Global Industry Study Reveals Fintech Lenders are Evolving Fast and Moving Up Market

Rhea-AI Summary

New research by Economist Impact, in collaboration with Salesforce, shows a significant shift in small business lending as traditional banks embrace fintech partnerships. 76% of banking leaders view such collaborations as the future, allowing for faster and more effective lending solutions. The study highlights that fintechs are expanding into larger loans, previously dominated by banks. The global lending market remains robust, and with fintechs leveraging technology, they are capturing unmet borrowing needs, especially amplified by the COVID-19 pandemic.

Positive

• 76% of banking leaders see partnerships with fintechs as essential for the future of small business lending.
• Fintechs are expanding their loan offerings to include larger amounts, indicating a shift in market dynamics.
• The global average credit to non-financial corporations rose to 110% of GDP, showing a growing lending market.

Negative

• Global lenders cite significant constraints including pandemic fallout, technology scalability, and margin pressures.

New Economist Impact research study shows changing mindset of traditional banks to partner with fintechs; 76 percent of industry leaders see partnerships as the future for small business lending

AUSTIN, Texas--(BUSINESS WIRE)-- Q2 Holdings, Inc. (NYSE: QTWO), a leading provider of digital transformation solutions for banking, today released a global research study conducted by Economist Impact in collaboration with Salesforce. Entitled What is shaping the ecosystem of small business lending?, the study reveals a rapidly shifting landscape in small business lending where “partnership thinking” is increasingly the norm, enabling small business lenders to move more quickly, effectively and at scale with the help of technology.

The new research shows traditional banks’ competitive strategies have evolved away from rivalries with fintechs, such as payment players, peer-to-peer lenders and crowdfunding platforms. More than three quarters (76 percent) of survey respondents see collaboration among traditional banks and fintechs as the future.

“Traditional lenders are realizing that collaboration with fintechs is accelerating the speed of innovation and driving a better user experience,” said Q2’s Chief Strategy Officer Will Furrer. “Q2 is committed to enabling these emerging partnerships and is excited by the faster, easier application and funding experience for borrowers, as well as the increased profitability for the bank and fintech participants.”

Today, fintech lenders are most active in the smaller loan space (under US$50,000), but are gaining traction in the larger-dollar realms. Although 50 percent of alternative funders have an average loan size of US$50,000 or less; 41 percent are issuing loans between US$50,000 - $500,000; and 7 percent are focusing on loans of US$500,000+, which has been the domain of traditional banks.

The size of the global lending industry is large and growing. Data from the Bank of International Settlements (BIS) reveals that the global average of total credit to non-financial corporations stood at 110 percent of GDP at the end of 2020, up from 95 percent a year earlier. With the arrival of fintechs on the small business lending scene, new battle lines have been drawn between traditional lenders and challenger banks.

According to the study, alternative funders are seizing the opportunity to serve the unmet needs of small business borrowers, and they’ve started to gain market share. Faster and nimbler fintechs are leveraging automation, artificial intelligence, cloud and APIs to issue more small business loans, particularly as COVID-19 exacerbated the need for liquidity among small businesses at the very time that traditional banks were shying away from increased risk.

Additional insights from the global Economist Impact report include the following:

• Megatrends Constraining Worldwide Growth - Global lenders report three significant constraints hindering their growth: fallout from the pandemic, scalability of technologies and pressure on margins.

• Near-Term Impacts - 43 percent say new technologies, such as automated decision making, will have the biggest impact on their businesses over the next 12 - 24 months. This scored well ahead of the pandemic’s economic recovery, which ranked second at 36 percent.

• Personalization is Vital - 71 percent say personalization and individualization is vital for building customer loyalty, with more mature digital banking adopters in North America and Europe strongly agreeing at 92 percent and 94 percent respectively. Newer adopters in Australia/New Zealand strongly agreed at just 28 percent.

• Environmental, Social and Governance (ESG) - 73 percent say ESG is playing a role to better address the needs of the underserved and underbanked individuals. As investors increasingly apply these non-financial factors in their analysis process to identify material risks and growth opportunities, they’re in alignment with global trends toward considering community-building, non-financial factors in lending.

Download the full Economist Impact report, and register for the webinar on December 2, 2021: What is shaping the ecosystem of small business lending?

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About Economist Impact
Economist Impact combines the rigour of a think-tank with the creativity of a media brand to engage a globally influential audience. We believe that evidence-based insights can open debate, broaden perspectives and catalyse progress. The services offered by Economist Impact previously existed within The Economist Group as separate entities, including EIU Thought Leadership, EIU Public Policy, Economist Events, EBrandConnect and SignalNoise.

Our track record spans 75 years across 205 countries. Along with creative storytelling, events expertise, design-thinking solutions and market-leading media products, we produce framework design, benchmarking, economic and social impact analysis, forecasting and scenario modelling, making Economist Impact's offering unique in the marketplace. Visit www.economistimpact.com for more information.

About Q2 Holdings, Inc.
Q2 is a financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices worldwide and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211117005299/en/

Carly Baker

Q2 Holdings, Inc.

+1 210-391-1706

Carly.baker@q2.com

Source: Q2 Holdings, Inc.

FAQ

What does the new Economist Impact study say about small business lending?

The study reveals that 76% of banking leaders see partnerships with fintechs as the future of small business lending.

How are fintechs changing the small business lending landscape?

Fintechs are moving into larger loan markets, traditionally held by banks, allowing faster loan processing.

What percentage of traditional banks partners with fintechs according to the study?

76% of survey respondents believe partnerships with fintechs are crucial for future lending.

How has the pandemic impacted small business lending?

The pandemic has increased the need for liquidity among small businesses, highlighting gaps that fintechs are now filling.

What are the main challenges facing global lenders?

Global lenders are facing challenges such as the pandemic's aftermath, technology scalability, and pressure on profit margins.