Ordering food. Taking an Uber. Booking a flight.
In this age of convenience and instant gratification, any consumer performing these activities can expect to complete them in a few clicks on their phone.
“The same thing is happening with finance and [among] business owners who have moved operations online in the wake of the pandemic,” Anil Stocker, co-founder and CEO at London-based FinTech MarketFinance, told PYMNTS in an interview. “[They] are now expecting a similar level of service in their business demands as they do in their consumer apps.”
For the company, which specializes in business-to-business (B2B) lending for U.K. small- and medium-sized businesses (SMBs), that has meant doubling down on investments in technology and credit models to meet the increasing demand for faster application and loan approval processes.
“[It’s] basically frictionless finance, that’s been our goal for a long time,” Stocker said, adding that they’ve set up their systems to ensure that people can get a decision in less than 24 hours after applying for a loan.
And boosting their systems seems to have served the B2B credit provider well, equipping the firm to handle the tenfold increase in loan applications at the height of the pandemic — from 30 million a month pre-pandemic to about 300-400 million — and leading to a revenue increase of 133% in 2021, the same year the business reached profitability since its launch in 2011.
Related news: Tenfold Borrowing Increase Drives UK B2B Lender MarketFinance to Profit
With that increase in demand for frictionless finance and quick access to funds, Stocker said they are approving more unsecured loans as more companies move away from the longer, more complicated process of borrowing against their invoices or future revenues.
Read more: UK FinTech MarketFinance Raises $382M in Debt, Equity
And while that might be a riskier option for any lender, he argued that it makes good business sense as oftentimes it is the “best companies” that expect a frictionless experience “and the more barriers you put up, you drive away the good [ones] and end up with the desperate people.”
Read also: MarketFinance Eases SMB Financing With New Features
He acknowledged, however, the need to invest more in technology and sophisticated underwriting models to minimize the higher risks involved. “You have to manage risk in a different way [in the unsecured market] but it’s a good challenge and a good discipline to try and build these very slick interfaces.”
Embedded Finance Unlocks Instant Lending
According to Stocker, the shift from bank-controlled offline lending to online applications stimulated the first wave of FinTech lending, leading to the present-day decentralization of finance — a pandemic-induced trend which involves embedding financial services into consumers’ apps, sites or ecosystems.
“It’s exactly the same thing that happened with consumers [with] the likes of Klarna or Afterpay embedding into retailers’ [apps and sites] and offering credit at the point of transaction. The same thing is starting now in the B2B [space],” Stocker remarked, adding that the trend will “completely change the [finance] landscape” in the coming decade.
MarketFinance is tapping into that opportunity with its MarketPay product, which embeds their payment and credit options into online checkouts, enabling suppliers to receive instant payment on the first day of purchase, while buyers are given up to 90 days to pay back the loan to MarketFinance at zero cost to them.
As Stocker said, embedded finance “is the direction of travel [we’re taking] – it’s instant, single click and unlocks [lending] with the least number of clicks.”
Shifting Business Models
To date, the U.K. credit provider has lent over $3 billion to small businesses to fund working capital products like invoice finance and flex loans, to longer-term loans for bigger purchases like capital expenditure (CapEx), for example.
And while they plan to continue to help profitable businesses that have viable business models, Stocker said they will be taking into account the unintended changes in business models triggered by the pandemic.
He referenced one customer that was supplying coffee to offices and cafes around London prior to the pandemic and had to pivot to delivering directly to people’s homes after everything shut down.
That shift, which required changing logistics, warehouse and tailoring their marketing campaign to consumers, came at a cost of £250,000 (about $326,500) which MarketFinance provided to support the coffee business.
“We saw a lot of good businesses that were being sensible in getting some cash in, rethinking their business model [and] how they could adapt their businesses,” he noted.
And with the ongoing war in Ukraine, the lockdown in China and supply chain shocks, as well as rising inflation and interest rates, he said the uncertainty caused by these macro level events is an indication that financing demand from U.K. small businesses will not be slowing down any time soon.
The U.K. lender also aims to expand internationally to serve SMBs outside the U.K. — a plan they intend to execute by identifying major trade corridors, leveraging the payment infrastructure that they’re developing to help businesses buy and sell internationally, and capitalizing on key embedded finance partnerships.
“Over time, you’re going to see more lending businesses succeed in their international expansion and we definitely look forward to that next phase as well,” Stocker said.
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