SME banking heats up as HSBC Kinetic lends £2 million in three months

HSBC’s mobile app for small businesses announced this week it had lent over £2 million in its first three months of offering the service.

One of the first digital banks to offer small business loans, Kinetic aims to offer quicker turnaround times for applications, with 60% of loans processed on the spot. The app provides loans of up to £10,000.

Kinetic is not the only significant SME offering from an incumbent player. NatWest launched Mettle in 2019, although it doesn’t have a lending facility.

While the big banks have set out to “challenge” themselves by creating in-house start-ups, dedicated specialists are also making headway in lending to SMEs.

OakNorth focuses on the “Missing Middle”, businesses that struggle to access fast, flexible debt finance. The solution is OakNorth’s bespoke ON Credit Intelligence Suite, which uses machine learning to analyse a range of data sources to understand each borrower’s business.

Allica Bank, granted its banking licence in September 2019, announced earlier this month that it had achieved the milestone of £1 billion in SME lending.

Both lenders highlight the use of technology to streamline and automate processes, bringing down the total workload. In a Financial Services Forum event earlier this year, Conrad Ford, Chief Product and Strategy Officer at Allica Bank said that larger banks such as HSBC have traditionally been better at providing either low customisation solutions for mass-market customers, or high-customisation, high margin solutions for large enterprises.

Historically, Conrad said, this underserved segment has been dealt with by “throwing people at the problem”, but with the decimation of branches, these relationship managers are disappearing.

“We’re going to see more specialised challengers – you can’t be great at everything.”

There is also a sustained challenge from B2C fintechs such as Starling and Monzo.

Ad campaigns

So far HSBC’s advertising for Kinetic has focused on the core theme of seeing the world differently. The campaign has included out-of-home, with 45 billboard ads across the country.

There was also a video ad (below), although HSBC did not disclose where this was displayed.