Small and mid-size enterprises (SMEs) are a considerable component of any country's national economy. In Australia, SMEs represent a whopping 99% of total businesses, contributing $380 billion to the economy and employing more than 5.5 million people. Unjustly, SMEs have historically been overlooked by traditional financial institutions and lenders in preference to larger and more established enterprises. This has resulted in a struggle for SMEs to get the funding and lending they need to expand businesses, secure commercial mortgages, buy equipment, and manage operational cash flows.
Fortunately, the development of Fintech in Australia is finally creating an inclusive environment for these tiny powerhouses, often the backbone of local economies. Fintech lending solutions can utilise progressive technologies to access the right partners in private lending and the P2P lending (Peer to Peer) market to find an accurate fit for every SMEs needs. SME entrepreneurs deserve the same options as larger businesses; allowing them to access necessary capital and secure lending partners to enable their prosperity. Fintech in Australia will continue to increase SME lending in 2020, especially as open banking penetrates financial markets. As the merging of Fintech and SMEs creates business development across the country, Acumen Finance will be providing secure, rapid private lending and commercial mortgage options for business endeavours and personal credit.
SMEs lack the workforce and deep wallets that larger organisations and corporations have access to, with the biggest block to their potential growth being an inability to access the necessary funding for operations. This gap in the market is where Fintech can step in, leverage their technology and innovation, and revitalise SME operations across Australia. Unlike traditional banks and the Big Four of the Australian market, they can work with less restraint from the regulations enforced in banking and private and commercial lending. These regulations have put the sector on a short leash since the Global Financial Crisis and Fintech companies offer nontraditional lending solutions like P2P loans. Fintech provides the convenience of online solutions with algorithms that are bias-free as opposed to humans evaluating lending choices who may have prejudices.
Beyond the lending cold shoulder SMEs have endured, lies a need for functionality and features that streamline internal business processes. A recent global study of SMEs, the EY Global Fintech Adoption Index, found that the main reasons SMEs would choose a Fintech organisation over an incumbent bank were the range of functionality and features for 66% of respondents and whether 24-hour services were available. Fintechs have the capabilities to offer these advanced features through progressive APIs with rapid application processes, greater transparency, faster turnaround times on loans and integrated platforms to manage SME finances, debts and bills easily.
Open Banking Ready
In 2019 the Consumer Data Right (CDR) legislation was passed in Australia, making an open data economy a reality for its more than 24 million citizens. Although many consumers in Australia are unaware of what this actually means to them personally and how to handle the mountains of data they will suddenly have in their hands, it is a progressive and potentially beneficial position. Consumers will finally have control of their own consumer, account and transaction data and have transparency between different financial institution’s products and offers. This should end the habit of keeping clients stuck at one institution out of fear or lack of knowledge about better lending offers.
Open banking will result in better and more transparent deals in an increasingly competitive market. Fintech firms in Australia are embracing open banking and SMEs are in an excellent position to benefit because they are willing to share their banking data to secure the lending and capital they need. 70% of SME adopters stated they are willing to selectively and securely share their banking data with other financial companies in the search for a better deal. Phase 1 of the CDR has already rolled out, and phase 2 is about to hit the market in February, which will directly affect lending as well as residential and commercial mortgages, making transfer of loans between financial organisations more fluid. Phase 3 will further open the market as banks will release data on personal loans, credits, foreign currency accounts and more.
Fintech, with their offer of streamlined APIs and rapid nontraditional private lending and P2P lending options, is clearly the best hope for SME support and growth in this time of cutting edge technology, open data and open banking. The Fintech industry in Australia’s synthesis of the digital realm, integrated platforms and their fresh approach to lending will only increase market share as more SMEs seek digital banking and mobile platforms to manage internal processes. Acumen Finance is here to assist with small business lending and commercial mortgage needs through our seamless online loan facilitation platform. If you are looking for capital to fund and maintain your SME, contact us to secure the efficient and secure lending solution your business needs.