Fintechs are becoming banks: What does it mean for SMEs?

From Point Solutions to Complete Financial Partners

The digital transformation of the financial sector has taken a dramatic turn, with innovative financial institutions no longer confining themselves to their original niches. They have begun adopting traditional banking roles, an evolution that is redefining the landscape for small and medium-sized enterprises. Over the past ten years, this segment was defined by its capacity to eliminate persistent obstacles in the financial industry, achieving what classic institutions could not do efficiently. From accelerating payment transactions to simplifying lending processes and enhancing the customer experience, challenger firms built their reputations precisely by removing old frictions in financial services.

Today, the dynamic has shifted radically. Many of these companies are moving beyond the specialized services that secured their initial growth. Instead of focusing exclusively on payments, credit or international transfers, they are expanding their portfolios to include a much broader spectrum of banking and financial management tools. This transformation is not merely a theoretical trend; it already has a measurable impact on the economy. Statistics show that fintechs now cover over 68 percent of lending volumes granted to small and medium-sized enterprises in the United Kingdom, underlining the increasingly critical role they play in how businesses access and manage funds.

This metamorphosis reflects a profound shift in client expectations. Small and medium-sized enterprises increasingly expect financial services to operate seamlessly in the background, supporting everything from payments and cash flow management to accessing financing and expanding into international markets. In response to this demand, fintechs aim to assume a central role in how companies manage and move money.

During the ascent of the fintech industry, the focus centered on targeted solutions. Market players differentiated themselves by attacking specific customer pain points, particularly regarding speed and transparency, areas where traditional providers often lagged behind new expectations. Ultimately, a superior customer experience became the decisive factor allowing challengers to compete with much larger institutions.

Currently, industry ambitions extend far beyond the boundaries of individual products. Fintechs are transforming into comprehensive financial platforms combining payments, banking, lending and business management tools into a single ecosystem. Instead of competing in isolated segments of financial services, they increasingly position themselves as the primary financial partner for the customer. Consequently, the competitive arena has shifted from individual products toward the global customer experience.

The Impact of Fintech Expansion on SMEs

The growing maturity of the sector is evident in figures, demonstrating how massively fintech has evolved from its startup roots. The United Kingdom remains Europe’s leading fintech market, attracting 3.6 billion dollars in investments in 2025. Many of the biggest names in the sector have already achieved sustainable profitability. The fact is that many fintech firms have transformed from fast-growing challengers into robust financial businesses. Just 11 of the top UK fintechs, including Revolut and Wise, generated a combined pre-tax profit of 2.4 billion pounds sterling during 2024, illustrating how far the industry has come.

An important driver of this change is the rise of embedded finance. Companies increasingly expect financial services to be built directly into the platforms they already use, rather than accessed through separate providers. As payment, lending and banking capabilities integrate more deeply into software and digital ecosystems, fintechs are better positioned to deliver financial services precisely when they are needed.

Klarna’s move toward broader banking services illustrates how the ambitions of many fintechs are changing. After establishing itself in the market through buy now, pay later solutions, the company expanded its focus to include everyday banking products like accounts and debit cards. This reflects the growing ambition of fintechs to look beyond individual services and become a business's main financial partner rather than just a standalone service provider.

For small and medium-sized enterprises, the expansion of fintech activities represents much more than a simple intensification of competition in financial services. It helps address many long-standing challenges that have historically limited business growth, from accessing financing and managing cash flow to navigating complex banking processes. Traditional financial services were not always designed with smaller enterprises in mind. Long application processes, rigid credit criteria and fragmented financial tools can create unnecessary barriers precisely when agility is essential.

Fintechs challenged this model by utilizing data, automation and digital-centric experiences, making financial services more accessible, efficient and responsive. Beyond accessing financing, small and medium-sized enterprises increasingly seek greater simplification in how they manage their financial operations. The growth of all-in-one financial platforms helps businesses reduce complexity by bringing payments, banking, expense management and financing solutions into a single environment. This not only saves time, but also provides clarity.