In Finland, traditional banks are becoming increasingly risk-averse, making it difficult for small and medium-sized enterprises (SMEs), startups and foreign entrepreneurs to access basic banking services. In response, neobanks are rapidly gaining traction by filling these critical gaps.

According to Toni Kivinen, CEO and co-founder of Narvi Payments, a Finnish virtual banking startup, access to banking services for businesses has worsen in recent years, with growing risk aversion from legacy banks leading to widespread exclusion.

“Opening a business bank account in Finland has always been challenging, especially for companies based outside the country. But now, the criteria are even stricter, and many more businesses are being categorized as “high-risk” by these legacy banks,” Kivinen wrote in a post.

“If your business, for example, has international offices, is a startup or SME, is in a “high-risk” industry, or lacks banking history, such as balance sheets, you might now find it tricky or even impossible to open an account with a legacy bank.”

Widespread banking access issues

A 2023 survey by the Finnish Accounting Union underscores the problem. According to the findings, 82% of respondents reported difficulties in securing banking services for their clients.

The main reasons cited for these difficulties include the client’s foreign background, either the entrepreneur or the person responsible for the company, which was noted by 69% of respondents. Additionally, 62% believed that banks found the client relationship unappealing, despite no violations of anti-money laundering (AML) obligations.

Open-ended responses further illustrated the breadth of the issue. Respondents reported that opening a bank account can take several weeks, services are sometimes terminated with little explanation, and some clients are seemingly disregarded altogether by banks.

“Based on the survey, it is clear that the problem has worsened significantly,” said Janne Fredman, a leading expert at the Finnish Accounting Union, who has been closely following the issue for years. “Previously, the problem seemed to mainly affect customers with foreign backgrounds and customers with payment default records. Now, the problem can affect almost any startup or SME.”

Regulatory pressure

Kivinen attributes much of this heightened risk aversion to regulatory and compliance pressures, particularly in light of recent money laundering scandals across the Nordic banking sector.

In August 2024, Nordea Bank, one of Finland’s largest lender, agreed to pay a US$35 million civil fine to settle charges by a top New York regulator for failing to properly police money laundering and other criminal activities, including matters uncovered in the Panama Papers scandal.

Just months later, in December 2024, Sweden’s financial supervisory authority, Finansinspektionen, fined Klarna Bank SEK 500 million (approximately US$44.8 million) for violating AML regulations. The investigation, covering the period from April 2021 to March 2022, found significant deficiencies in Klarna’s compliance with key AML requirements, particularly in customer due diligence procedures.

Faced with increased regulatory scrutiny, Finnish banks have responded by tightening onboarding criteria and focusing on businesses that promise maximum profitability, widening the gap for the fintech players to step in.

Digital banking platforms rise to the occasion

Digital-first banking platforms are seizing the opportunities. Purpose-built to serve companies that fall outside the conventional risk appetite of legacy institutions, these platforms are proving more accessible and adaptable for today’s diverse business needs.

Neobanks come with several distinct advantages. For one, their onboarding processes are faster and more user-friendly, often taking just minutes compared to the weeks or months required by legacy banks. They also tend to offer more flexibility and more transparent banking experiences, which is particularly advantageous for new and rapidly growing companies.

Neobanks also excel at handling international payments. They typically offer lower fees and more straightforward pricing structures, making cross-border transactions easier and more affordable for businesses operating globally.

Finally, because they are fully digital, these platforms offer real-time access to banking data, and use advanced, compliant technology designed from the ground up. Their built-in security features, including two-factor authentication, passkeys, and hardware wallets, can surpass those of traditional banks that rely on older, less adaptable systems.

Narvi Payments is among the frontrunners in Finland’s digital banking ecosystem. Tailored for digital businesses, startups, e-commerce companies, Web3 projects, and even digital nomads, Narvi Payments offers secure IBAN accounts and international payment solutions via SEPA and SWIFT. It caters primarily to business clients across the Nordics, Baltics, and broader European Union (EU), serving a client base of 1,000-2,000 mostly corporate users.

Another popular virtual banking platform from Finland is Holvi. Founded in Finland in 2011, Holvi is online business banking for the self-employed. Holvi combines real-time cash flow insights, automated bookkeeping and streamlined invoicing, helping business owners cut down on admin for a better work-life balance. Holvi serves approximately 35,000 business customers in its main markets of Germany and Finland.

Featured image: Edited by Fintech News Nordics, based on images by stockexpert and Rawf8.com via Freepik