Oliver Wyman - How "new form lending" will reshape banks' small business strategies

you will have to write to Oliver Wyman to get a copy of this very interesting paper by Peter Carroll and Ben Hoffman, but it's worth it.  While the focus is on the USA, the paper is a great and concise description of how banks should be looking to transactions records to build  the strongest SME businesses, in this era when more and more SMEs do more and more of their business on credit cards.  It cites pioneers like Capital Access Network, Amerimerchant and OnDeck Capital, who have been discussed in our Forum.  Their key point, which I believe soon will apply equally to emerging markets (particularly for larger banks), is that this is becoming the standard way of driving SME business.  The article makes the important point that this approach allows banks to offer different types of credit products for SMEs, in particular standby lines, that SMEs often say they want, but rarely can get with the flexibility and responsiveness needed. They estimate the market for this as approximately 8 million lines for $80-120 billion, with a potential after tax profit of $1.5-2.5 billion.   It also notes how this approach not only reduces marketing and underwriting costs, but also loan administration. the article also points out that third party providers can provide platforms for running such programs for banks (as we well know, as several of them have partcipated in our discussions on emerging markets!)...and it points out that many of these (as is the case for our commenters) also have their own finance companies, opening up possibilities for dividing up markets and leaving the riskier prospects to the platform partners.overall, a very useful overview of this approach, and just 7 pages!  worth a read...write to OW for more...maybe they will comment further?matt