Technology and Working Capital Finance

Abstract

We study the role of technology in providing working capital finance to small and medium-sized enterprises. Our analysis discusses the variety of forms of working capital and the range of ways that it can be provided. It also examines some prominent case studies, including: Ant financial services; OnDeck; Kabbage; Biz2credit; Amazon Lending; Market Invoice and Funding Circle. Some of these firms are successfully tapping niche market serving the demands of firms too small to obtain credit from conventional banks. However, the magnitude of this type of lending remains small compared to the overall working capital finance market which continues to be bank dominated. Our main conclusion is that, while technology has the potential to significantly lower costs and improve the access of smaller firms to short-term finance, there is still a long way to go for these benefits to be fully realised and doing so requires a range of supporting policy measures.