SME lending, SCF face the biggest threat from non-bank players - report

According to a recent survey conducted by financial software company Misys, banks believe that new digitally enabled supplier finance networks and alternative lenders now pose a significant threat to every part of the commercial lending business.

Key findings from the survey include: 68% cited small business lending as being under high threat; 61% see competitive pressure in supply chain finance product lines, such as receivables finance and factoring; 84% see pressure on pricing of loan products as a challenge; 75% fear loss of market share to alternative lenders.

The research took answers from 114 respondents from 77 banks across the US, EMEA and APAC, who were asked to share their views on the threats and opportunities created by digital disruption in commercial lending, trade and supply chain finance.

Banks have been under pressure since the financial crisis, as demand for credit from small and medium sized businesses has risen, but increased regulation and scrutiny of balance sheets has diminished lending capacity. The rise of alternative financiers, peer-to-peer lenders and new supplier networks in the market is leading banks to re-evaluate their operating models and embrace partnership, new technology and more agile approaches to lending and trade finance.

According to a report entitled Capital for Commerce – Fuelling growth through non-bank lending by Grant Thornton, in 2014, 60% of businesses in the mid-market were already using non-bank lending as a source of finance, showing that it is no longer a fringe activity, but one that is widely considered normal by corporates.

Despite these challenges, the Misys survey results show that banks also believe that a strategic partnership with non-bank players can be a strong driver in growing their trade finance business, with 68% citing that they see this as a big opportunity.