Few trends have the potential to shake up Australia’s financial sector like digital disruption. Digital disruption is bringing new players into the business and personal loan markets, pushing old players aside, and creating a novel set of risks and opportunities. So, what is digital disruption, and what does it mean for your small business?
What is digital disruption?
Digital disruption occurs when companies use digitally-powered technologies to shake up the status quo in an established sector or industry. For example, peer-to-peer online platforms such as Uber and Airbnb have used apps and websites to disrupt the personal transport and accommodation sectors, respectively, creating challenges for established players like taxi companies and hotel chains.
Digital disruption is also reshaping Australia’s financial sector, as FinTechs leverage tech-powered innovations to challenge the dominance of banks.
The key innovations threatening the traditional banking sector include peer-to-peer lending apps, big data, blockchains, algorithms powered by artificial intelligence (AI) and crowdfunding platforms.
These innovations are allowing a new breed of financial lender to eat into the market share of traditional banks, by offering loans and other financial services that are potentially faster, cheaper, and less encumbered by regulations than those offered by financial sector incumbents.
What does digital disruption mean for Australia’s business loan market?
Digital disruption means that Australia’s business loan market is now more competitive – and complex – than ever before.
If you went back two decades, a handful of banks provided the vast majority of business loans. Approval times and repayment terms were relatively standardised, and interest rates varied by small percentages.
Fast forward to present day and prospective borrowers face an almost overwhelming variety of business loan options. Approval times on loans range from weeks (if you’re going through traditional banking channels) to minutes (if you’re relying on the AI-powered algorithms of FinTechs). Interest rates and repayment terms also vary massively, depending on whether you’re taking a traditional or non-traditional route to finance.
What does digital disruption mean for small businesses?
For small businesses, digital disruption has a range of implications.
On the one hand, heightened competition is leading to faster approval times, lower interest rates and more favourable repayment terms for borrowers. This means that if you suddenly need working capital to cope with the pre-Christmas sales rush, say, your chances of procuring an instant loan are much better than they were before FinTechs entered the fray. You can also be more selective about interest rates and repayment terms when choosing between loan options.
On the other hand, the sheer quantity of different loan options can be overwhelming for borrowers. WIth so much choice, it is hard to know where to start – let alone how to find the optimal loan for your purposes and financial situation. The rise of unregulated lenders also creates the risk that your loan provider could be a scammer.
One way of getting the best of both worlds – of making the most of heightened competition while not getting overwhelmed by choice or ripped off by scammers – is to seek support from a business loan specialist. Ironically, such specialists often leverage the power of digital technology themselves, using AI to instantly search and compare loan options, providing you with individually tailored finance without the hassle.
At Make It Cheaper, we have intimate knowledge of both the traditional and non-traditional loan markets. Our expert loan brokers can help you find a small business loan for your unique purposes and financial situation. Compare business loans with Make it Cheaper or call us on 1300 098 338 and speak with a Business Lending Expert today.