Banks believe that new digitally enabled supplier finance networks and alternative lenders pose a significant threat to every part of the commercial lending business, claims Misys.
A survey by the financial software company took answers from 114 respondents within 77 banks across the US, Europe, the Middle East and Africa (EMEA) and Asia Pacific (APAC). They were asked to share their views on the threats and opportunities created by digital disruption in commercial lending, trade and supply chain finance (SCF).
Among the responses from the survey respondents, 68% cited small business lending as being under high threat and 61% saw competitive pressure in SCF product lines, such as receivables finance and factoring.
Eighty-four per cent said pressure on pricing of loan products as a challenge, while 75% feared loss of market share to alternative lenders.
According to Misys, banks have been under pressure since the 2008 financial crisis, as demand for credit from small and medium sized businesses has risen, but increased regulation and scrutiny of balance sheets has diminished lending capacity.
It says that the rise of alternative financiers, peer-to-peer (P2P) lenders and new supplier networks in the market is leading banks to re-evaluate their operating models and embrace partnership, new technology and more agile approaches to lending and trade finance.
A report issued by Grant Thornton found that in 2014, 60% of businesses in the mid-market were already using non-bank lending as a source of finance, showing that “it is no longer a fringe activity, but one that is widely considered normal by corporates,” notes Misys.
Despite these challenges, the Misys survey results show that banks also believe that a strategic partnership with non-bank players can be a strong driver in growing their trade finance business, with 68% citing that they see this as a big opportunity.
“The banking sector understands that it must now react to remain at the centre of corporate credit requirements,” said David Hennah, head of trade finance at Misys. “Our survey respondents believe they can leverage emerging supplier networks and the financial technology vendors that can provide digital enablement and connectivity across trade and lending to grow and retain clients.
“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.
“Innovation is outpacing the limitations of legacy bank frameworks. By thinking differently and embracing change banks, in partnership with their vendors, can define new value propositions along clients’ financial supply chains.”
On-Demand Treasury Management Solutions continue to gain increased adoption in the US and EMEA regions.
Deutsche Bank plans to partner with fintechs that have complementary business models, rather than buying out tech start-ups and competing in the market, bank executives said at press briefing this week. They also discussed future strategies for the technology, securities and payments spaces.
From music festivals to motor racing, events and festivals are an integral part of the move to a cashless society, reports SIX Payment Services.
The US Commodity Futures Trading Commission approved LedgerX as the first regulated clearing house for derivatives contracts settling in digital currencies.