Banker's Guide to New Small Business Finance: Venture Deals, Crowdfunding, Private Equity, and Technology, + Website

Chapter 11What Innovation Means for Bank Lending

For readers making it this far without calling a headhunter, be rewarded with confidence that the banking business is going to be just fine. Even small business lenders and community banks will weather these changes and likely emerge with some interesting competitive advantages as the small business financing marketplace continues to evolve.

There are major changes still ahead and competition will likely be even more fierce for business, but those bankers/lenders willing to embrace change and leverage their franchise value will do well. Embracing change, though, may mean adapting to change more often than leading it. Much innovation in lending and other banking operations will be derived from non-bank companies’ decidedly lower levels of regulation. The author of an April 2013 article, “The Future of Banking—and Why it Won’t Be Determined by Banks,” said the following:

The day-to-day of banking is changing worldwide, and banks are not the ones driving the innovation. For instance, by some measures, Starbucks is among the 200 largest banks by deposits in the US, having $3 billion on their in-store card in 2012. Both Google and Amazon are also talking about providing finance to users of their marketplaces. At the other end of the economic spectrum, 31 percent of Kenyan GDP now flows through M-Pesa, which is so simple it can be operated on a very modest Nokia phone and has no physical bank branch presence.¹

Many questions remain ...