The Fintech Effect

This UK fintech is taking on big banks with business loans — and one key EU law is driving it

Key Points
  • U.K. digital invoicing platform MarketInvoice is launching business loans to its customers
  • MarketInvoice said the loans will be funded through its digital platform
  • CEO Anil Stocker told CNBC the firm was taking advantage of an incoming EU rule that forces banks to open up their customer data to third parties
Market Invoice co-founders Ilya Kondrashov, left, and Anil Stocker, right.

A digital invoice finance platform in the U.K. will provide business loans to its customers for the first time, it was announced Wednesday.

Financial technology company MarketInvoice enables businesses to sell their unpaid invoices to provide working capital.

The firm said it would expand into the business lending market, pitting it against established players such as U.S. listed peer-to-peer lender LendingClub and Britain's Funding Circle. The latter raised £82 million ($100 million) in funding from venture capital investors earlier this year.

Peer-to-peer lenders connect lenders to borrowers through an online platform. Businesses apply for a loan and are matched with an investor. They then repay the loan to the peer-to-peer platform, which is then distributed to the investors.

CEO and co-founder Anil Stocker told CNBC that MarketInvoice will take advantage of an incoming European Union regulation called the Second Payment Services Directive (PSD2), which forces banks to open up data about their customers to third party companies.

"PSD2 is a regulatory change that is going to be a real catalyst for us because we're able to get access to SME (small to medium-sized enterprise) customer information," Stocker said in a phone interview Tuesday.

"We can use things like machine learning and artificial intelligence to build better credit scores with this data. I think the banks are starting to realize that this world they've had guarded around customer data for so long, now it's starting to open up."

MarketInvoice said the loans will be funded through the company's digital platform.

"For the loans, we have a marketplace model in the sense that investors put money into loans," Stocker said.

"They're divided into high net-worth individuals and institutional investors. About 50 percent of loans are institutional funded, while 40 percent are from high-net worth investors."

Businesses will be able to borrow from £10,000 to £100,000 over a 12-month term with no early repayment fees. The loans will be available to businesses with a minimum turnover of £70,000 and which have been trading for at least six months.

Open banking

MarketInvoice's Stocker told CNBC there would be "a lot more" firms entering the market with the introduction of the EU's new law.

The regulation would adopt a concept known in the fintech world as "open banking," which requires banks to open up their payments infrastructure and customer data to third party firms.

This idea is also being embraced by Britain's Competitive Markets Authority, which has set out measures to enable customers to share their data with other banks and third parties.

Business lending as a whole is a market that has been traditionally dominated by banks. But some warn that even tech giants, such as Google and Amazon, could be set to disrupt it.

Another British peer-to-peer lender, Zopa, is planning on launching its own bank. MarketInvoice appointed Zopa's founder and former CEO Giles Andrews as its chairman earlier this year.

As the EU pushes for banks to open up their customer data to third parties, Stocker believes his platform will be well poised to take advantage.

Peer-to-peer lending 'here to stay': Zopa CEO

"In the backend, how we collect all that information, is we pull lots of data points. Banks have very few data points whereas we have a much richer picture," he said.

"The more loans that we do and the more transactions that we do basically make that model better and better."

MarketInvoice said it has beta-tested business loans for three months, and that this was met with positive feedback.

MarketInvoice 'definitely looking into' partnering with banks

Stocker added that, as the EU's new rules come into play, fintech firms and banks should be encouraged to collaborate and partner.

"We're definitely looking into partnering with banks but at the moment we're pretty happy with our model," Stocker said, when asked whether his firm was considering partnership.

He didn't comment further on whether MarketInvoice company would seek to team up with a bank.

MarketInvoice claims it has funded, to date, more than 17,000 invoices totaling £1.6 billion.