The Future Of Lending – Blockchain
The world has become a significantly smaller place today, even if you compare it to what is was a decade or so ago. With world economies opening up, markets becoming more globalised, businesses world over have percolated into different markets leading to more job opportunities, competition and over all giving rise to a healthy market for all, whether it is big multinational companies or small scale businesses.
While big firms are great, it is these small scale enterprises, or SMEs that really form the back bone of any economy. Small scale businesses are a corner stone for the economic development of a country, which is why it is that much more important for a business environment to be conducive to SMEs, but sadly that is not always the case.
Take the funding scenario that we currently have. Loans and financial aids are essential to small scale and medium scale enterprises and yet the way that our banking systems functions, it almost discourages SMEs, if not makes it impossible, for them to get funding from banks. The existing competition, breaking into a saturated markets etc. discourages funders from investing in these small scale companies.
As CEO and founder of Wish Finance Eugene Green says,“Small businesses play a significant role in the modern economy, as they hire more people, pay more taxes, strengthen their local communities and eventually propel the growth of the economy. However, SMEs consistently report access to capital being one of the most important factors of success, as getting unsecured business loans still remains a large issue for them. In fact, SMEs are the most underbanked business category worldwide and Asia Pacific is the region with the least banked SMEs in most of the countries.”
Block chain to the rescue
Speculated for its rather path breaking approach to how we currently look at finances, Block chain has gathered attention, both positive and negative. While traditionalists have had a cautious approach to this new wave of financial tech (i.e. Bit Coin, digital currency), the technology itself offers flexibility, ensures transparency as well as security in this existing system.
There is a considerable rise in the use of Block chain across various industries. This innovative technology has enabled SMEs to bypass the strenuous process of borrowing money in the traditional way from the bank. Avoiding collaterals and planning fair interest rates based on the companies’ real cash flow rather that its assets are some of the advantages that Block Chain lending offers and traditional banking can’t. With access to POS terminal infrastructure Block Chain can also look into real time financial transactions along with the local market data score. Loans can be approved as early as 24 hours, with repayment deducted right at the point of sale with a per cent of the customer’s payment going towards payment of the loan.
Transparency and security is another feature that has been chalked out well by Wish Finance. Combining performances of the company in the Block chain to the Company’s portfolio makes the entire process open for both the lender as well as the borrower and even to potential investors in the future. This is also a great feature to help future endeavours, fund projects, apply for approvals, improve predictability and accountability of the company and the overall value of the company in the public eye. This new wave of creating more transparency in investment will make a more investment friendly environment for SMEs.
Where is it now
While Block Chain and its many alluring features sound good enough to take over the marketing and business world today, let us not forget this is still a very experimental, and can only be used by financial bodies willing to take it up. The good news is that major banks all over the world are taking a serious look at Block chain technology, in one form or another.
This technology might still be at the periphery of the financial circuit and not made it to the core business of these banks, but it is not being neglected or labelled as illegal either. Companies that are giving way to this new wave of financial tech are Mizuho in Japan, who recently announced their partnership with Microsoft with an agenda to take up Block Chain in syndicating loans. J.P. Morgan, an investment firm in the US has moved in the favour of Block chain to speed up loan transfers making it quick and easy. Wish Finance is also open to lending in Hong Kong and Singapore and will look to grow in other markets in the near future.
This change in attitude could be attributed to the disruption of traditional financial methods that new technologies are causing and smart businesses know that they need to adapt to changing environments. Incorporating a new way of dealing will be a slow grind but its growth and popularity is quite guaranteed as long as it promises to make the world a more transparent and open place.