FinTechs and non-bank financial service providers are set to take over traditional banks as the preferred choice for small business (SMB) customers in Australia, a new report by Scottish Pacific found.
The “Scottish Pacific SME Growth Index,” released twice a year, found the portion of small businesses that said they would use banks for funding declined from 38 percent in 2014 to 24 percent in 2018.
At the same time, interest in alternative lenders increased. In 2018, 22 percent of SMBs surveyed said non-bank lenders were their top funding choice, up from 11 percent in 2014, according to reports in Dynamic Business on Monday (March 19).
Nearly half (47.6 percent) of SMBs that said they never used a non-bank to access financing said they would be interested in doing so in the future.
“Alternative lending options, including debtor finance and P2P lending, offer SMEs the chance to fund growth without using property as security,” explained Scottish Pacific CEO Peter Langham in a statement. “Business owners need to know they have credible choice when they are looking for funding.”
In another statement, Stuart Stoyan, the chair of Fintech Australia, said the survey results demonstrate the “extremely important role” of alternative finance.
“FinTech lending and finance firms are increasingly providing the capital that these businesses need to invest and grow, through a focus on innovation and customer needs,” said Stoyan. “FinTech offers include creating seamless online loan applications and software that analyzes financial data to deliver the best possible deal. Some are also applying innovative new finance business models, directly linking investors and borrowers or helping businesses to unlock the value of their unpaid invoices. In doing this, FinTechs are providing new options for businesses.”
While the report highlights competition between traditional and alternative SMB lenders, the financial services industry in Australia and elsewhere is also experiencing a rise in collaboration between the two sides.
Last December, Tyro, a bank-FinTech hybrid, launched in Australia after it landed a banking license in 2015.