FinTech is revolutionising lending for smaller businesses, according to British Business Investments director Marilena Ioannidou in a research interview with FinTech Global.
Ioannidou, director at the commercial arm of the British Business Bank, the UK’s national economic development bank for smaller businesses, is clear, “the FinTech sector is an increasingly influential force in the development of new financial products and services.”
FinTech has flourished by offering businesses, particularly smaller businesses, a service focused on three areas: speed of access, simplicity of use, and range of choice in terms of the financial products on offer. This model thrived upon innovation and disrupting a previously traditional finance market; “the first wave of FinTech was about being disruptive, always fighting against the status quo” according to Ioannidou. Crucially, “alternative lenders, such as those found in the FinTech sector, have focused on giving the customer more flexible solutions and developing an ability to react fast to customer demands.”
The competitive, alternative option that FinTech offered to smaller businesses looking to access finance was why the British Business Bank was an early supporter of the sector. Since its first FinTech investment in 2013, the Bank’s commercial arm, British Business Investments, has made five FinTech portfolio investments with over £135m committed. The Bank’s own figures estimate that this has helped support over 11,000 businesses.
For Ioannidou, FinTech’s future has great potential; “the FinTech lending space has grown quite significantly over the last couple of years but it is still a small part of the overall lending market so there are plenty more opportunities ahead for growth in the sector.”
Characteristically, the FinTech sector is innovating again as it continues to focus on what the customer wants. Ioannidou sees the sector shifting from disruption to collaboration. “Before the sector thrived on disruption, you now see more collaboration, with FinTech firms partnering with traditional market players to ensure their products are available to as much of the market as possible.”
This new wave of FinTech is focused on maximizing the opportunities that collaboration can offer to improve the service for the customer. These include developments such as the rise of open data. For Ioannidou, “as traditional lenders and customers take a more open approach to data sharing, there is a new wave of innovation across the FinTech sector as firms offer new products and services predicated on newly available data and the technology to harness it.”
Although Ioannidou welcomes these innovations, FinTech’s profile within the smaller business community the Bank is focused on is still too low. The British Business Bank works through its programmes, including those of British Business Investments, to increase both the supply and diversity of finance for the UK’s 5.5m smaller businesses. That’s why the Bank has been such a stalwart supporter of the FinTech sector. However, the Bank also has a mandate to raise awareness of the finance options available to smaller business, and Ioannidou is clear; “small businesses are starting to see there are other ways to access finance, outside of traditional high street banks, but our research shows that small business awareness of finance options, such as those offered by the FinTech sector, remains too low. To address this, we work with industry partners to raise awareness through publications like our Business Finance Guide.”
In terms of the future of the FinTech sector Ioannidou doesn’t believe FinTech should panic about regulation. “In the beginning, the regulatory framework allowed people to get set up and establish something quickly and get traction in the market. Although it looks like the sector may well become more regulated in the future, FinTech firms shouldn’t necessarily be afraid of such regulation – the Government is clearly supportive of the sector.”
Ioannidou doesn’t think the sector is too crowded and she sees plenty of opportunity ahead for the sector. “We’ve already seen some traditional lenders move to copy and even acquire FinTech firms but the sector is built on innovation and the UK’s FinTech sector has a bright future if it remains relentlessly focused on offering what customers want.”