragmented Architecture
In many incumbent banks, payment systems, FX engines, and core ledgers still operate on separate tracks. Data doesn’t always update simultaneously, making it hard to provide instant balance visibility or smooth cross-product journeys.
2. Product-Driven Economics
FX desks, payments units, and cash management teams often hold their own P&Ls. Pricing, margins, and customer treatment vary by product line. Internally, this makes sense but externally it creates inconsistency and complexity for customers who expect transparency across services.
3. Control-Centric Model
Processes such as account opening, adding currencies, or adjusting limits were originally built for oversight and risk management, not speed. Interfaces have modernised, but many underlying workflows still rely on manual review and layered approvals.
None of this reflects a lack of capability. Incumbent banks have deep balance sheets, regulatory expertise, and risk infrastructure.
The challenge is that optimising individual features can’t overcome structural fragmentation.
Challenger banks started from a clean slate, building payments, FX, and account functionality as parts of a single engine.
Incumbents must evolve platforms and operating models never designed for that level of integration.
That’s why the competitive response cannot be limited to matching spreads or releasing new digital front ends.
The issue runs deeper than features – it goes to how payments, FX, liquidity, and data are integrated across the bank’s architecture.
4. Why Challengers Move Faster
The gap is not only in what challengers offer, but in how their architecture allows them to operate.
- Single ledger, not product silos
Payments, FX, and balances update within a unified system, removing the need for reconciliation across internal product lines.
- Global account architecture (virtual accounts)
A single account structure can be represented locally across multiple markets, enabling global reach without replicating infrastructure country by country.
- Bank-wide development, not per business line
Capabilities are built once and reused across retail and SME segments, avoiding duplication and accelerating rollout.
- APIs as the default interface
The same infrastructure powers internal features and external integrations, allowing faster iteration and easier distribution through partners.
These design choices remove coordination overhead, reduce dependency chains, and allow new capabilities to be deployed consistently across the platform.
5. What Incumbent Banks Must Do to Remain Competitive
The shift is already visible in the data:
- Challenger banks now serve well over 200 million customers globally, with Revolut alone at ~69 million customers as of end‑2025 and adding 16 million in 2025 (+30% YoY).
- Leading challengers are scaling revenue at high double digits: Revolut reached ~£4.5bn in 2025 revenue (+46% YoY) with £1.7bn PBT, while Wise generated ~£1.36bn in FY25 underlying income (+16% YoY) and >£0.5bn reported PBT.
- Cross‑border specialists already process hundreds of billions in volume: Revolut’s total transaction volume hit ~£1.3tn in 2025 (incl. £277bn from Revolut Business), while Wise processed ~£145bn of cross‑border volume in FY25 and over £41bn in Q1 FY26 alone.
- Wise’s network continues to push both price and speed: the FY25/FY26 data shows a cross‑border take rate trending towards ~0.5% (52 bps in Q1 FY26) as Wise keeps cutting prices while volumes and customer balances (over £21bn) grow.
- Both Revolut and Wise are now broader financial operating systems: Revolut operates as a licensed bank in 30 countries, with a £2.2bn lending book, £50bn+ in customer balances, and business banking at ~£1bn annualised revenue; Wise is scaling Wise Account, Wise Business and Wise Platform, embedding its infrastructure into leading banks and platforms globally.
Closing the gap with challenger banks requires a fundamental shift in how business banking is architected, governed, and measured.
Design Around Integrated Money Movement
Incumbent banks need to move away from treating payments, foreign exchange, and liquidity as adjacent product domains and instead manage them as components of a single, integrated money movement layer.
This means ensuring that transaction data, balances, and pricing logic are consistently connected across systems and update in near real time. It also means designing customer journeys around end-to-end flows rather than individual products.
Without this level of integration, banks may continue to offer competitive point solutions, but will struggle to deliver a coherent operational experience that matches challenger platforms.
Modernise the Operating Model
Many business banking processes remain rooted in operating models built for control and manual oversight. Over time, digital channels have been layered on top, but underlying workflows often remain complex.
To compete effectively, banks must redesign core SME processes – such as onboarding, account and currency setup, user management, and limit changes – for straight-through processing by default. Manual intervention should become the exception rather than the norm.
This is not primarily a user-experience exercise. It is an operating-model transformation that affects risk, compliance, operations, and technology functions.
Align Strategy to Treasury Outcomes
Incumbent banks should assess their business banking competitiveness through treasury-relevant outcomes rather than feature counts.
The critical measures are the quality of cash visibility, the consistency and transparency of FX pricing, and the efficiency with which money can be moved and deployed.
When these outcomes are strong, product differentiation follows naturally. When they are weak, additional features tend to add complexity without closing the competitive gap.
Banks that succeed in aligning architecture and operating models to these outcomes can remain central to how SMEs move and manage money. Banks that do not risk becoming increasingly marginal to daily financial activity.
5. Continuing the conversation
For many institutions, the challenge is not recognising this shift, but determining how to respond in a way that is strategically coherent, operationally realistic, and aligned with long-term treasury and infrastructure priorities.
TreasurUp works with banks and financial institutions at this strategic intersection – where treasury thinking, money movement, and financial infrastructure design converge.
If your team is exploring how to make that shift, we would love to explain how TreasurUp can add real value. Get in touch here.
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