However, Paul Clampin, Chief Lending Officer at Landbay, believes that collaboration is the best way forward.
“Peer-to-peer (P2P) has taken over 10% of the UK SME lending market and, with the new Innovative Finance ISA coming in next month, the rise of lower yielding, lower risk lending such as peer-to-peer residential mortgages, is inevitable,” said Paul.
“Now is the time to start talking about how we can work together.”
During the past year, SPF Short Term Finance introduced its own bridging app and Executive Director Alex King said a growing number of firms were looking at FinTech.
“Some of what we see Barclays and Santander are doing in the retail banking space is really encouraging and we expect to see more of it,” said Alex.
“FinTech or P2P lending has increased significantly over the last few years but still represents a tiny percentage of total borrowing.
“As with many other sectors, existing businesses are cautiously monitoring how technology is shaping the future of their markets while at the same time developing their own strategies.”
Paul Marston, Head of Commercial Finance at RateSetter, agreed with that view, saying it would be naïve to assume traditional lenders were not looking to improve their financial technology.
“Banks have large R&D budgets and a few have even founded their own accelerator programmes,” said Paul.
“This is a very healthy kind of competition.”
However, Paul pointed out that some lenders had retreated from lending in areas where FinTech is thriving.
“Traditional lenders are certainly more aware of marketplace lending platforms such as RateSetter than they were a few years ago,” said Paul.
“Responses to that range from doing nothing, to competing to forming new relationships.
“In the case of lending to SMEs, we've seen traditional lenders retreat significantly from this activity, so there is a great opportunity for FinTech platforms to fill the gap that has been created.”
Andrew Lazare, Managing Director at Mint Bridging, doesn’t believe FinTech lenders are encroaching on the way the bridging lender underwrites loans.
“FinTech is predominantly a tool to move money fast through peer-to-peer or money wires which is fine when small amounts of money are involved,” said Andrew.
“But when you are talking about loans of £500,000 plus then there needs to be more involved than a PayPal transaction.
“While we also understand that brokers and clients need rapid turnaround answers and loan[s] completed in record times – especially if their terms have or are near to expiring [and] knowing deadlines can financially cripple a client – there are still traditional problems that need traditional solutions.”
Paul Clampin said anything that streamlined the mortgage lending process was a good thing but urged lenders not to get overly excited.
“No lender should get carried away and lose sight of the importance of common sense underwriting and expertise,” said Paul.
“At Landbay we leverage technology to do the basics efficiently, but all lending decisions still involve good, old fashioned human underwriting.
“There isn’t an algorithm that beats an experienced underwriter yet – particularly in specialist lending like buy-to-let.”
Andrew concluded by saying that Mint was constantly looking to improve its software but, even with the best systems in the world, common sense couldn’t be matched.
“Any company that wants to grow needs to set systems in place and that includes using the best technology to achieve results,” said Andrew.
“We must not forget though that any financial systems in any company cannot always replace the person that needs to programme them.”
Leave a comment