10 years ago in order to set up a bank account, transfer money or pay someone you would have to go to your nearest bank branch (hoping it will be open).
Computer technology and the Internet have changed the personal banking landscape irrevocably.
With online banking, transactions are rapid and it only takes a few steps to open a bank account, there is also a greater transparency as records are produced at both ends and statements can be read online. Now thanks to banking apps people can access their funds on the go. The Internet has changed the developed world’s whole way of doing business. No one used to know the real cost of insurance, mortgages, DVDs, data storage etc. Originally, picking a credit card could be a daunting prospect but now thanks to price comparison websites you are able to compare a number of different rates and perks. Smartphone technology and 3G connectivity ensure that an answer is at your fingertips.
Why not in Commercial Banking?
If you are a business owner or are an entrepreneur that has founded a start-up, doubtless you are aware that the technological revolution has not transferred to the business banking side as adroitly. Speaking from experience it is jolly hard to set-up a business bank card or increase your overdraft. And it is basically impossible (whatever is promised) to get a business loan in 24 hours or less from a major bank. We hear from our clients that 3 months is a typical timeframe.
Why is this the case? Partly this is due to resistance on the part of the banks. These ‘too-big-to-fail’ banks feel that they don’t have to evolve as much due to the perceived competition. Recent banking problems first with the RBS/NatWest IT technical fault which caused problems for thousands of customers, as well as late July’s problem with Nationwide has further shaken the public’s confidence in the current banking system. Banking technology is prehistoric compared to the innovations that are happening in the alternative finance sector. For the large commercial banks when new machines and systems were ordered and delivered, it was deemed too expensive to replace the thirty five-year-old legacy systems. Now a huge market in financial services for “middleware” firms has sprung up, with the specific role of making different generations of computer talk to one another. No bank has yet taken the step to completely over-haul and modernise their IT systems. Every bank has its own system, which has created further compatibility problems when banks are amalgamated or taken over.
The Present Future
Big banks’ grip is beginning to loosen as businesses in the UK explore alternative methods. There are new players in the business finance market. Metro Bank is Britain’s first new high street bank in over 100 years. Their particular focus is on service and convenience for the customer. Metro Bank have geared themselves towards business banking with a strong emphasis on SMEs. Services include business instant access deposit accounts, speedy small business loan applications and a competitive business credit card with low rates.
Advances in technology have enabled this undulating funding landscape to change. Technology has enabled next-generation finance to become faster, more transparent and efficient. The Internet has made peer-to-peer lending possible, lenders like Funding Circle facilitate an online marketplace where businesses can find and access low cost loans quickly. Invoice finance services, like ours at MarketInvoice, are a very old industry in itself, and they have really embraced the huge inroads made by finance technology. Invoices can be uploaded almost instantaneously onto online invoice trading platforms. Online finance platforms allow clients to stay in control of their funding, unlike an old dial-up Internet connection, high-speed broadband and cloud technology allows business funding to be made less complicated and more transparent, with unparalleled access to information and data storage.
Although it sounds like the same old record, it is still very much the case that access to finance remains one of the key challenges facing growing businesses in the UK. There is nothing to stop banks from changing the way they run the commercial finance environment apart from their own inertia. Until that time comes it is up to alternative funders to bridge the finance gap in business lending.