Misys, the financial software developer, has released its latest survey of commercial banks. The bottom line: serious concern over alternative finance sources.
The survey involved 144 respondents from 77 banks across the US, EMEA and APC and asked them about digital disruption in commercial lending, trade and supply chain finance. The key findings were:
The report continues by outlining the problem for banks. Since the financial crisis, banks have experienced a rise in demand for credit from SMEs but have experienced increased regulation and scrutiny over their balance sheets – forcing them to restrict lending. This has fuelled the emergence of alternative lenders.
David Gustin - editor of Trade Financing Matters – remarked:
“The threat from non-banks on traditional banking models is clear and present and this has grown largely from the technological innovation in this space… in order to compete, banks need to replace outdated delivery models and put customer interests at the core of their business strategy.”
However, it’s not all doom and gloom for banks as 68% see partnership as a big opportunity going forward. David Hennah – Misys Head of Trade Finance – commented:
“The banking sector understands that it must now react to remain at the centre of corporate credit requirements.”
“Our survey respondents believe they can leverage emerging supplier networks and the financial technology vendors that can provide digital enablement and connectivity across trade and lending to grow and retain clients.”
“We have seen an increasing focus on strategic technology partnership. Clients want to build trade and lending platforms that help overcome their technical debt in digitally enabled corporate banking and build a foundation to dictate future innovation.”
It is hard to argue against this sentiment – with the UK Liberum AltFi Volume index showing cumulative lending in UK alone at £4.2 billion – a 111% growth rate over the last 12 months. But exciting growth continues in all regions. In Europe, a platform recently secured a €31 million investment, in China, a $207 million raising was just closed and, in the US, SoFi has just announced a staggering $4 billion valuation after a $1bn raise. Alternative finance is growing, and increasing cognizance of that fact from traditional financial services firms begs the question of whether we will see more cooperation, or more competition.