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There have been a lot of headlines over the past few years announcing that ‘Alternative Finance Is Storming The Barricades of Traditional Banking’. The revolutionaries in the alternative finance movement argue that they are going to sweep away the old order and offer customers a complete alternative – they will no longer need their old providers in this brave new world. Alternative finance will meet their needs on its own.
But for all the noise, the old order hasn’t been overturned and our view is that it’s not going to be. Several years into the age of alternative finance, it’s time for a reality check and the reality we see emerging looks much more like evolution than revolution. It’s obvious that technology is helping to change the way traditional finance is bought and sold and that in many cases it is making the process smoother and faster. But we don’t see that change sweeping away the traditional finance providers or making them obsolete. Instead, the many conversations that we are having indicate that fintech is taking its place alongside banks and other finance providers as part of the evolving system.
The system we see emerging is based on partnerships and complementary skills that use the strengths of new and old to create better products and services for businesses. We are having lots of discussions about these partnerships and we can see that they are pointing towards a time when fintech companies work closely with big institutions instead of standing on the fringes hoping to replace them.
A significant benefit of this shift is a move towards greater transparency. The common factor amongst start-up alternative finance businesses is that in order to compete with the old guard they have had to clearly communicate how their cost structures work. This has prompted businesses to challenge existing finance providers to clarify in the same way.
In the past SMEs looking for finance were often locked in to one provider through lack of choice and understanding. But with increasing transparency, there is now an opportunity for SMEs to develop coherent strategies for their financial requirements and to choose the right financial partners and products as they develop.
We cannot see an attractive future in trying to “own” parts of the finance business that existing players do not want to touch. Instead, we believe in working with multiple partners to offer something new and different that moves the market forward. For us, the future lies in a coordinated and complimentary approach to deliver SMEs with the flexible finance services they need.
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