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Santander and eBay have teamed up to offer loans to small- and medium-sized businesses (SMBs) in the UK, according to the Financial Times. The Spanish banking giant’s app, dubbed Asto, will start to offer loans to the over 200,000 SMBs in the UK that sell products on eBay. Users will be able to access funds in "a matter of minutes," according to Sigga Sigurdardóttir, chief executive at Asto.
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Under the partnership, Santander will be able to connect to eBay’s data and receive information on sales and cash flow, among other things, to better identify prospective SMB customers. Additionally, receiving such data will help Santander develop a stronger credit decision-making process. eBay already partnered with Square in 2018 to offer a similar product to SMBs in the US.
Here’s what it means: Santander has launched other stand-alone apps recently as part of its digital strategy, but focusing on SMBs may be particularly attractive.
- Launching new products as stand-alone offerings can help Santander overcome a significant barrier to innovation. Asto was developed in-house by Santander in 2018, as part of the bank’s four-year €20 billion ($22.4 billion) digital and technology investment plan, which aims to help fight back against challengers and big technology groups entering the finance space. The bank’s other stand-alone apps include Openbank, a digital bank that initially rolled out in Spain and is now expanding to Germany, with plans to launch in the Netherlands and Portugal later this year. Building new solutions in-house, yet as stand-alone offerings, likely helps Santander maintain ownership of the services without having to depend on its legacy processes, which can be a barrier to launching new, agile solutions.
- Asto will likely see high demand from SMBs, which continue to be underserved by financial services companies. There are 5.6 million small businesses in the UK that employ over 16.3 million people. Almost 3 million SMBs in the country struggle to stay on top of their finances, according to a new study from Funding Options. Additionally, only 41% of UK SMBs can access capital via their preferred funding route, and of those that have received funding, 34% said they couldn’t get enough capital to finance their investment plans. This suggests that UK SMBs need new ways to access funds.
The bigger picture: This partnership may help Santander compete with the likes of Amazon — a fight that incumbents should take seriously.
- Big tech and alt lenders are out to take the incumbent’s market share. Incumbent banks like Santander are increasingly being threatened by big tech companies, like Amazon, that are moving into finance — 70% of global consumers would switch to a big tech provider for banking services, according to a report from Capgemini and Efma. And while alt lenders have yet to dip into incumbents’ business lending market share, big tech companies could accelerate this threat — and banks should respond to this issue sooner rather than later. Amazon Lending already launched in 2011, and in 2017 reported it had originated $3 billion in loans; of note, the service is only available to businesses selling on Amazon via an invitation. Additionally, PayPalsurpassed $10 billion in loans originated earlier this month.
- Hence, incumbents need to re-evaluate their strategies to ensure they can continue to provide services to customers where they need them. Sixty percent of all small internet businesses receive 50% of their online sales from sites like Amazon. So, teaming up with e-commerce platforms is likely a lucrative way for incumbent banks to fight back against big tech and alt lenders, and ensure they can secure their market share in the future.
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See Also:
- US open banking fintech unicorn Plaid has launched in the UK
- Global Payments is acquiring TSYS for $21.5 billion
- Lendy has collapsed amid a UK watchdog investigation
Source: Business Insider – feedback@businessinsider.com (Lea Nonninger)