Marketlend Academy: What’s the problem with Fintechs in the SME space?

Marketlend CEO and Founder Leo Tyndall discusses how the problems with the FinTech industry as it applies to the SME space. If you want to read the full transcript, see below.



So, the issue with FinTechs in the SME space is the fact that the majority of investors and FinTechs have not identified how they can help the SME. They have identified that there is this open market with very little regulation where you can charge rights, which, in any other market, would be not acceptable. So, classic example, we’ve seen announcement by another FinTech saying you bu- uh-uh raise some money and it turns out that the rate that they tell the borrower is, uh, you know, in the teens, but then they have these additional charges, which, if you do the numbers, could possibly add up to 20 to 25%. If you go to the man on the street and say, “Would you like a personal loan?” And you want to pay 25%. He’ll say, “Go away.” But yet, SMEs all day long are turning around and committing to these types of returns. And why? Because it’s not crystal clear. And all that FinTech’s done is opened essentially a market to those FinTechs, or those venture capitalists, to be able to turn around and get a high yield.


You only have to look, for an SME, if thy want to understand where the problems are they just have to ask why are all these investors are jumping into the SME funding space. They’re doing it because the yields are so high for the investor. Now they’re doing it because they’re sitting there, with FinTechs, saying, “Hey look, I can get access to this market. This guy’s gonna tap the buttons, within six hours you’ll get the facility, and then he’s gonna pay us 20, 25%. And, by the way, what you may not know is if he pays out within three months, you’re not gonna get 25. You’re even possibly gonna get a higher rate of return because we’re gonna charge him for the full six months.” And this is where the problem in FinTechs is, is that they’re not looking at a longevity of the market. They’re looking at a short term play for them and then possibly IPO or something similarly, and they’ll be gone before everyone realizes that this isn’t a sustainable model.