The megalith internet company that is China’s Alibaba has linked up with a pair of British alternative business funders in Ezbob and Iwoca.
The partnerships have been struck in order to allow UK small businesses to more ably buy from Asian suppliers via the Alibaba network. Both Ezbob and Iwoca make loans to SMEs in the form of a credit line. The two alternative funders occupy slightly different tracts of the lending spectrum. Iwoca will offer loans of as much as £50k for up to 6 months at interest rates sitting between 1.5% and 2% per month. Ezbob will extend credit lines between £50k and £120k for up to 15 months, charging 0.75% a month.
For those that are unaware, Alibaba provides a B2B market for around 40 different industries – centralizing the supply of a supremely broad range of goods. Birmingham University PhD Student Wei Wu, a researcher in financial inclusion, conducted a thorough analysis of Alibaba’s activities, in the wake of the company’s high profile partnership with Lending Club. That partnership took on a similar form to the deals that have now been struck by Iwoca and Ezbob. US small businesses may now access credit from $5k to $300k via the Lending Club platform in order to fund any single purchase order from an Alibaba supplier.
Alibaba is clearly engaged in an aggressive expansion phase – with Western SME markets serving as the primary target. As Wei Duan, European Head of Marketing and Business Development at Alibaba, explained to the FT:
“We know that small businesses need fast access to trade finance in order to compete and succeed. We want to make financing as easy as possible for the millions of British companies that do business through Alibaba.com.”
Those words will be music to the ears of UK/US alternative financiers. With buckets of institutional lending capital pouring into the space, the challenge for the majority of alternative lenders has been trying to create loan origination sufficient to keep up with investor demand. The Alibaba partnership is worth its weight in gold. PwC’s Mark James weighed in:
“We think we will see many more of these sorts of partnerships. In the rapidly growing P2P finance market, platforms are on the whole not short of lenders right now: institutional capital is queuing up to be lent. But they are short of potential borrowers. E-commerce platforms, with their wealth of small business relationships (including real time data on the sales of those businesses) are a logical place to start.”
The value of the data that is inevitably accumulated by the Alibaba network must not be underestimated. Both Ezbob and Iwoca rely on automated, algorithmic lending decisions. The more data the back-end machines are fed, the more powerful those machines become.
“Alibaba has many customers in the UK that use it to buy products from China and these customers find it tough to gain financing from the banking channel. We’re using a very data-driven risk angle to understand our customers better and faster, so we can provide financing where banks cannot.”
“The discussion with Alibaba goes back a long way. It’s the first time in Europe you see two technology companies coming together to provide a trade finance proposition to UK businesses.”
And finally, from Russell Gould of Ezbob:
“We predict that this will help fuel a significant increase in UK trade volume on the Alibaba.com platform.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.