Fintech-enabled non-bank SME lenders (‘fintech business lenders’ for the purpose of this report) are an emerging alternative to banks for small and medium-sized enterprise (SME) borrowers, often through seamless and highly automated online application, assessment and decision processes. But with rapid growth in the number of lenders and the variation of fintech products, it becomes more difficult for SMEs to make informed decisions about which products and lenders best suit their circumstances. This research highlights areas where the implementation of consistent practices for transparency and disclosure in relation to fintech loans can create better outcomes for SMEs and help build further credibility and trust for the fintech sector in the long-term.
Fintech business lenders are being proactive to ensure best practice and transparency within their sector. While the discussion about ‘next steps’ for improving lending practices focuses specifically on this sector, some of the recommendations are equally relevant to all providers of SME lending. Fintech business lenders have an opportunity to take a lead on improving lending practices and establish broader good lending practices.
This report forms the first part of a collaborative research project by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) with the not-for-profit industry association FinTech Australia and independent SME finance expert Neil Slonim from theBankDoctor.org to focus actions. The second part will be advice and tools for SMEs wanting to borrow from a fintech business lender.