At the onset of the financial crisis, high street banks significantly retrenched their lending activities, both to consumers and to small and medium-sized enterprises (SMEs). To fill the gap, a range of specialist lending models emerged, either in the form of new or re-directed challenger banks, the most successful of which pursued multi-niche strategies, or non-bank specialist lenders pursuing mainly monoline strategies.
Since the recovery of the economy, the big banks’ business models have returned to a more stable footing, with a dramatic fall in personal debt write-offs. As a result, other lenders and investors are concerned that the high street banks will return to the lending areas they left, threatening the new businesses that sprung up in their wake.
In this Executive Insights, L.E.K.’s Peter Ward, Diogo Silva, and Rob Wild explain why challenger banks and specialist lenders are right to be cautious, but highlight the many niches that remain sustainable opportunities, providing they take some crucial steps to ensure their ongoing success.