New businesses are increasingly attracted to digital banks and tools due to their cost-effectiveness, convenience and adaptability to modern business practices. Digital banking platforms offer easy-to-use, flexible and scalable solutions that integrate seamlessly with other digital systems, which is crucial for startups operating in dynamic environments.
They offer fast transaction processing, essential for maintaining healthy cash flow, as well as innovative features such as real-time analytics and enhanced security measures. Additionally, the reduced paperwork and tech-savvy nature of these platforms meet the expectations of a digital-first customer base and fit naturally into the broader digital ecosystem in which many new companies operate. This synergy between digital banking and the needs of new, often technology-oriented companies makes these tools not only attractive, but also essential for their growth and efficient management.
New companies and the new challenger banks
Challenger banks (or neo-banks) are modern retail banks that compete directly with more established banks in the UK, typically by offering financial technology with app and online-based branch banking that is more customer-focused. Following regulatory changes in the UK banking sector following the 2008 financial crisis, it became easier for new entrants to challenge the dominance of incumbent banks in the UK. This led to the creation of several new banks that emphasized greater customer interaction through mobile apps, real-time payment notifications and competitive pricing.
Since their launch, challenger banks have captured the imagination of SMEs in the UK, and the British Business Bank’s recent Small Business Finance Markets report showed that in 2022, £35.5 billion of bank loans to businesses came from challenger banks has a market share of 55%, overtaking the lending of major banks.
The Ambitious UK Start-Ups Report, sponsored by Starling Bank, is based on data from 1,219 applicants for the 2023 UK StartUp Awards, which recognize the best new businesses across the UK. It shows that 67% of new businesses have accounts with challenger banks.
There are no gender differences in banking preferences, although younger start-ups are based in new industries (i.e. in cutting-edge and innovative areas such as agritech, AI, fintech, high-value manufacturing, life sciences, medical technology, mobile applications or platforms). and new product development) and those based in wealthier regions of the UK are more likely to use their services. As a result, the UK landscape is witnessing a dramatic shift in start-ups’ banking preferences. Innovative platforms, personalized services and a user-centric approach appear to be the key features that have made these startups popular with challenger banks.
With a market share of 31%, Starling Bank is proving to be the most popular banking partner for new businesses. Five other challenger banks or fintech companies – Tide, Revolut, Monzo, Wise and Metro Bank – are also among the top ten financial institutions used by new businesses.
Although traditional banks have been serving businesses for decades, the increasing preference for challenger banks signals a shift toward more digital, agile and user-centric banking solutions, potentially pushing incumbent players toward much-needed innovation and agility. In terms of traditional lenders, NatWest is the leading major start-up bank in this survey with a 10% market share, followed by Barclays (9%), HSBC (5%) and Lloyds (4%).
These findings open up an interesting narrative about the ever-evolving preferences of entrepreneurs excited about leveraging modern, digitally-focused banking experiences. The rise of challenger banks is also a testament to the innovation and potential of technology in reshaping industry landscapes, much like start-ups themselves. The banking preferences of these potentially high-growth companies paint a fascinating picture of the future of the UK business ecosystem where innovation , flexibility and customer orientation come first.
Digital platforms drive business success
Startup founders also leverage a range of digital platforms for global reach, cost efficiency, e‑commerce, data analytics, customer engagement, flexibility, collaboration, automation, brand building, innovation and accessibility. These platforms – including LinkedIn, Instagram, Facebook and
The most popular digital platform used by startup founders is LinkedIn. 89% of founders use it to connect, collaborate, and grow their business. It is used not only for professional networking, business development and recruiting, but increasingly, as founders raise their own profile, for personal branding, thought leadership and community engagement. The second most popular platform is Instagram. 72% of startups use it to connect with potential customers. As a visual platform, it allows startups to showcase their products, services and brand identity through photos and videos to build and promote their brand through consistent creative content. Additionally, with over a billion monthly active users, Instagram offers entrepreneurs access to potential customers around the world and in specific niches. Facebook is used by 64% of start-up founders for wide audience reach, targeted advertising and customer reviews. It serves as a powerful platform to engage with an audience, build brand credibility, and grow businesses through networking and e‑commerce opportunities.
New businesses are increasingly attracted to digital banks and tools due to their cost-effectiveness, convenience and adaptability to modern business practices. Digital banking platforms offer easy-to-use, flexible and scalable solutions that integrate seamlessly with other digital systems, which is crucial for startups operating in dynamic environments. They offer fast transaction processing, essential for maintaining healthy cash flow, as well as innovative features such as real-time analytics and enhanced security measures. Additionally, the reduced paperwork and tech-savvy nature of these platforms meet the expectations of a digital-first customer base and fit naturally into the broader digital ecosystem in which many new companies operate. This synergy between digital banking and the needs of new, often technology-oriented companies makes these tools not only attractive, but also essential for their growth and efficient management.
In summary, the changing dynamics of the UK business landscape clearly illustrate the growing inclination of new businesses towards digital banking and digital platforms. Challenger banks have gained significant traction with their customer-centric models, capturing significant market share and becoming the preferred choice for many start-ups. This change is driven by these banks’ digital, agile and user-centric services, perfectly tailored to the needs of modern, technology-savvy companies. The results of the Ambitious UK Start-Ups Report underline this trend and highlight the dominant role of challenger banks such as Starling Bank in the start-up ecosystem. Additionally, the extensive use of digital platforms such as LinkedIn, Instagram and Facebook by start-up founders reflects a broader trend towards digital-centric operations. These platforms enable global reach, efficient customer engagement and brand building, which are essential for the growth and scalability of new businesses. Taken together, these trends paint a picture of an evolving UK business ecosystem where innovation, flexibility and customer focus are at the core, and where digital banking and digital platforms are not just tools but essential drivers of business success.
