Most people today are at least vaguely familiar with crowd-funding, but not everyone knows that it’s only one example of a broader trend usually referred to as “alternative financing”. More and more, small-to-medium companies are finding themselves in need of partners that are intimately familiar with their business and capable of providing credit solutions within days, rather than weeks – and that’s exactly what lean and flexible market players claim to deliver better than incumbents.
Invited to speak at a panel discussion held at the Fintech Inn conference on 21-22 October, Diego Perez – CEO at the Fintech Association of Brazil, and co-founder of SMU Investments – talks about the importance of fintechs in providing underserved people in Brazil with access to financial services.
“When it comes to numbers, Brazil now has a framework for digital credit, over 100 fintechs working in this area, and no less than 200 that collaborate with banks in one capacity or another to provide access to digital credit,” Mr. Perez explains.
Big changes are also taking place in Lithuania, where only 3 banks currently make up 80% of the market. According to the panellist Tomas Mačiulaitis – the CEO of FinBee Verslui – the alternative lending market and its product range are growing very rapidly, e.g., allowing farmers to finance their equipment through crowd-funding platforms.
In addition, “the state support agency INVEGA is adding significant value to our local market as well by helping with liquidity and financing the most vulnerable young businesses in Lithuania, which fall outside of the scope of traditional investors,” he says.
The pandemic was another opportunity for innovators to shine. This is exemplified by the fact that, in Lithuania, over 2/3 of the government loans (a total of 200 million euros) allocated to SMEs were issued by alternative lenders, primarily because the slow-moving local banks were unable to adjust their policies and provide the much-needed emergency capital in time.
“Being a super flexible alternative lender, FinBee Verslui was able to integrate the necessary technologies, develop efficient processes, and hire the right people within days of the announcement. At FinBee alone, we issued 45% of all loan applications, which we are really proud of,” Mr. Mačiulaitis says.
Ultimately, what sets alternative finance apart is a potent mix of the following: 1) a close and personal relationship with customers; 2) superior risk-scoring models that increase lending accuracy, speed, and flexibility; and 3) solutions that are simple and easy to understand for customers.
“I think that for an alternative lender to be truly successful, it has to ensure customer-centricity,” believes Michel Breeuwer – General Manager Benelux at Mambu – in summing up the above components. Alternative lenders must understand the entire customer journey, “from the moment they’re not yet even aware of their needs to the moment they really need that specific loan”.
Ultimately, what sets alternative finance apart is a mix of three things: a personal relationship with customers; superior risk-scoring models that increase lending accuracy, speed, and flexibility; and solutions that are simple and easy to understand for customers.
“I think that for an alternative lender to be truly successful, it has to ensure customer-centricity is at the forefront,” believes Michel Breeuwer – General Manager Benelux & Baltics at Mambu – in summing up the above components. “Alternative lenders must understand the entire customer journey of their customers, and leverage today’s technology such as APIs and best solutions to create a proposition that meets their customers’ changing needs best – today and in the future.”
In a similar vein, Mindaugas Mikalajūnas – the panel’s moderator and CEO of SME Finance, a B2B financial services platform – highlights the need for up-and-coming alternative finance fintechs to have a bolder attitude in comparison to traditional lenders, both in product development and other business practices.
“When you control 80% of market share, you are entrenched enough to have clients come to you automatically, and you can cherry-pick. When you are young and hungry for growth, you need to take a more active approach, for instance, invest more in PR or hire people with a more entrepreneurial mindset,” Mr. Mikalajūnas says. “From the Baltic perspective, we already see that banks consider us as potential competitors.”
Join this and other discussions on the hottest fintech trends and challenges during the virtual Fintech Inn 2021 conference. Held on 21-22 October, Fintech Inn 2021 will bring together 250+ enterprises and start-ups, as well as 1000+ investors, policymakers, entrepreneurs and technology leaders from all over the world to exchange knowledge and discuss topics from green finance to startup media. You can get your free ticket to one of the largest industry events now on myOnvent platform.
