Trust is a very valuable thing. It’s defined as something one can rely on, and have confidence in. Once, it was synonymous with certain figures in public life – the neighbourhood doctor, the local policeman, and very probably the town’s bank manager.
Sadly, those days are gone. Since the economic downturn of 2008, public trust in the traditional financial services sector has been at an all-time low. With taxpayer money used to prop up the banks, but few apparent changes in the working of the Square Mile and other decision-making centres, many people have developed a deep cynicism about those running the banking institutions. It’s against this backdrop that alternative finance has risen to prominence, and I would argue that the common disillusionment with the traditional world of finance has been to our advantage. Where the banks are now often perceived – rightly or wrongly – as remote, lacking in transparency, and untrustworthy, our new, upstart industry appears fresh and untainted, ready to adapt to customers’ needs, and eager to listen to their concerns and opinions.
But it’s not all sunshine and roses. There’s still much work for us to do. I’ve said before that there are too many SMEs that either haven’t yet heard about us or that are still wary to try something so novel and unfamiliar. We come back to that concept of trust – how to build it, how to earn it, and, once we’ve won it, importantly, how to retain it.
Again, there are lessons to be learned from the banking mainstream here – lessons in what not to do. They’ve taken their business customers shamefully for granted, and assume they’ll put up with any amount of poor treatment and neglect. The alternative finance industry doesn’t have that luxury – not that we’d treat our customers with such contempt, having worked so hard to woo them and win them. Much of our business comes from word-of-mouth recommendation, so we’re really only as good as our last deal. The small business community is tight-knit, healthily cynical, and loath to waste time. That’s why Boost Capital’s application process is quick, hassle-free, and as efficient as possible. Our business loans are unsecured, simple, and rapidly processed. We pride ourselves on excellent customer service. But, it seems, we’ve yet to relay all of this persuasive information to many of Britain’s business owners.
We should be talking to groups that are currently under-represented in the alternative finance space. Female business owners, for example, are still too thin on the ground, so we must present our offering to them in a way that appears relevant to them and their enterprises, making it clear that we want to learn from our customers and grow with them. Alternative finance shuns the one-size-fits-all business lending model that’s so prevalent among the high street banks, but we clearly aren’t getting that message across sufficiently to the business community at present. There’s a better marketing job to be done, highlighting the robust system of consumer protection that the industry has chosen to build into its fabric. And I’ve often mentioned, too, the importance of the role of the commercial finance broker network in informing SMEs of our presence.
But it’s not just about wooing the general public. There’s the legislators, too. We may all be a little tired of the parading and posturing of our politicians in the wake of the recent general election, but there can be no denying the importance of the role of those in Westminster in the ongoing development of our industry. It’s these leaders and policy makers who will have a huge influence on how alternative finance grows in the coming years, and there’s clear evidence that many MPs are pretty clueless as to how alternative financial products work.
There was an interesting report called Banking on Innovation published by public affairs body Interel last December, which analysed political attitudes towards recent innovations in the financial services sector, including the alternative finance industry. What it revealed was that our political class is being largely left behind by the rapid changes in consumer and business funding being driven by technology. The last Government said it wanted to see more diversity and innovation in financial services, but the Interel survey polled about a quarter of MPs, and it emerged that more than a third had never heard of or had a very poor understanding of crowdfunding or peer-to-peer lending. And, as is so often the case, this ignorance rapidly morphs into mistrust – almost half of the politicians expressed reservations about how trustworthy alternative providers are.
We must lobby our law makers to help them understand the business funding revolution that’s taking place on their watch. As I’ve always said, once people understand how our world works in practice, they typically become rapid converts. The figure that I often repeat – but it exemplifies the point I’m making – is that about seven out of ten Boost Capital customers return for a second or third tranche of funding. That’s hard evidence that what we do works for SMEs. Obviously, politicians represent the people, and they must better understand the lessons already being learned about alternative finance by the businesses in their constituencies. Having the backing of politicians and Government is seen as a measure of trust by business owners, so we need to do more to tell them the good news story of how alternative providers are helping small firms grow right across the UK.
Trust is a currency in its own right. Alternative finance is currently building up its reserves, earning the public’s trust by proving ourselves useful, reliable, and worthy of their confidence. But we must remain aware of how easily the banks devalued their huge store of faith and goodwill through complacency and arrogance. Our hope is that trust in us will only grow as we mature and become more familiar to businesses and politicians alike. I think if they see what we do, they’ll find much to like and admire.