The fintechs targeting SMEs
Fintech companies have increasingly started targeting SMEs looking for ways to finance their businesses, but fintechs shouldn’t expect a revolution without a few setbacks.
At least, that’s the view of some of the industry’s own experts and participants. With the market having had a few years to run its course, digital lenders, payment platforms and other financial technology firms have been given a warning: change, or face extinction.
The changing face of fintech
In lieu of more banking alternatives, fintech companies have increasingly started targeting more specific niches. It’s these businesses – not just those offering simple loans – that will end up surviving a glut of entrants, experts say.
“Fintech…is where you get the most people out of the industry who deeply understand what’s going on,” says Kim Heras, partner at tech startup hub 25fifteen, which houses three fintech startups.
“Fintech tends to have older, more mature people who understand the industry. And I think that’s why you’re seeing this wider range of fintech startups because of the people coming out of financial services.”
Fintech is no doubt established as a serious market, with the Australian Government announcing funds in the most recent Federal Budget to establish Australia as a hub for the industry – along with the relaxation of rules for businesses to experiment with new products.
That experimentation is warranted. The market, according to Frost & Sullivan, will explode to add $1 billion by 2020. One KPMG study from this year found alternative finance grew by 320% in 2015 to $460 million.
Much of that will be in lending focused on small businesses, as dissatisfaction with the major banks is reaching fever pitch; former NAB business bank head Joseph Healy has even set up his own fintech venture Judo Capital, which is marketed to businesses with turnover up to $20 million.
But according to Neil Slonim, an independent banking advisor and founder of thebankdoctor.org, says the huge glut of new entrants is making it harder for these lenders to survive. Any credit crunch or setbacks will have a harsher effect on them.
“The fintech lenders only represent a small proportion of the whole industry,” he says, adding that these businesses may be subject to the same credit restrictions that affect the major banks.
“I think the biggest challenge a fintech leader has is being able to clearly able to articulate their customer value proposition.”
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