The Evolution Of FinTech As A Replacement For Banks In SME Lending
Fintech has slowly but surely changed the banking industry over the last few years, giving people more options when it comes to enhancing or maintaining their finances. We have seen the introduction of highly innovative concepts, such as blockchain and cryptocurrencies, and many more possibilities are either in circulation or currently under development.
Many people have grown tired of the current process that takes place when loan applications are made. When you seek certain financial plans from leading banks, there is often an abundance of paperwork that needs to be filled out every single time.
One of the most progressive initiatives that Fintech is trying to implement is phone applications that allow you to enter the type of funding you are looking for, which will then generate a list of appropriate options to suit your specific needs.
This would be highly beneficial for any businesses owner; since the time typically spent putting business loan agreements in place could be used to decide how you are going to invest your newly acquired finances.
Why Are People Turning To Fintech For Lending?
Lending has always been one of the leading sources of revenue for all the major banks across the world. However, the financial crisis that took place in 2008 created a series of critical disruptions and made it increasingly more difficult for businesses to acquire loans from traditional lending platforms.
Recent reports have suggested that since 2013 we have seen a decrease of 42% in the number of loans being approved by leading banks. In the case that you do manage to get some kind of agreement in place, you are likely to be inflicted with extortionately high-interest rates.
What Is The Latest With Fintech?
Small businesses are always going to be keeping tabs on the most recent developments when it comes to the Fintech initiative. These types of operation have actually seen the most prominent changes, with the most newsworthy being the introduction of the ‘competition market authority’s revolutionary open banking rules’, which were introduced in January of last year.
This particular set of regulations have been specially designed to ensure every single one of the nine major banks in the United Kingdom is sharing all their key information with other lesser known firms. This means any Fintech companies have much more flexibility when it comes to targeting any potential customers.
Before this was all introduced, if any Fintech company wanted to collaborate with banks in order to create new financial ideas, they would have to navigate their way through a number of highly time-consuming obstacles, most notably the need to gain agreements from procurement team.
The new open banking concept allows any Fintech company to use interfaces which are known as API’s, which make any processes far smoother and time-efficient. This also allows for the implementation of brand new applications and innovations within existing products, which is a powerful method in which to gain serious traction on an existing customer base.
More Power Is Being Handed to Small Businesses
There is certainly going to be a power shift when it comes to the influence Fintech companies have compared to leading banks, giving more empowerment to small business customers. The question remains whether Fintech could cause serious damage to the biggest names in banking since Fintech apps are starting to take a real stranglehold over the industry.
At present, there are a number of Fintech platforms that are hugely influencing the banking sector, such as the highly responsive Funding Circle. This concept has begun to work on providing a trustworthy and reliable lending solution that can bypass the use of leading banks. Since the idea was first introduced in 2010, it has lent over $5 billion to a number of businesses around the world.
Research conducted into this particular platform suggested that 21% of the people that managed to acquire their finances through this concept believed they would all but certainly not obtain the same funds from an alternative source of lending.
Fintech Is Still A Working Progress
Its quite clear that a number of Fintech solutions were introduced as an immediate response to the financial crisis, in which leading banks started to develop trepidations about providing small-business lending.
Fintech is still in its developmental stage, which means it won’t come without a series of potential hindrances. One of the biggest concerns people have is the fact they may experience issues when it comes to data privacy. Customers are expected to increase the number of times they share critical information, and there is no concise proof to suggest that such distribution is being monitored carefully.
The platforms that have been created through Fintech have all been purposely designed to ensure proficient user engagement, but they don’t always have the capacity to provide constructive decisions when it comes to making any kind of lending choices.
Banks vs Fintech
Unlike Fintech, traditional banks have the knowledge and recourses to provide contact support when you are applying for loans. However, in order to sustain an influence within the technology sector, banks are starting to collaborate with Fintech companies as they attempt to recover from the financial crisis.
Banks are now required to innovate and create new ideas that can directly compete with the user-friendly and simple concepts being used with Fintech. Failure to do so could lead many small businesses to take the digital route for their financial lending.
Fintech also benefits from the fact that data can be easily leveraged, which means customers can gain a much clearer insight into their finances and have more flexibility with access to capital. The functions that Fintech applications provide will give people more transparency when it comes to managing their cash flow, which should give them a greater chance of making effective business decisions.
Fintech certainly comes with a number of core benefits that could make it the route to choose when you are looking for small business lending. Its highly responsive and simple applications make it quick and easy for any customer. However, the concept is still going to struggle to provide the same kind of tailored analysis and insight that could be provided by a leading bank.
If you would like to receive more information about Fintech, get in contact with any member of the team we have here at Think Business Loans, by simply calling 0203 80 9880, today.