Another month, another alternative finance and fintech conference – this time in Amsterdam for the AltFi Global Summit. A smaller affair than last month’s Lendit conference, it attracted a good mix of decision-makers from many pan-European finance businesses.

Given Brexit and the cloud of uncertainty that hangs over the UK market until a new trade deal is finalised, the thoughts and aspirations of our business-lending friends on the continent are both interesting and insightful.

Squaring the circle

The keynote speech was delivered by Funding Circle’s managing director in the Netherlands, Jeroen Broekema. The message was clear – “World Domination” (and we would expect nothing less from a company advised by Goldman Sachs). Their view was that with the continued retrenchment of European banks from SME lending, there was plenty of room to roll out the Funding Circle model into many more markets while consolidating their position in the UK.

However, what was also interesting (and pertinent to Business Money readers) was the insistence that they would concentrate on a single product – small unsecured SME loans – and not foray into other products such as invoice discounting and property lending, a market from which they have recently withdrawn. This laser focus would be backed-up by investing resources in automated credit-decisioning and machine learning, with 30 dedicated staff working in this area alone.


When is a bank not a bank? When it’s a bank running a start-up backed by that bank’s balance sheet and credit models. Confused? So was I, listening to a presentation by New10, a start-up backed by Dutch giant ABN AMRO.

New10 is a little like Funding Circle, providing unsecured SME loans (but solely into the Dutch market), through a (nearly) fully automated online application. The start-up is completely independent from ABN’s creaking technology stack, but it does rely on ABN’s balance sheet and credit-decisioning data.

So why has ABN launched a competitor to its own SME lending business? The answer, after much soul-searching at the bank, was that if they didn’t launch a tech-enabled SME lending platform in their home market, somebody else would – and clearly they were right, with Funding Circle already making inroads into the Dutch market.

We’ve seen NatWest try something similar in the UK with their ESME business, so this may be the start of a trend throughout Europe. It remains to be seen whether the traditional banking mindset can be applied to the start-up space to achieve scale quickly and securely.

Alternatively, customers may well prefer to work with an online provider backed by a bank, for peace of mind that their lender carries reputational risk if it behaves badly, even if the systems, processes and marketing are not quite as slick as the competition.

In the market for invoices?

In direct contrast to Funding Circle, spot invoice discounter MarketInvoice has decided to expand its range of products by offering an unsecured business loan product, ranging from £10,000 up to £100,000 in size over a term of 12 months.

It looks like the fintech will be targeting start-ups and micro SMEs for this product, and the business now appears to be more like a one-stop shop for business finance as opposed to a niche funding provider.

In other news…

OakNorth has become the latest fintech unicorn – a private tech firm with a valuation of at least a billion dollars – following new investment from GIC, Singapore’s sovereign wealth fund, and others. This challenger bank, known for its business and property lending, has been going great guns, with a focus on technology raising its valuation as a tech company rather than as a traditional bank. Its proprietary technology platform, ACORN, was clearly a factor in this stellar valuation, using machine learning to extract relevant data from millions of data points on prospective customers.

Brexit or exit?

One interesting discussion at the conference was whether Brexit would lead to a brain drain of tech talent from the UK back to continental Europe. The view from the panel was that Brexit probably would lead to a brain drain, but that it would not necessarily harm the finance/tech industry – many firms are offshoring their tech capabilities already, with Bulgaria being a notable destination.

The panel also thought that the UK’s finance talent would not leave, as the financial infrastructure we have here simply cannot be matched in Paris or Frankfurt. We await the next round of Brexit talks with bated breath…

Jonathan’s article is in the November 2017 edition of Business-Money magazine.


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