Ross Republic

Ross Republic


Building a financial super-app for small businesses

January 30, 2023


Thank you for joining the Ross Republic podcast. In our thirty-third episode, your host Adrian Klee is joined by Jon Fath from fintech startup Rauva to talk about the unmet financial needs of small businesses in southern Europe.



RR Podcast #33

Listen now on Spotify / Apple Podcasts


Starting a digital bank for small businesses in Southern Europe is no easy feat. The region is known for its traditional banking system and conservative approach to finance, but the rise of digital banking is changing that. With small businesses increasingly turning to digital platforms to manage their finances, there’s a growing need for digital banking solutions that cater to their specific needs. Hence, in this podcast episode, we’ll explore the opportunities and challenges of starting a neobank for small businesses in Southern Europe. From understanding the local market, building a multipurpose banking service, to navigating regulatory hurdles, Jon shares his latest experiences on creating Rauva, a SME neobank focused on the Mediterranean region, from scratch.


The southern European banking market, which includes countries such as Spain, Italy, Portugal, and Greece, provides an untapped innovation opportunity for fintech challengers due to a number of challenges that the traditional banking sector grapples with, briefly set out below.


High levels of non-performing loans (NPLs)

The high level of NPLs in southern European countries is a significant challenge for lenders that provide funding to small businesses. NPLs are loans that are unlikely to be fully repaid, which means that banks have to set aside significant amounts of capital to cover potential losses. This makes it difficult for banks to lend to new customers or to invest in innovation programs. During the episode, we discuss that fintech startups leveraging real-time and alternative sources of data can get a headstart in the business lending segment.


Low profitability

Southern European banks have been struggling with low profitability in recent years. This is partly due to the high level of NPLs, but it’s also due to the low interest rate environment in the region. Low profitability makes it harder for banks to attract investors and raise capital to fund growth. Since fintech startups start out on a much lower cost base, e.g. due to cooperating with Banking-as-a-Service providers or due to high levels of process automation, they have a strong competitive advantage right from the start.


Digitalization and innovation gap

The majority of Southern European banks haven’t caught up yet with global advancements in digital and platform banking, which is leading to a gap between the services offered by traditional banks and the services offered by digital challenger banks. Since businesses already use a variety of digital tools to run their business, they expect the same level of digital experience and interconnectivity from their banking provider, which created a market gap that Jon plans to fill with Rauva.


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