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This year. We're going Beyond.

Why big 4 bank shares are on watch

Big 4 banks like Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) may want to look over their shoulder when it comes to small business lending.

Why?

Well, there is an army of fintech companies hungry for the big 4 bank’s small business lending market share.

New kids on the block

Small business specialist lenders like OnDeck and global payments giant, Square (NYSE: SQ) are striving to capitalise on delays in the loans approval process.

According to the Australian Financial Review, OnDeck and Square are seeking capital to accelerate their penetration.

OnDeck revealed a new product called Lightning Loans, which uses an algorithm to approve borrowers in 90 minutes and deposit up to $100,000 in their account in less than two hours. It’s a fitting name when you compare this to what the big 4 banks offer.

If we roll over to the other side of the hemisphere, you have Square offering Aussie customers flat-fee micro-loans to ensure customers remain in its ecosystem.

Square customers can apply for unsecured loans up to $75,000 and secured loans of up to $250,000.

It leverages the customer’s existing information to automate the loan process so it only takes three clicks, with a response provided on the same day and the funds deposited the following day.

Is this cause for concern?

Given the immense competition in the small lending space, innovation remains key.

So, it’s no surprise that CommBank is focused on developing new products and forming strategic partnerships. Most notably, CommBank’s BizExpress Online tool promises to approve and provide as much as $100,000 to customers in 12 minutes.

In such an environment, I would monitor the return on capital of technological developments and the rate of customer churn.

If you’re more interested in ASX small-cap shares, check out the Rask Rockets Beyond program. You might want to hurry – the mission is opening to new members tonight!

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Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

Note: the report is 100% free.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

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