Business Borrowing Outside the Big Banks

Fintech offerings are more attractive as traditional lenders ration the credit. In this circumstance, there are some advices in business borrowing outside the big banks. There are two groups of people, one regards fintech as the answer to the business world’s problem by filling gaps in finance market, and it is responsible for improving customer experience to a field. On the other hand, some people believe fintech will lead to the next money market crash. They regard fintech as holding few physical presence, resourcing, experience and regulatory oversight.

When the technology moves on, there are more exciting, customisable and flexible options. The trusted financial adviser or accountant may recommend the client continues to approach large-scale institutions for the credit needs. Using the ecosystem of fintech towards the client’s needs and identification of specific providers, which is not the issue as there is plenty of credit providers have access to funding. The time of trading on the fact in making the recommendation with due diligence is fewer in fintech institutions compared with large institutions.

The fintech region is virtually unregulated as Australian Securities Investment Commission (ASIC) announced the “regulatory sandbox” where eligible fintechs can test certain services without holding many authorisations.

Currently, there are around 300 businesses in the fintech industry don’t have a code of lending practice, apart from the six biggest fintechs signed a Code of Lending Practice in 2018. They don’t have complaints mechanisms and they are not forced to be members of an external dispute mechanism such as the Australian Financial Complaints Authority.

The fledgling industry will have not delivered on the promise of innovation and service if there is a need for customers to depend on the mandated code of conduct regarding the fintech reputation is paramount in attracting and maintaining consumers. Focusing on transparency and customer service are necessary to support the consumers especially in the unforeseen difficult time. The regulatory sandbox is not an anarchic environment but enables eligible businesses to be given permission to test specific services under 12 months as the fintech licensing exemption. It can hold up to 100 retail clients and be offered without an Australian Financial Services Licence (AFSL) or Australian Credit Licence (ACL) under certain consumer protection conditions. ASIC’s fintech licensing exemption reflects the commitment to facilitate innovation in financial services and be equally committed ensure innovative services and products are suitably regulated and improve the customer results. Balancing facilitation and consumer protection within the regulatory remit by introducing the fintech licensing exemption is necessary to demonstrate the competence to deal with consumers.

The regulatory sandbox provides the environment that helps reduce red tape and solve the first challenge as speed to market. ASIC also makes information available for educating advisers and customer including on the MoneySmart Borrowing Basics and Peer-to-Peer Lending sites.

Credit can be more difficult to obtain for both customers and small-to-medium enterprises as some traditional financing products withdrawn from market. It is switching from lenders who are known and generally trusted to the unknown, although fintechs help fill the void as traditional lenders reduce the presence in this area. There are some emerging compliance and risk problems. For instance, the consumers may worry about to find the physically existence to talk if they face the temporary cash flow problem after taking the loan. Furthermore, the lack of certainty around the new highly technologized environment is the real problem and accountant need to know how to respond if the customers ask whether to consider the fintech lender.

Fintech is neither the only product choice to toss into the mix nor the same as a bank loan, which means consumers need to consider the risk matrix, with careful contract reading and proper analysis.

Good accountants will find the product that is suitable and, in the customer’s best interests and largest demands. Possible products could be the most affordable or hold more about access to credit or cash flow. The online fintech industry enables the small business to credit, therefore, small businesses can grow and hire more employees as well as provide young job seekers more opportunities. Banks have shortages in servicing unique or unusual requests such as from specialised industries and not existing in delivering credit, and the fintech lending’s existence tries to fill this gap. In conclusion, Fintech is smaller but more care about customer experience and good at tailoring the responses.

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