Fintech was born amid the last economic crisis and now is its turn to help us climb out of the current economic crisis we find ourselves in.
There are already comparisons between the 2008 recession and the current global crisis caused by COVID-19. While they have different causes, predictions are that the fallouts will be more or less the same. These include SMEs (small and medium-sized enterprises) fighting for their survival, credit drying up, and society’s most vulnerable being placed in a hard-pressed position.
The good news is that we have made tremendous strides in our ability to solve these problems. One noteworthy area is Fintech. It is a sector that has proliferated since its advent in the 2008 Great Recession and is currently poised to solve the very problems that we faced before.
The Growing Importance of Fintech
The Fintech sector has disrupted finance and is now powering and delivering innovative services throughout the financial services sector. This includes sectors such as insurance, savings, current accounts, foreign exchange and payment, core banking infrastructure, and banking systems, to name a few.
Fintech already has a strong base on which it can build and help us climb out of the current crisis. SME financing is one of the areas that Fintech can achieve substantial impact and help in the drive towards recovery because of the level of growth it has reached there.
The government has placed a priority on the survival and future of SMEs, and Fintech lenders have been instrumental in the disbursing of the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) to SMEs.
Yet access to credit has been a big problem for small businesses, which are the UK’s economic backbone. This is a problem that has lasted for many years in the UK to the point that many entrepreneurs have given up on their ambitions because of lack of financing.
Fintechs Role in Business Financing
As a result of, and in recognition of this problem, several new digital-first businesses have been created by different innovators to ensure that SMEs get the financing they need. Some of these businesses include Atom Bank, Capital On Tap, Tide, OakNorth, Funding Circle, iwoca, Starling, and Challenger banks. These were all created with one objective: To disrupt the SME lending market; and have been doing so since their creation in 2010.
One of the strong points of these new lenders is that they can cater to several SMEs faster because they are more flexible and smaller than their counterparts, the big banks. They also have new technology that helps them make decisions more efficiently. Some of that technology includes machine learning, artificial intelligence, and data analysis technology. Together, these help them to process a larger number of requests from SMEs and at a faster rate than the conventional players can.
There are no doubts regarding the role that Fintech lenders can play in fostering small-business financing. They are already connected to a huge amount of SMEs, and they stand out because of the flexibility and speed with which they can deliver their services. How they go about supporting SMEs will play a significant role in how well the economy rebounds over the long-term.
Whether we know it or not, the fortunes of SMEs will significantly determine how fast the economy recovers. If they can get access to the tools, options, and financing they need to thrive and grow, the better for everyone.