Changes Affecting the 2020 Commercial Lending Landscape – Six Things to Watch Out For

As the new decade begins, changes in the Australian economy, financial industry, and consumer preferences look set to reshape the commercial lending landscape.

Nathan Daly
October 15, 2020

Changes Affecting the 2020 Commercial Lending Landscape – Six Things to Watch Out For

As the new decade begins, changes in the Australian economy, financial industry, and consumer preferences look set to reshape the commercial lending landscape. The nation’s four biggest banks, once the most sought-after lenders, are now facing the risk of losing out to boutique brokers like Acumen Finance who are experts in the competitive private or peer to peer (P2P) lending space. Commercial lending in Australia is a landscape in flux. Amidst these changes, watch out for these six things.

1.   Record Low-Interest Rates

In Australia, we are expecting interest rates to hit an unprecedented low in 2020. The slowdown of the global economy, starting in 2018, was expected to pick up this year. However, the sudden Covid-19 outbreak, already affecting domestic spending, tourism and the education sectors, is likely to hamper progress. To provide extra support to the economy and employment figures, March already saw the Reserve Bank of Australia slashing rates to 0.5%, a historic low, with economists expecting a rock-bottom value as low as 0.25%. Such competitive rates make 2020 one of the best years for business owners to take a shot at commercial financing.

2.   Stricter Regulations on Banks

Ever since the Australian government’s Royal Commission showcased banks’ downplaying of their non-financial risk exposure, the intricacy and amount of regulations implemented in response are, inevitably, greater than ever. Not only are banks cutting back on funding in response – but they are also beefing up their loan application processes to require more detailed evidence of borrowers’ solvency and credit-worthiness.

With the traditional banking markets drying up, borrowers, even those that could previously secure funding from banks, are increasingly having to turn to alternatives like private lending. If you’re looking to increase business liquidity this year, casting a wider net to open up your options would be a good idea.

3.   Growing Availability of Consumers’ Financial Data

The emergence of open banking is shaking up the world of business financing. The Australian government is making changes to its Consumer Data Right (CDR) treasury laws, to allow consumers to have access to banking data that has previously been stored by financial institutions. Moreover, individuals can now decide whom they want to share this data with, and how it’s transferred.

Macquarie, an Australia-based bank, already lets its clients share their financial data, with open banking set to be formally launched in July, just a few months later. Eventually, it will be mandatory for all banks to come on board, and for them to grant access to data on all their products. Jason Baden, ANZ regional vice president of app services company F5 Networks, expects to see more banks devoting resources to implementing open banking in response.

For businesses seeking commercial loans, this will make it much easier for a comparison of what banks can offer to alternatives like the P2P lending space, thereby giving them the option to choose the best possible offer.

4.   Higher Demand for Customer-Centred Service

Although customer-centricity has long been a point of focus for the banking industry, with the rapid developments in technology, customers will naturally start to expect better service from financial institutions. Organisations need to experiment and find out how to become more connected to their clients. This could include customer segmentation to understand different needs and priorities better. Combined with the capabilities of IT systems, increasingly bespoke financial products, tailored for individuals, can be offered – much like what Netflix and Spotify have been doing in the world of entertainment.

Unfortunately, this is easier said than done, as it usually involves a firm-wide transformation of traditional approaches to product design, technological involvement and the role of a credit manager. Surprisingly, though, smaller organisations might be the fastest to ride this wave. Without the weight of legacy systems holding them down, boutique firms like Acumen Finance stand the best chance of a quick pivot to break new ground in customer satisfaction levels.

5.   Preference for Tech Firms Over Banks

The rise in Fintech is radically challenging today’s financial services sector. Forrester, a leader in market research, has found that many customers in the Asia-Pacific region trust payment companies and technology firms over traditional banks when it comes to handling their finances. Furthermore, a banking survey conducted by Bain & Company shows that 55% of Australian bank customers have more trust in tech companies than traditional banks as a whole, with 31% trusting tech companies over their primary bank.

The data suggests that consumers are now more concerned about the security of the platforms used to manage their finances than just a brand name. Financing firms that are tech-oriented, like Acumen Finance with its Fintech-inspired platform, naturally invest heavily in technology that secures customer accounts. For the everyday businessman, especially those who are resource-strapped or for whom liquidity is paramount, this might be a significant factor to take into account when choosing a loan provider.

6.   Increasing Borrowing Alternatives

As Australia’s finance industry grows and matures, business owners benefit from the surge of diverse lending solutions in the commercial lending sector, especially brokers that specialise in specific industries. These teams focus on deeply understanding their inner workings and building strong relationships with investors in that field, allowing them to provide their borrowers with expert advice otherwise exclusive to industry insiders. The most professional brokers, like those at Acumen Finance, will customise your loan proposals according to their deep understanding of investor priorities to secure the best offer. With these alternative lending options, businesses need not fear being left out by the traditional major banks.

Overall, commercial lending in Australia is becoming more diverse and technology-based. If you’re a business owner looking to expand your operations or are simply seeking additional liquidity in the short-term, the highly-experienced team at Acumen Finance promises to guide you in navigating this ever-changing funding landscape. Connect with usto find the best solutions for your needs and finance your business today.