The emergence of Amazon as a finance provider, and other large technology firms like it, into the SME lending market signals a disruption of old business models, according to Oliver Prill, CEO of Tide, speaking on a panel at the Global Business Banking Summit in London this week.
“90% of the UK business banking market is dominated by banks who have the same business model,” said Prill. Amazon making steps into the sector, he added, will open up the industry and create a segmented future where different business banking models all run in parallel.
Also on the panel was James Gibson, product owner at Revolut for Business. He said that Amazon places its products into a centralised interface for users to interact with, making decisions much easier. The technology firm, he added, creates a strong user experience because “it’s part of their DNA”.
“New entrants to the market will add to this agenda,” he said. “Customers want to be able to engage with their money easily without distractions. That comes down to [products] looking good on the page and systems having a good flow.”
A 2019 study from Fraedom found that 57% of SMEs want to move to an online/mobile banking business environment, while 95% of commercial clients who bank digitally in their personal lives expected to do so at work as well.
“We’re going to see a proliferation of data around SMEs, and the ecosystem will have some interesting partnerships emerging,” said Andy Booth, managing director for business banking at Barclays. “There will be some natural points of aggregation with new players, who will build trust with consumers over time. Banks haven’t covered themselves in glory over the past few years, but customers and SMEs still have trust in them when it comes to handling their data.”
Gibson said Revolut has started with something “fundamentally better” than the SME offerings already in the market. “Being able to create products from scratch is a major advantage. The risk I see for legacy banks is that they’re in a position where they see new entrants coming in like us and try to create a product like ours.”
Prill finished the panel by questioning the future of bank branches. “Just like some people will go to Amazon, and others will rely on their local retailer, there will always be people who want to use the branch. Yet there is a commercial reality, where [banks] will have to answer to shareholders about having this enormous cost base. That reality will see different business models emerge focused on different services, but you simply cannot offer a large branch network without charging for it.”