2019 Alternative Finance Predictions

With 2019 approaching, deBanked asked executives in the funding and payments industry if they had any predictions for the new year. We kept it pretty open-ended and received forecasts regarding technology, regulations, and the evolving relationship between fintech companies and banks. And yes, we also asked a few lawyers in the small business lending space for their two cents. Below is what they had to say:

“The hype around cryptocurrencies is nearly gone, and it’s time to focus on the more interesting part of it – the blockchain technology. In 2019 we expect to see first use-cases of such technology for logging and sharing data among lenders. There is a true potential for real-time data sharing which will help lenders avoid lending to clients which just took similar loans from other lenders, in a decentralized and anonymous way. This will allow the industry to overcome one of the challenges quick loan approvals bring: real time loans stacking.”

Ido Lustig, Chief Risk Officer, BlueVine

“We look forward to big changes coming. Four years ago banks still were not sure about Fintech firms. Now the banks are approaching alternative lenders trying to figure out various partnership options. We think in 2019 we will see banks engage in various levels of mutually prosperous partnerships…We believe new products will be launched in 2019 that will continue to support small business growth. And as the Alt Lenders are able to access cheaper cost of capital, it will give more options to small business owners.”

Robert Gloer, President and COO, IOU Financial    

Given the explosive growth of MCAs and the fact that MCAs have evolved from an early stage industry to a mainstream industry – MCAs have been around for decades – we expect regulation of the industry to become a reality. At 6th Avenue Capital, we believe regulation will be healthy for the industry and will reduce the industry’s bad actors, allowing those institutions that practice transparency and industry best practices to thrive.

As a former Chief Compliance Officer, I set up the company with regulation in mind. In fact, we are the only firm to be a member of both ILPA and SBFA, both organizations that are active participants working with regulators to help create a regulatory environment beneficial to both SMBs and SMB funders. The need for alternative credit, and access to fast capital, continues to grow and the industry is not going away with regulations. The winners in the MCA space will be those that adopt sound practices early.

Christine Chang, CEO, 6th Avenue Capital

“We will likely continue to see state efforts to enact disclosures in MCA and small business lending transactions. We will also likely see efforts at the state level to ban practices viewed as aggressive by elected officials. These efforts will lead to a weeding out of the weaker players in the space and will strengthen the companies dedicated to compliance and customer service.

Catherine Brennan, Partner, Hudson Cook

“A business slowdown (possible but hard to predict, at least by me) will test the effectiveness of algorithm-based credit granting.  I am not optimistic. Mid-market banks might start to purchase MCA-type technology and try their hand at selling it, albeit at a lower cost.”

Robert Zadek, Of Counsel, Buchalter

“Older, more traditional SMBs will broaden their lending horizons. In 2017, 30% of business owners looked for a small business loan online. The 70% who didn’t are predominantly older, and more traditional in their approach to seeking financing. In 2019, we will see a more aggressive push by SMB lenders to tap into a more mainstream audience of business owners who have not been looking online for financing options. This will be driven in part by increased competition between the SMB lenders, and a larger push by those lenders to market themselves to a broader audience of SMBs.”

Charles Amadon, VP of Business Development & Strategic Partnerships, BlueVine

“In 2019, we’ll see more and more retailers offer flexible, pay-over-time financing options and promotional 0% tools to drive sales and make gifting more affordable for customers. As customers continue to look for online pay-over-time options, we can expect to see savvy [merchants] taking advantage of these trends to both improve performance and meet the expectations of the modern shopper.”

Kate Levin, Vice President of Merchant Success, Bread

“Large corporations, from card payment organizations right through to banks, are making significant investments in reinventing themselves. I think some of them will be very successful in doing this…like Marcus by Goldman Sachs and also First Data’s Clover product. These both demonstrate that long-established companies are starting to really get it right when it comes to being innovative with fintech. I believe in the next five years, we’ll see other huge companies begin to get it right with fintech.”

Simon Black, CEO, PPRO

Todd Stone was a reporter for deBanked.