World Economy

Alternative Lenders Significant Threat to Banks

Alternative Lenders Significant Threat to BanksAlternative Lenders Significant Threat to Banks

Alternative lenders now pose a “significant threat” to every part of commercial lending, according to a survey from financial software company Misys.

The report showed that 68% of banks fear small business lending is under high threat from digitally enabled supplier finance networks and alternative lenders, NewsNow reported.

It also showed that 75% of banks fear loss of the market share.

David Hennah, Head of Trade Finance at Misys, said: “The banking sector understands that it must now react to remain at the center of corporate credit requirements.”

“We have seen an increasing focus on strategic technology partnership.

“Clients want to build trade and lending platforms that help overcome their technical debt in digitally-enabled corporate banking and build a foundation to dictate future innovation.”

The report stated that banks had been under pressure since the financial crisis and increased regulation had damaged their lending capacity.

Increased regulation, along with the emergence of P2P lending, has led to banks re-evaluating their operating models.

David Gustin, Editor of Trade Financing Matters, added: “The threat from non-banks on traditional banking models is clear and present and this has grown largely from the technological innovation in this space.”

“The challenge is lenders don’t know what they don’t know, meaning many clients will access alternative forms of finance without their knowledge.

“In order to compete, banks need to replace outdated delivery models and put customer interests at the core of their business strategy.”

The survey was compiled after speaking to 114 respondents from 77 banks across the world.