The small business industry is one of little interest to large banks due to their risk-averse outlook on investing in companies. A recent study has been conducted where it was discovered that smaller institutions were 18% more likely to invest in smaller businesses and those that partnered with larger banks had a 51% satisfactory rate. With the recent rise in fintech companies and attributes, competition in the banking industry has grown significantly due to the success of the technology’s processing method and rate. Companies such as Kabbage and Trustly have processed over $1 billion in small business loans each and have provided a more cost effective and efficient way to process payments. Other SMEs are the ones taking advantage of fintech and disrupting the market for the larger institutions. It operates all under one contract for all market, thereby lowering admin costs and performs other functions such as refunds and splitting payments. Fintech allows you to eliminate the middlemen and save the extra money it would cost to process. Its no surprise that fintech is disrupting the status quo of the investing business and that banks are paying the price for it because of its inconvenience. In order to reclaim the market they are slowly losing, large institution must utilize a way to adapt fintech to their advantage and the place to start would be the small business market. I believe in the future we will see larger corporation invest more in the smaller businesses and soon will reclaim the market they have lost.
URL: https://smallbiztrends.com/2017/01/fintech-trends.html
This is an interesting article. I wonder if fintech will be able to provide competition to the large banking institution for a prolonged period of time. It appears that potentially acquiring some fintech companies could provide large banks with the ability to serve small businesses that would not normally be approved. The increased competition between fintech and large banks could benefit small businesses by driving interest rates lower.