A recent report shows that the total amount lent in 2014 had more than doubled from the previous year - up from £666 million to more than £1.74 billion. Whereas this is a mere fraction of the total advanced in the ‘traditional' space, the speed of growth is impressive. Indeed figures from Touch Financial, the largest independent asset based lending brokerage, lend further support to the Fintech growth story. In 2014, the total percentage of deals completed with Fintech providers grew to c10% from a position of less than one percent the previous year.
For those who suggested that Fintech may be just a flash in the plan, it seems they were wrong and that the alternative market is here to stay.
And yet there are still understandable concerns. Fintech businesses have looked at the ‘traditional' market, recognised its value and importance, and then looked at ways in which it could be improved. Partly this has been through the development of new technology platforms that simplify the product and its delivery, and partly through finding new ways of accessing cash, such as peer-to-peer. They have created new channels to market, understanding a company's pressure points and capitalising on them, as in the recent tie up between Sage and Market Invoice and Funding Circle.
These alternative providers have never been exposed to the same levels of risk as their ‘traditional' partners, and appear to portray less fear and a different mind-set. To some this may appear ‘cavalier' but those who thought that the alternative model (and especially peer-to-peer) would soon be found wanting and implode have not (yet) been proven right. Yes Fintech firms may still trip over but they have shown the way. What the ‘traditional' players must do now is respond, and respond positively.
The growth of Fintech has once again shone a spotlight on the invoice finance sector. Fintech firms have taken something that has always been good, and made it better and - dare I say it - ‘sexier'. They have provided the ideal subject matter for the media: bright young things delivering the funding to other bright young things while the rest of us stand by the sidelines and admire. But looking at this in another way, Fintech provides the traditional lenders with the perfect opportunity to respond.
It is the mainstream banks that have the infrastructure, the customer base and - most importantly - the experience to adapt their current thinking, streamline their service, and grow the market still further. Far from being a threat to the traditional players, it represents a whole new opportunity to re-invent themselves and the industry.
Banks are still the first port of call for more than three quarters (78%) of SME seeking finance. They have not, as yet, lost faith. Now what the banks must do is rise to the challenge.
