Fintech Disruption of SME Continues

The latest edition of the Disruption Index which tracks change in the small business lending sector, and more generally, across financial services has been released. The latest score is 38.39%

The Financial Services Disruption Index has been jointly developed by Moula, the lender to the small business sector; and research and consulting firm Digital Finance Analytics (DFA).

Knowledge of Non-bank Financial Providers

Further to the Business Data observation, we are seeing actual evidence of SME awareness of alternate financial offerings through data (eg. evidence of payments received from and made to alternative lenders; credit enquiries at the credit bureaus). At 11% of all data sets reviewed this quarter (above 10% for the first time), this appears to be forming a continuing, upwards trend.

Service Expectation

SMEs are becoming more demanding of their financial service providers, as we continue to see a collapse in their expectation of how long it should take for a loan application through to a decision. The latest data shows this number is below 5 days for the first time… at 4.8 days.

Business data in the cloud

SME’s continue to show a willingness to provide electronic data access in return for access to credit, with this quarter’s % of SME’s increasing to 16.2% from last quarter. It feels we are almost now at a tipping point, where businesses are moving into the ‘comfortable’ range in permissioning data, especially if there is economic and ease-of-process upside from doing so.

Loan Processing Speed

Time taken to execute loans was impacted by April’s 3 x 4 day weeks (school and public holidays), which slowed down the pace at which SMEs completed their loan applications and pushed out average total loan time elapsed to 36 hours… still well inside the Service Expectation measure observed (ie. fintech is doing its bit to meet and drive service expectation).

Smart Devices

The proportion of SMEs with smart devices has risen – now well over half of all SMEs at 54%

Read more on the Disruption Index Site.

Fintech Disruption Continues Apace

The latest edition of the Financial Services Disruption index is released today. It measured 40.16, up 5.52% from last quarter.

The Disruption Index tracks change in the small business lending sector, and more generally, across financial services. The Financial Services Disruption Index, which has been jointly developed by Moula, the lender to the small business sector; and research and consulting firm Digital Finance Analytics (DFA).

Combing data from both organisations, we are able to track the waves of disruption, initially in the small business lending sector, and more widely across financial services later.

Highlights this time include:

  • Non-bank SME lenders are becoming more mainstream, with 14.1% of the surveyed population now familiar with the options available from this segment of lenders. Compare this 4.2% at the same time last year, we see a significant 230%+ increase. However, in number terms, we are talking about roughly 300,000 businesses now aware (up from less than 100,000), so there is sizeable upside for those willing to shake the market up and be relevant for the ‘engine room’ of the Australian economy.
  • The gulf between SME loan assessment expectations and banks’ loan assessment execution is growing, with continued downward pressure on expected turnaround times. The latest survey indicates 5.4 days expected assessment turnaround… requiring significant bank process replumbing to meet those types of targets.
  • Businesses data provisioning is now commonplace and the early fears around security of login credentials and ‘what will they do with my data’ appear to be receding.
  • Ease of process (loan applications completed in a few clicks) and speed of assessment appear to be the catalysts here. In the last quarter, 80%+ of all businesses starting a loan application moved on to provision some form of electronic data.
  • Moula continues to execute loans in, on average, 29 hours.  Loans to more complex business structures, such as trusts, impact on the average loan processing speed due to additional compliance-related processes.  Loans to more simple structures such as sole traders and companies are typically executed within 12 hours of the initial application.
  • Business confidence rose in borrowing SME’s especially in eastern states of NSW, VIC and ACT. Less strong in SA, TAS and QLD. There has been a strong fall in WA thanks to the end of the mining boom, and second order impacts across other industry sectors there.

 

SME Digital Disruption Continues Apace

The latest edition of the Digital Finance Disruption Index, a joint initiative by Digital Finance Analytics and Moula – a fast and friendly way to give small businesses access to capital – is released today. The Disruption Index tracks change in the small business lending sector, and more generally, across financial services.

di-chart-q3-2016-smallFinancial Services are undergoing disruptive change, thanks to customers moving to digital channels, the emergence of new business models, and changing competitive landscapes. Using combined data from the DFA SME Survey, and from Moula on loans processed, we track the momentum of this disruption in Australia.

This quarter the index slipped a little to 38.06, from 39.26 in the previous quarter, showing the first small decline in the index in the 6 quarters since the index began, but should be read in the context of a significant increase in the previous quarter.

The reasons are mixed, however, we still see the trend moving strongly upward over the long term as all the catalysts of disruption are building : use of electronic devices, use of electronic data and a continuing trend away from bank brand loyalty to those providers who deliver the best products and service.

Looking at some of the highlights:

  • Awareness of non-bank funding options continues to grow among SMEs, thanks partly to greater coverage in the media of “Fintech”. However, there is more to be done to link Fintech more directly with unsecured lending in the minds of SME’s.
  • Business confidence rose in borrowing SME’s especially in eastern states of NSW, VIC and ACT. Less strong in SA, TAS and QLD. However, this was offset by a strong fall in WA thanks to the end of the mining boom, and second order impacts across other industry sectors there.
  • The proportion of SMEs with smart devices has risen – now well over half of all SMEs at 54% are using their smart device as their primary business management tool. Most smart devices are multi-function phones, rather than tablets. Younger business owners have an ever higher penetration rate.
  • Coupled with the increasing adoption of smart devices in SMEs, we are also seeing increasing use of cloud accounting data, not only in running a SME but also to obtain a loan (through data permissioning). In the latest results, over half of all businesses permissioned Moula into cloud accounting data.
  • The availability of data, and the non-reliance of traditional business plans, has meant that Moula is capable of processing SME loans within a 24 hour period – evidenced by an average approval time of 20 hrs in the most recent quarter.

The Disruption Index is an important tool which will highlight the changing face of financial services in Australia. There is no doubt that new business models are emerging in the context of the digital transformation of the sector, and bank customers are way ahead of where many incumbents are playing. The SME sector in particular is underserviced, and it offers significant opportunity for differentiation and innovation.

In the last three months we have seen a significant shift in attitudes among SMEs as they become more familiar with alternative credit options and migrate to digital channels. The attraction of online application, swift assessment and credit availability for suitable businesses highlights the disruption which is underway. There is demand for new services, and supply from new and emerging players to the SME sector.

Read more on the Disruption Index Site.

 

Latest Fintech Disruption Index Higher

The latest edition of the Financial Services Disruption index is released today. It measured 39.26, up 8.51% from last quarter.

q216-disruption-indexThe Disruption Index tracks change in the small business lending sector, and more generally, across financial services. The Financial Services Disruption Index, which has been jointly developed by Moula, the lender to the small business sector; and research and consulting firm Digital Finance Analytics (DFA).

Combing data from both organisations, we are able to track the waves of disruption, initially in the small business lending sector, and more widely across financial services later.

Highlights this time include:

  • Surveyed small businesses are becoming increasingly aware of funding alternatives away from the traditional banks, with a rise of 14% quarter on quarter.
  • We have now reached the point where SMEs using smart phones, tablets and laptops within their businesses are in the majority for the first time, with nearly 52% of businesses indicating these important tools in a small business.  This trend is only likely to accelerate.
  • Coupled with the increasing adoption of smart devices in SMEs, we are also seeing increasing use of cloud accounting data, not only in running a SME but also to obtain a loan (through data permissioning). In the latest results, over half of all businesses permissioned Moula into cloud accounting data.

In light of the vacuum of information in respect of the size of SME borrowing, DFA have used their survey to provide an estimate of this market segment.

DFA looked at SME’s borrowing less than $500,000. The total stock of debt is in the order of $107 billion of loans (including unsecured overdrafts, structured loans, personal loans for business purposes) and $36 billion of credit cards debt, or $143 billion in total.

Of surveyed respondents, approximately 13% of businesses are just aware of fintech offerings, whilst 2% considered applying for funding but did not follow though. In addition, a further 5% have visited a fintech lender web site and 10% may apply within the next 12 months.

So, the opportunity for fintech lending is significant…

Read more on the Disruption Index Site.

Financial Sector Digital Disruption In Full Swing

The latest edition of the Disruption Index, a joint initiate between Moula and Digital Finance Analytics, shows disruption continues apace. In the latest results, focussing on small business lending, more of the market is in play, with an overall disruption score of 36.18, up 2.99%.

SME service expectations continue to rise with the continued deployment of online applications and tools, in concert with the ongoing rise in mobile, always on smart devices. There has been a significant rise in awareness of non-traditional funding alternatives this quarter, following recent publicity and government innovation statements on fintech. As a result, a slightly higher proportion of SMEs are willing to trade their data.

Business confidence amongst borrowing SMEs has risen, as a result of the announced budget tax changes, and more favourable business conditions, especially in the east coast states. This was offset by a fall in confidence in WA and SA.

Dis-July-2016While knowledge of non-bank lenders is starting to increase, we are still seeing low usage of such credit options by small businesses (at less than 10% of all businesses in the sample); with increasing awareness, and increasing focus on the fintech sector by media commentators, we expect that non-bank lending to small businesses will become mainstream in time.

SME expectation of the time it should take to access unsecured finance has continued to collapse, with the most recent observation at 6.5 days.  This is reducing quickly, and highlights the small businesses sector’s increasing awareness of alternatives in the market, coupled with the expectation that lending decisions should be fast in an era of data availability.

We are witnessing a significant trend in terms of borrower’s preparedness to provide electronic access to private information, mainly in the form of bank and accounting data feeds.  This trend has been evolving quarter on quarter, with the most recent quarter showing an 11% increase in loan applicants that permission data, and a doubling since the Disruption Index began a year ago.

The key interpretation here, we believe, is that consumers and small businesses have accepted that data permissioning and data transfer are:

  1. necessary to access new financial service offerings, and
  2. data transfer is generally accepted as being secure.

The Disruption Index is an important tool which will highlight the changing face of financial services in Australia. There is no doubt that new business models are emerging in the context of the digital transformation of the sector, and bank customers are way ahead of where many incumbents are playing. The SME sector in particular is underserviced, and it offers significant opportunity for differentiation and innovation.

Digital Finance Analytics says that in the last three months we have seen a significant shift in attitudes amongst SMEs as they become more familiar with alternative credit options and migrate to digital channels. The attraction of online application, swift assessment and credit availability for suitable businesses highlights the disruption which is underway. There is demand for new services, and supply from new and emerging players to the SME sector.

Moula ramps up for long-term growth

Moula, the data-driven lending platform for small businesses has announced the appointment of former Managing Director of Xero, Chris Ridd, to its board as it positions itself for significant growth.  They also released the latest edition of the Disruption Index, which measures the digital intrusion of new players into the Financial Services Sector. Ridd’s appointment comes off the back of strong growth for Moula over the past twelve months, as Australian small businesses change the way they access loans.

Moula-PhotoThe Disruption Index, shows that the number of data-approved loan applicants has doubled over the past year. The Disruption Index index has been jointly developed by Moula and research and consulting firm Digital Finance Analytics (DFA).  It is an initiative designed to track the waves of disruption in Australia in the small business lending sector.

Business confidence among SMEs seeking finance has risen over the past quarter as a result of taxation changes outlined in the recent Federal Budget along with more favourable business conditions, according to the latest findings from the Disruption Index,

Figures from the Disruption Index reflect the changing way in which SMEs access finance, including:

  • the number of data-approved loan applicants has doubled over the past year as more businesses become comfortable with providing bank and accounting data to access unsecured finance
  • SMEs want faster access to unsecured finance, with the average expected wait time reducing from 7.5 days to 6.5 days over the past year

The Hon. Philip Dalidakis, Minister for Small Business, Innovation and Trade welcomed the role that alternative lenders like Moula play in supporting the economy.

“Having access to capital is one of the most important requirements for a small business to get off the ground or stay operating.”

“It is wonderful to see fintech companies like Moula providing our small businesses with innovative new ways to access capital and manage their finances at the same time. This is another great local success story that cements Victoria’s growing reputation as the number one tech and startup destination in the Asia Pacific region.”

A fully Australian-owned and operated platform, Moula enables businesses to grow by providing loans that are approved via a short online application process.

“Small business owners know that to survive in business you need to meet customer expectations. We live in an age of instantaneous transactions with the increasing availability of data at our fingertips. This means that the pace of business has increased exponentially and in line with that, so too have customer expectations. The lending space is no different,” said Moula CEO and co-founder Aris Allegos.

Over the past twelve months, Moula has aligned itself with best-in-class partners including Liberty and Xero to deliver its unique lending solution to Australian SMEs.

“The Disruption Index indicates a significant shift in the way SMEs expect to access finance, and there is a huge opportunity to help SMEs grow through accessible finance that is based on a thoroughly transparent, data-driven approach. Having somebody of Chris’ calibre on the board, with his track record of building exceptional businesses, is a tremendous boon to Moula,” Allegos said.

“He has a genuine talent and a passion for this space. He ‘gets’ small businesses and the challenges they face and is a huge advocate for what Moula is trying to achieve — to help Australian SMEs grow via a simple loan application that is fast, affordable and responsible.”

As a Xero preferred financial services partner, Moula was the first online lending platform globally to use Xero’s API integration to analyse and underwrite a business loan.

“Over the course of my five years at Xero Australia, I saw a marked shift in the way SMEs use online data to streamline business process and drive growth. The findings from the Disruption Index support this with a slightly higher proportion of SMEs willing to trade their data,” Chris Ridd said.

“There is an opportunity to help support the continued success of small businesses. Lending based on the strength of accounting data is a unique point of differentiation in the market, and one that is the way of the future for finance-as-a-service.”

Ridd joins the board of five executives, including Moula co-founders Aris Allegos and Andrew Watt, Sherman Ma, Managing Director of Liberty Financial and tech entrepreneur Nathan Cher.

 

Aggregator announces fintech partnership with Moula

From Australian Broker.

Liberty Network Services (LNS), the branded distribution arm of non-bank lender Liberty, has partnered with online lender Moula to better service small business clients.

Through the partnership with Moula, in which Liberty acquired a part stake in last year, LNS brokers will be able to refer any small business customer directly to the fintech lender through an online portal.

LNS managing director, Brendan O’Donnell, said the partnership was formed to meet the growing needs of small businesses that struggle to secure short term finance with the major banks – while also helping brokers to diversify their business.

Liberty supplied Moula with $30 million in funding last year to finance its cashflow loans to small business, however O’Donnell told Australian Broker that the timing of announcing this referral partnership now is significant.

“Business confidence is increasing on the back of Malcolm Turnbull’s push to support more entrepreneurs and small businesses – so we’re seeing business lending growing more each week as well.

“The opportunities for our advisers to sell more business loans has been on Liberty Network Services radar for some time.”

Co-founder of Moula, Aris Allegos, said this partnership marks Moula’s first step into harnessing a broker model.

“We’ve had a lot of success in going direct to customers, and also via referrals through our finance partners, but this is part of a new strategy to harness the broker model and get Moula in front of customers in different ways. It’s going to bring Moula its next level of growth,” he said.

O’Donnell said partnering with a fintech lender will also help keep its brokers’ offering “more attractive and relevant” and is something the group will be open to exploring further.

“As we know there are many fintechs emerging and providing an alternative way of doing business across the finance spectrum. We will continue to explore opportunities with fintechs that are able to enhance our adviser’s proposition and offering in the market – and that can meet our customer’s ever changing needs,” he told Australian Broker.

Financial Service Industry Disruption Index Higher

The latest edition of the Financial Services Disruption index is released today. It measured 35.13, up 3.51% from last quarter.

The Disruption Index tracks change in the small business lending sector, and more generally, across financial services. The Financial Services Disruption Index, which has been jointly developed by Moula, the lender to the small business sector; and research and consulting firm Digital Finance Analytics (DFA).

Combing data from both organisations, we are able to track the waves of disruption, initially in the small business lending sector, and more widely across financial services later.

We continue to see a rise in penetration of mobile devices, rising service expectation, and more interest in accessing alternative finance solutions.

Read more on the Disruption Index Site.

Measuring Disruption in Small Business Lending

Launched today, the Financial Services Disruption Index, which has been jointly developed by Moula, the lender to the small business sector; and research and consulting firm Digital Finance Analytics (DFA) shows that Financial Services are undergoing disruptive change, thanks to customers moving to digital channels, the emergence of new business models, and changing competitive landscapes. Combing data from both organisations, we are able to track the waves of disruption, initially in the small business lending sector, and more widely across financial services later.

The index tracks a number of dimensions. From the DFA Small business surveys (26,000 each year), we measure SME service expectations for unsecured lending, their awareness of non-traditional funding options, their use of smart devices, their willingness to share electronic data in return for credit, and overall business confidence of those who are borrowing relative to those who are not.

Moula data includes SME conversion data, the type of data SMEs share, the average loan amount approved, application credit enquiries, and speed of application processing.

The index stood at 33.02 from May to July 2015, and rose to 33.94 in the August to October period. The higher the score, the greater the disruption. Of note SMEs are becoming more aware of non-traditional unsecured lending options, are becoming more demanding in terms of application processing times, are more willing to share data and are more likely to apply using a smart device. In addition, the loan values being written are rising, more businesses are willing to share richer data, and the confidence levels among borrowing SMEs is on the rise.

Overall, unsecured lending to the SME sector is being disrupted significantly, and we expect the index will continue to trend higher, as awareness of alternatives to traditional banking continues to rise, and more firms apply for credit.

  1. The average expectation duration was down from 9.2 days in Q3 2015 to 7.5 days this quarter. SMEs continue to expect better service standards when applying for credit. Whilst they accept it may take a few days for an application to be processed, the survey data shows that many think a week should be enough to complete an unsecured loan and get money into their account, and they expect to receive regular progress reports and updates on the way through.
  2. We see a rise in awareness among SMEs of the availability of alternative credit solutions and greater familiarly with the tag “Fintech”. This month 3.75% of businesses recognised the concept, up from 2.74% last month, and momentum is increasing.
  3. More business owners are using smart devices to run their business. They expect access to a wider range of services this way, and more immediate responses. Last quarter 42.6% of businesses used a smart device, this time it was 44.6%, and the rate of adoption is increasing.

The index is featured in an SMH MySmallBusiness article today.