With the election now behind us, we have every reason to expect the spirit of competition and enterprise to prevail and hopefully flourish further. In particular, the revolution that has been taking place under the banner of Alternative Finance looks likely to continue unabated with the number of new entrants growing virtually by the day.
If finance brokers, media and regulators have been struggling to keep pace with this rapid expansion, imagine what it must be like for an SME seeking that all important finance for their business. Where do they start?
One answer to the question is with ’aggregators’ – those who provide no finance themselves, but who host the equivalent of comparison websites for finance. Typically they offer no advice, but play a fundamental part in providing all the information necessary to enable would-be borrowers to make their own informed decisions. Their basic proposition is that borrowers are spared the almost impossible task of having to visit each lender site individually to gather all the data – aka ‘one-stop shopping’. They can evaluate what both the alternative and mainstream markets have to offer, by answering questions which filter the options that might be available to them, without feeling that they have to visit many different sites.
One of the mounting problems is that there are now estimated to be in excess of 40 Alternative Finance aggregators. This growth is being fuelled in part by recent legislation mandating banks to refer unsuccessful applicants to non-bank providers, which is expected to be via designated ‘neutral’ platforms. The sheer number of platforms which has emerged means that there is a danger of fragmenting the delivery of real intelligence to the prospective end user. Some of the more established sites have really invested a lot of time and money in their offerings and this is to be applauded. However, which platform does an SME use? How do the more niche products ensure their voices are heard beyond price and speed comparison? How do these sites ensure that they show broadly ALL of the alternatives available?
Given the diversity of the Alternative Finance marketplace, which includes an increasing number of niche players, perhaps it is impossible to answer these questions with certainty at the moment, but it is very encouraging that the more established sites are clearly investing huge amounts of time and money in their offerings. It is important, though, that in addition to the SMEs themselves, aggregator sites are designed to help the hugely important broker network to match their clients to the most appropriate lenders.
The race is there to be won, but with it must come clear, useable market intelligence and education to spread the word and improve the general level of SME understanding of the Alternative Finance sector. An important part of this process should be the companies that are developing these sites consulting with SME organisations and lenders alike, many of whom should be willing to contribute some time in order to help get this right. I know we would.