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Digital invasion – A look at the offerings signalling a new era for banking

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That’s because a number of fintech firms, including Everline, have been doing this in the business space since 2012. But what is it each are offering? And how does it compare to what the alternative finance market is doing for businesses?

Digital banks 

A number of digital banks are set to launch in the UK next month and a few smaller ones opened virtual doors in September. Why? According to Fidor, which launched in the UK last week, “because traditional banks have lost touch with the fast evolving digital revolution.”

We couldn’t agree more. Here’s what they have to offer:

Fidor

Initially only open to consumers, its German arm caters for businesses too, so you can expect it to extend its services soon. All products are accessible from one account and its approach is strongly focussed on community, encouraging customers to request services, changes and offer advice to other customers – showing the personal power of online versus traditional bricks and mortar.

Mondo 

As a frustrated bank customer with “an awful – so so awful” current account, founder Tom Blomfield (GoCardless co-founder) set up mobile-only bank Mondo. 

Currently awaiting its FCA licence, Mondo has already issued its first debit cards but Blofield said it will take a couple more years to get it fully up and running. When it is, it will focus on predictive and intuitive software such as flagging when your electricity bill is higher than usual or alerting you if you’ve forgotten to touch out with your Oyster – helping avoid a costly fine. 

Starling

Originally started out by Blomfield before reported ‘tensions’ led him to leave to start up Mondo, Starling too is waiting for its FCA licence before launching in the UK. When it does launch, it will be a current account only offering, because it believes that is the core customer need for money management. 

Atom

With its banking licence already in place, Atom’s founder Anthony Thomson forecasts it can take a five per cent share of the personal current account market in Britain over the next five years. 

He plans to do this by allowing customers to do all of their banking on the go, transparently, simply and at a low-cost. Previously behind the launch of Metro Bank, Thomson has heritage, so watch this (digital) space.

Alternative lenders

This catch-all term for any lender that’s not traditional has helped create awareness for the fact there are other options out there for small businesses looking for a cash injection. It’s not necessarily helped drive awareness for the different types of funding that fall under that category though – despite their very diverse offerings. 

Unlike digital banks, the alternative lending market has small business owners at the heart of its operations. The approach used (and reason behind each’s existence) all sound very similar though: banks aren’t servicing businesses in the way they need, with archaic practices slowing processes down and inhibiting small business growth. Alternative lenders are embracing digital (albeit in different ways) to reverse this and put the control back in the hands of business owners. 

Think online dating and that’s a simplified version of what crowdfunding and peer-to-peer sites are all about. Offering a digital meeting point for like-minded individuals to connect and invest money (rather than time) in businesses they like the look of and see a future in.

The return for the investor is in either cash or equity, depending on the platform.
Invoice financing has had a modern makeover with online platforms offering small businesses the chance to sell invoices to investors in return for a percentage of the face value, while e-lenders have made the traditional lending process 100 per cent automated, connecting in real-time to a business’ data to make lending decisions within minutes and deposit funds within the same timeframe.

Read more from Russell Gould:

The future’s digital

Some people will always want the reassurance of being able to pop into a bank and talk face to face. But with more and more people embracing digital and technology disrupting every area of our lives from taxis to tax accounts and finance to fashion, it’s no surprise that the alternative finance market is experiencing rapid growth. 

According to a report from Always in Beta project, traditional financial institutions are becoming increasingly irrelevant to an ever more digitally engaged customer base. In a recent report it produced, one third of “millenials” (those born from the 1980s onwards) are disinterested in banks, and believe they won’t need a bank at all within five years. 

Two thirds would “rather go to the dentist than listen to what banks are saying”. Ouch. 

Meanwhile, from 2013 to 2014, global investment in fintech ventures tripled to $12.2bn and the alternative finance market is currently predicted to grow in Europe and the UK beyond $7bn in 2015, up from $2.5bn in 2014.

To quote the founder of real-time mobile payment tool Moven, Brett King: “It’s like what happened to books with Amazon. This is what is happening in banking now.”

Russell Gould is COO at Everline and ezbob.

Everline profile: Flexible funding with speedy approval

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