Despite the fact that the SME finance space has been evolving in recent years, and that we’ve seen some innovations, the appearance of brand-new companies and the implementation of digital strategies, we still have small businesses that need money, and the CEE region is no exception. The SME credit gap remains one of the most significant constraints to the growth, productivity and even survival of SMEs. And this is both a customer- and lender-side problem. On the customer side, many SMEs cannot access credit because they cannot provide lenders with all the required documents. And the process is very time-consuming as well. Lenders, and especially traditional banks, continue to consider small businesses a high-risk segment.
From March 5 to March 15, 2018, the SME Banking Club conducted a study in the CEE region by checking banks’ websites and by calling banks to find out whether it was possible for micro and SME customers to get a loan quickly and online without leaving their home or office.
Here are some of the results:
Five of 15 commercial banks that work with SME customers offer the possibility of applying for an unsecured loan online. This service is mainly available to sole proprietorships.
Two banks (ING Bank Sląski and mBank) offer existing customers a completely online process of decision-making and loan disbursement without having to visit a bank branch and/or to sign hard-copy documents.
All the banks surveyed allow users to see an overview of their loan agreement details and payment schedule via online banking, as well as to pay normal instalments on their loans.
ING Bank Sląski
The Bank offers both sole proprietorships and other companies the possibility of applying online.
Name of the loan product: Kredyt Obrotowy. Type: working capital loan. Term: up to five years, unsecured.
Both existing customers and new customers can complete the entire application process online. Existing customers can apply via the online banking system. In the event of a positive decision, the customer can sign a loan agreement with the bank via online banking (ING BusinessOnLine), thus not having to visit a bank branch to sign a hard-copy agreement. New customers have to apply via the bank’s website.
percent of loans to micro customers were sold via online channels in 2017, double the results from 2016.
93 percent of loan applications from corporate customers, including SMEs, were processed online in 2017.
The following banks offer sole proprietorships the possibility of applying online in Poland:
Idea Bank (Kredyt z decyzją online), Alior Bank (Pakiet Kredytowy) and mBank (Kredyt w rachunku bieżącym). BZ WBK offers only new customers such a possibility (Kredyt MSP Online).
TBI Bank is the only bank in the market that has an online application for its Credit Online product.
ProCredit Bank is the only bank in the market that has an online application for micro and SME customers via its website.
No banks allow small businesses to apply for a loan online.
What we see generally in the region is that the online process is available mainly to sole proprietorships, while it is still not common for companies, such as limited liability companies. The benchmark for TTY (time to yes) is one working day.
Therefore, there is a lot of room for digitalization here, and not only in the front end (meaning an online application form for customers). There is room for more widespread usage of alternative data in the decision-making process and in assessing the creditworthiness of small businesses.
The increasing usage of online banking, mobile banking and mobile phones in general, as well as cloud-based services, big data, and the use of social media will lead to an increase in the global stock of digital data. It has been predicted that, by 2020, the global stock of digital data will double every two years. It is important to note that, by 2020, 60 percent of the global stock of digital data will be contributed by developing economies.
And this is something that alternative lenders will be able to take advantage of. And banks should do the same. And, moreover, we are starting to see new partnerships between banks and fintechs in Europe (see pages 22-25 for the example of iwoca). These partnerships allow banks to offer innovative products and to better serve their SME customers. Banks will be able to offer their customers a better experience with lower capital expenditures if they can learn how to plug fintechs into their ongoing operations. Fintechs will also benefit, as they will gain access to banks’ large customer base, existing infrastructure and lower costs of funds.