Fintech disruptors prepare banking for the 4th industrial revolution

As the government seeks to boost industry with a shiny new Industrial Strategy, it is worth remembering the basics. Among the building blocks for the engineering sector is access to finance, especially for smaller firms.

During and immediately after the financial crisis of 2007-9 was a dire time for small businesses (SMEs) as liquidity dried up and when it returned, most credit was lent on less risky residential mortgages not business loans.

An improving economy and market innovation has helped recapitalise British industry and 10-years on the situation is much healthier. The body UK Finance finds that eight out of ten business loan applications by SMEs are successful and its latest SME Finance Monitor, a survey of around 4,500 SMEs, found an increase in demand for finance in the final quarter of 2017. Liquidity is back and today access to finance is characterised by innovation and choice.

In addition to the big high street banks and challengers such as Aldermore and Metro Bank, SMEs can now also turn to a clutch of sources known as “alternative finance” to raise money. This includes financial technology, or fintech, platforms that use digital technologies including blockchain and APIs (application programming interface)  to source capital in a peer-to-peer model. And whilst other peer-to-peer structures such as crowd funding are also increasingly used to fund growth, fintech has made arguably the biggest dent on the bank loan market.