Industry leaders join to drive digitisation to support SMEs
Leading fintech platform, Funding Xchange, and global technology and management consultancy Capco are encouraging the financial services industry to recognise the importance of fintech lenders to small businesses as the government-supported Bounce Back Loan Scheme (BBLS) comes to an end.
Expressing concern that an unintended consequence of positioning the availability of bounce back loans through the high street banks, and a small group of challenger banks, has been an ‘unplugging’ of many of the alternative lenders in the eyes of businesses.
CEO of Funding Xchange, Katrin Herrling, noted in a recent webinar discussion with Alla Gancz, UK head of digital at Capco, that “CBILS and BBLS have slowed down the growth of the fintech sector significantly, the digital processes that existed before the crisis that were working well have been entirely disrupted – they’ve been unplugged. There’s no doubt that the government needed to step in, but the way it’s been executed has fundamentally impacted the increased competition that fintechs had introduced, together with the options for finance available to SMEs.”
Essentially, the large banks were accredited to provide the government loan schemes – but if businesses banked with a smaller bank or digital challenger, the SMEs largely did not have access.
Herrling highlights that on the Funding Xchange platform, they have witnessed an “increase in customers coming from challenger banks looking for a loan: “Before the crisis, it was about 15% of customers and now it’s upwards of 40%.”
The indications from the latest Funding Xchange Lending Monitor point to approximately 250,000 businesses being excluded from the BBLS simply as a result of them not banking with one of the accredited banks.
Capco and Funding Xchange believe this highlights a potential negative impact on SMEs’ access to funding in the future. To avoid that scenario, the financial services sector – across incumbent banks and the non-bank lending fintechs – must work together to leverage the rapidly emerging digital opportunities available to them.
Alla Gancz said: “At Capco we are already supporting many banks to realise their digitisation goals. It is clear that there is a willingness among banks to integrate existing digital solutions into their service offerings to optimise efficiencies, speed to market and the customer experience. As we exit the pandemic, it is critical that this cooperation be extended to providing the best funding solutions to SMEs as they look to recover from the challenges of 2020.”