Banking News

Concerted response to RBA SME credit competition push

(28 February 2020 - Australia) Australian Big Four major ANZ has expanded the group’s ‘Quick Assist’ small business funding program by A$9 billion and increased the maximum credit limit from A$150,000 to A$500,000.

The initiative is designed to provide faster credit approval turnaround times for 40,000 current ANZ small-and-medium sized enterprise (SME) customers with timely access to credit. The bank uses existing customer information to inform its credit decision to save customers from re-submitting financial position details.

“These process improvements for our small-business customers will save them time and provide them with more money to continue running or growing their business. Time and money are two of the biggest factors for small business operators. They often don’t have enough time to get things done, and they can’t always get the money they need fast enough. We already have a history with these customers, so we should be able to make quicker decisions than we have been, and with these improvements now we can” stated ANZ Group Executive Australia Retail and Commercial, Mark Hand.

Targeted relief of well publicised small business working capital constraints has led to the Reserve Bank of Australia (RBA) demanding enhanced credit support for the SME segment crippled by inadequate cash flow.

“Major banks are not doing enough to provide small businesses, entrepreneurs and start-ups adequate and affordable access to finance. Lending to small businesses is dominated by the major banks, and there is less competition in this market” said RBA Assistant Governor Christopher Kent.

East & Partners research indicates the concentration of primary Big Four SME lending and transaction banking relationships has reached a record high despite the advance of neobanks, Fintechs and non-bank lenders.

Online small business lender Prospa affirms that it is up for the challenge by highlighting in its view banks will continue to focus on a narrow section of an SME market estimated to have grown to A$20 billion in value. Prospa is focused on shorter tenor unsecured loans to SME customers who have been turned away from traditional bank funding sources.

“It still looks like a very underserved market. This is not new that the banks have products in this space and they're focused on this space” stated newly announced sole CEO Greg Moshal as co-founder Beau Bertoli shifted to the role of Chief Revenue Officer. “Prospa’s focus is to keep lending to the broadest possible range of small businesses – something the big banks may well struggle with, for all their big talk” said Bertoli.

ANZ’s move follows NAB launching a digital application process allowing small businesses to borrow A$100,000 without traditional collateral requirements such as business plant, equipment, lending against the personal home or equity.

CBA also announced a renewed focus on small business lending as part of the group’s strong H1 2019/20 results briefing headed up by its new business banking chief, Mike Vacy-Lyle. The bank planned to use improving conditions and the strength of its operations to capture millennial customers and business owners, by launching a fee-free business transaction account.

"We'd like to invest in the business banking market in particular. We have seen a continued and strong uptick with younger customers who are using us as their primary financial institution ... that's a result of our investment in digital. That’s part of our best everyday banking proposition and our promise to make business banking easier and so a number of those segments are a real priority for us” commented CBA CEO Matt Comyn.