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FinTech in the UK is driving better access to lending and leasing

Access to capital can mean the difference between business longevity and business insolvency. Many UK businesses, particularly SMEs, either lack the access to capital or they find it takes a long time to secure funding from traditional offerings.

In the context of the digital economy, lending and leasing customers, such as manufacturers, retailers and logistic firms, expect to be able to request quotes seamlessly and in a timely manner. Customers don’t have the luxury of waiting for weeks which could cause issues within their supply chain and impact on the ability to fulfil current and future customer demands, or the payment of suppliers for services rendered.

According to a report by PWC (2017) the global asset finance market in 2015 was worth more than 3.9 trillion pounds. With the rise of disruptive non-banking entities providing competitive financing solutions, lending and leasing is becoming a high growth and highly competitive sector for traditional service providers to continue to play within.

There is a golden opportunity for traditional banking and finance institutions to tap into the lending and leasing market, however, a key challenge is that their systems are not fit for the digital age. This means that businesses go for the path of least resistance and choose a challenger offering, which are able to provide a quote in a matter of hours rather than days, weeks or months.

The prevalence of inflexible systems, manual processes, and siloed data management at traditional banks can lead to a high level of operational inefficiencies. There is a clear need to provision for an overhaul and consolidation of core IT infrastructure.

The key to providing an enhanced lending and leasing customer experience is to work with third party tech providers. By forming partnerships, banks are able to tap into digital technologies that can transform their processes to enhance customer experience. The provision of a multi-channel self-service, provides real-time business insights leading to greater productivity and flexible workflows.

A flexible IT architecture through the opening up of APIs is the key to achieving a competitive advantage, such as loan processing and collection, screening, credit scoring and underwriting all as one end-to-end process.

At the same time, financial technology is transforming the way entrepreneurs and SMEs apply for loans in the UK, driving greater equality to access financial products and to support their growth. These businesses are currently being under-served by traditional financial providers which may become irrelevant if they do not catch up with demand.

Small and growth businesses previously were at the mercy of local financial providers can now access a range of services including peer-to-peer lending, accounting software, financial management, insurance, and business valuation services – all as one complete offering.

Source: FinExtra

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What can the mortgage market expect in 2019?

The mortgage market saw a fair amount of product innovation last year and that it likely to continue into 2019. In particular, equity release and the later life lending market is set to grow further as the older population increases. ONS figures show that in 2017, around 18.2% of the UK population were aged 65 years or over, up from 15.9% in 2007; and it is projected to grow to 20.7% by 2027.

Bank of England base rate went up twice last year to end 2018 at 0.75% – the first rises in a decade – but will the rate go up again in 2019? It is unlikely there will be any movement until we know what is happening with Brexit and even then any increases will be small and steady.

House sales have fallen in the past two years and RICS believes sales volumes will weaken by around 5% in 2019. It also thinks house price growth will continue to fade in the first half of the year and come to a standstill by mid-2019 taking the annual figures to a static 0%. Others agree that house price growth will stagnate with national estate agent Jackson-Stops predicting an average increase of 1% this year and Strutt & Parker forecast 2.5% growth.

NAEA Propertymark reports that the number of house hunters registering with estate agents is down as is the supply of housing for sale. It says almost two thirds (62%) of estate agents think the trend of renovating rather than moving will continue this year.

We have seen new lenders come into the market and more are set to enter in 2019 and they have the advantage of starting their journey with new systems. Technological development is going to be even bigger this year and we will see its impact throughout the whole housing chain. From viewing houses in the comfort of your own home to the rise in digital brokers, improvements in mortgage applications, enhancements in the surveying process and conveyancing journey.

Fintechs will work even more closely with established banks, building societies and specialist lenders. And the impact of open banking, which is still in its infancy and is a year old this month, will accelerate as more people get to understand it.

It will be a turbulent year for the UK as it withdraws from the European Union. Competition among mortgage lenders will continue as interest rates remain low and mortgage lending is likely to tick along at similar or slightly higher levels to 2018.

Source: Mortgage Finance Gazette