Fintech and the growth of P2P business lending
Disruptive technologies are changing the way money is managed and the UK’s commercial peer-to-peer sector is leading the fintech charge, says Chirag Shah, CEO of Nucleus Commercial Finance
Fintech is constantly revolutionising the banking world – in a relatively short period of time, we have seen a surge in disruptive technologies such as online banking, robo-advisors and blockchain, among countless others. Its influence is so powerful that it has even transformed our relationship with lending and commercial lending in particular.
Peer-to-peer business lending is growing rapidly and showing no signs of slowing down. Its innovation is built upon a simple premise: allowing private capital to invest in small to medium enterprises (SMEs) in need of flexible, affordable alternative finance.
P2P lenders can offer businesses a wealth of finance options that are designed to boost their growth, without costing them a fortune in the long-run. Approval turnaround time is fast, payment terms are attractive and products are built to have an immediate and positive impact.
It’s a busy time for the sector. Traditional institutions are tightening their belts, yet the demand for financial assistance is increasing across all industries. It’s an unprecedented opportunity for alternative finance to support the British economy in strengthening and stabilising as the post-Brexit dust settles.
However, the regulators are paying attention and P2P players will have to remain agile and vigilant in order to avoid certain restrictions. Any changes to the current regulations will affect many currently successful lending models, increasing red tape and thus the cost of doing business. To safeguard their growth and freedom to innovate, P2P lenders must keep regulators on-side and conduct strict credit checks on all companies that apply for funding.
To further enhance its reputation in the market and with regulators, the P2P sector needs to ensure that it meets all due diligence requirements. If lenders give regulators just cause for imposing stricter restrictions – namely, losing money and investing badly – then we only have ourselves to blame.
Automated systems remove the potential for human error and they can process certain functions faster and more efficiently. For example, SMEs in need of funding can often make use of an online portal. The process is fairly simple: the applicant submits their turnover and business information online, the system collates the information and then the information is passed on to the financial team to run an in-depth credit analysis. Should the company tick all the due diligence boxes, they will receive a range of relevant funding options. The next step is usually a phone call, but by this time both parties are very well informed and the process is quick and effective.
There is enormous potential for new technologies to speed up onerous processes such as credit checking. The power of data is driving future fintech developments fast and furiously and businesses need to evolve in parallel. Banks, for example, are investing heavily in market disruptors such as blockchain which aim for greater transparency, speedier transactions and reduced costs.
The P2P business lending sector has come of age in a world where technology and big data are working together to leapfrog slow, outdated systems and processes. It is our responsibility to test, push and improve financial solutions for our clients. Regulations may change and new technologies will overthrow old – how we meet and overcome these challenges will be the true test for our sector.
