NEOBANKS: SMEs
THE NEXT FRONTIER Australia’s open banking environment and an SME community hungry for new funding options has led Edo Omoniyi, Co-Founder of Cape to head Down Under By almost any metric, buy now, pay later (BNPL) has found a natural home in Australia. So-called ‘soft credit’ providers such as Klarna, Afterpay, Humm, Zip, LimePay and LatitudePay have already staked their flag in the territory, allowing consumers to defer payments for purchases. AfterPay alone saw the value of its transactions double last year, from A$5.2billion to A$11.1billion. During the 2020 online holiday shopping season, it is believed one in three Australians made a BNPL transaction. In March, Australia’s biggest lender, Commonwealth Bank, revealed that it’s throwing its hat into the ring with its own offering, while PayPal announced that it would launch a BNPL option in Australia this June. From clothing to conveyancing services, consumers are falling over
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offers to ‘spread the cost’, often for zero fees. But what about businesses? Various studies put the funding gap for Australian SMEs at between A$70billion and A$103billion. While that is partly being addressed by the federal government’s Small Business Stimulus/ Relief Package, announced in January in response to the pandemic, it’s been estimated that as many as 160,000 of Australia's two million small businesses won’t survive having their cash flow choked off by the crisis. That’s where small business financial provider Cape, which offers a ‘recession fighting’ business credit card and expense management capability for SMEs, has spotted an opportunity to step in. “There hasn’t been a massive focus on BNPL for SMEs so there is a huge opportunity there. We can understand businesses, provide them with more choice and deliver a brilliant way of lowering borrowing costs,” says co-founder and COO, Edo Omoniyi. Developed in the UK, Cape is the brainchild of former 11:FS staffer Omoniyi and ex-Funding Options MD Ryan Edwards-Pritchard. Powered by open
banking, it’s due to launch first in Australia where SMEs find traditional credit models unfit for purpose, says Omoniyi; they are too rigid and data-poor, especially in a COVID-impacted world. “Look at the current route that lenders or banks use to try to assess the picture of an SME, or assess risk – it is pretty rigid and wooden,” he says. “They wouldn’t seek the information you need to have an up-to-date accurate picture of a business. That’s the space we can occupy. “We’re simply trying to solve the issue of access to working capital for SMEs. For example, if you are a relatively new business, you don’t typically have the track record that a traditional lender will require. They might instead want a personal guarantor or secure a line of credit against your home. “What we want to do is knock down some of those barriers to credit for SMEs, remove all that unnecessary complexity and provide a flexible solution.” Cape is one of a growing number of fintechs that are chipping away at the old ‘one-size-fits-all’ approach to business banking, which never really suited the SME multiverse.
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