Flush With Cash, The Banks Still Do Not Lend To Business

Little wonder then that the banks prefer lending to the treasury over lending to small businesses. They not only earn an outrageous premium over cost, but take no credit risk and gain praise for regulators for playing it safe. In contrast, fintech faces a very different profitability equation. Fintech lenders do not collect deposits. Their costs are often administrative or technical, and when they borrow, they do not enjoy the same low cost of funds that banks do. At the same time, small businesses, neglected as they are by the banks, are more willing than they once were to pay relatively high rates for credit. Because the fintech lenders are not harassed by regulators to keep it safe, they have greater incentive than ever to pursue small business lending.

Fintech has accordingly and eagerly stepped up its efforts to provide Main Street with credit. Smaller regional banks have noticed the trend and for the sake of future business have strived in many cases to partner with fintech firms. The big banks have done less of that. They may be content with their treasuries for the time being, but they will suffer when they want to return to Main Street lending and discover that they have to fight hard to regain market share.

Read the full article at Forbes

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2020-11-11T12:55:50+05:30November 11th, 2020|Categories: Banking & Finance, FIAKS daily, Finance, Fintech & Technology, Regulator|Tags: |Comments Off on Flush With Cash, The Banks Still Do Not Lend To Business
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