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Fintech Startups challenge “Big Banks” in Sweden

Den här veckan gästbloggar Ana Paula Picasso hos oss. Ana, ursprungligen från Brasilien, har ett stort intresse för tech och ekonomi och driver sidan Emerging Market Today. På senare tid har hon fått upp ögonen för svensk fintech generellt och P2P specifikt. Hennes artiklar har bland annat blivit publicerade i Business Insider och The Market Mogul.

In search of better deals and conditions customers turn to alternative finance for mortgages and loans.

The Swedish banking system is large in comparison to the Swedish economy and highly concentrated. Only four banks together (Handelsbanken, Nordea, SEB and Swedbank), have the market share of 70% of the lending market in the country. However, it’s becoming more common for consumers in Sweden to shop around for financial products.

In 2017, according to a report from the Swedish Competition Authority (Konkurrensverket), consumers only using one bank accounted for 47% of people surveyed, a fall from 14% from the previous year (61%). The reason to change banks or seek a second financial institution may vary, but according to a poll from YouGov, 1 in 3 people in Sweden feel they’ve been “fooled” or overlooked by their main bank.

Sweden’s Home-loan market: a US$392 billion business

In February 2018 the home-loan market size was US$392 billion and the 4 main banks (Handelsbanken, Nordea, SEB and Swedbank) hold the majority of the market (51% / 2017), there was a significant drop from the previous year. In 2016, the “big 4” comprised of 69% of the home-loan market, a decrease of 18%.

The other 49% of the market are going to alternative banks and other online fintech startups for loans. That comes to show that discontent customers are going elsewhere, seeking better rates for their home-loans.

P2P lending: a better alternative from traditional bank loans

Mirroring what’s happening with the home-loan market, individuals and small business are turning to P2P (Peer to peer) lending companies as a more viable alternative for personal loans. P2P lending is a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary ie. banks – it totally removes the middle-man.

The Swedish P2P personal-loan market still is fairly small (US$ 114 million / SEK 1 billion 2017) compared to the UK (US$ 1.55 billion / 2016) but is growing rapidly.

In 2016, Brocc came into the P2P lending scene. With the mission of making the financial market less concentrated and therefore, fairer and more accessible. Providing only loans to individuals at this point, Brocc’s motto is “Smart business for smart people”. In just the first quarter of 2018, their customer base increased with 300 % compared to the same period 2017. That’s an impressive growth for a market that has just began in Sweden.

Disruption in the financial sector is here to stay.

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