The banking royal commission has this week turned its attention to the matter of SME lending.
I must say the it is a terrible indictment of the number of questionable bank practices when it takes the royal commission this long to focus on SME lending in spite of how much data and many reports there are as to the terrible state of SME lending practices from the banks.
In the Australian Financial Review and afr.com site there is an article that turns its attention to fintechs and the current SME finance situation.
Fintechs (newly innovative financial services technology businesses) have been hailed for the last five years as the future saviour of consumers and SMEs, though the reality has inevitably been something far more like more convenient niche versions of the old way of doing things, thus far.
the AFR article presents the arguments that fintechs have been delivering the wrong kind of SME finance and that fintechs are a new version of the ‘Wild West’.
On the first matter it is hard to disagree as the vast majority of SME finance fintechs are focused on short-term, high-cost finance for SMEs.
Short-term finance has an important, but small role in SME finance. It needs to be considered like a certain smooth, soft, sickly sweet round chocolate ball wrapped in bright paper. Lovely but not a staple of a balance SME finance diet as too much of it will cause far more harm than good.
The second claim of the article, that the fintech ‘industry is still a Wild West’ is nothing short of ludicrous. Fintechs are not an industry in there own right, we (and I say we because the Franchise Finance Market is also a fintech focusing on SME finance) are a very small part of the financial services and finance industries, which is one of the most regulated industries in Australia (although watching the royal commission developments might cause one to snigger at the suggestion).
Still, it is great that there is such a discussion going on at this time.
If you have an afr.com acccount you will find the article at http://www.afr.com/technology/small-businesses-need-urgent-protection-from-fintech-wild-west-20180517-h107ls