Earlier this year I wrote and released a white paper in advance of the LendIt Conference that focused on the personal loan marketplace (The Hourglass Effect).  It was a combination 10 year retrospective and a forward looking view that shared my thinking about what could happen tomorrow and beyond.  The paper was long and full of economic jargon and more a labor of love than what the typical reader would call “accessible”.  But to my surprise, the paper was very well received, having been downloaded thousands of times with zero negative feedback. And an even bigger surprise was that the predictions in the paper are ALL coming true.

So, when an opportunity arose for QED Investors to present about Small Business lending trends at Money2020 it seemed obvious that another white paper was in order.  My first thought was to keep it simple and write the children’s book version of a white paper — lots of pictures and very few words — but I quickly dismissed that idea because it isn’t who I am.  Instead, I was (somehow) able to rope in our good friends at Oliver Wyman to co-author an in-depth paper with me (thanks Peter Carroll!)  The data that Oliver Wyman has assembled about the Small Business lending ecosystem and the perspective they’ve been able to create given their position in the marketplace (the premier consulting firm in the financial services industry with direct access to the C-Suites of Banks) can only be thought of as “unparalleled”.  The paper wouldn’t be what it is without them.

So….feel free to download the paper, digest it, criticize it, discuss it, share the download link with your friends, and add your comments below.

The Brave 100 – The Battle for Supremacy in Small Business Lending



  1. I had been hoping to read such insightful analysis, but instead found myself laughing at the fanciful leaps of logic. The ultimate conclusions may turn out to be correct. But if they are correct, it’s not because of the logic.

    As a former small business owner, I had a checking account, savings account, etc. which according to this author “proves” that the bank has “a significant share of mind” advantage with me over an innovator. I also had a relationship manager, which proves that banks enjoyed “a privileged position in my life as a small business owner”.

    Only someone who has *never* owned a small business could believe the above. My company was courted by numerous banks, like all the successful business owners I know. And like those others I would switch to an innovator in a heartbeat, and would have no bad feelings if I never had to deal with a bank again.

    That’s because in every interaction, the bank is out to nickel and dime small businesses with numerous ridiculous fees, arcane processes and superfluous bureaucracy that are inflexible with a small company, and in general are not pleasant to deal with.

    So in other words, the author of this study is misinterpreting the *necessity* of interacting with a bank, with the *desire* to interact with a bank. And that is a tremendous logical mistake.


    • Wow – my first critic. It’s about time!

      What’s sad is that I actually agree with much of what you’ve said and think if you re-read the paper you’ll see this. The paper points out the advantages that the Banks and the Innovators each enjoy, but by no means does it say that having an advantage means that it will be used. Think of it in terms of “potential energy” vs. “kinetic energy”. Using this framework, the Banks have quite a bit of potential that has yet to be actualized.

      And the negative points you make about Banks also are captured in the paper through the concept of “user experience” being a major advantage of the Innovators. Process and transparency are key decision criteria for many SMBs and it’s pretty clear that the Innovators are much better in this arena (i.e. – Digital DNA).

      So….thanks for the criticism and I think that if you take a close second read you’ll see that we’re actually not very far apart in our thinking.


      • Hey Frank, I really appreciate your open attitude in listening to feedback. It was obvious you spent considerable time and effort creating this paper, and I thank you for providing it to the community to foster additional conversation. And I thought all your conclusions at the end of the paper were very logically presented and well thought out. I wouldn’t be surprised at all, if all of them and of coming to pass.

        And I understand where you’re coming from regarding the idea of a “potential” advantage, versus actual/”kinetic” advantage. At the same time, in my opinion, even to call them potential advantages is a bit of an overstatement, because they more like paper advantages rather than actual. (In my opinion, the banks have too much institutional inertia and regulatory baggage to consider them realistic potential outcome/advantages). But I do see where you’re coming from, so I will just “agree to disagree”.

        By the way, I thought you did a great job of laying out the history of banking regulations and industry, and I learned several new things from your discussion.

        One thing I was surprised not to see, was mention of the community banks, and their role in the current landscape. These traditionally were the source of most small business loans, but took a huge hit in the Great Recession from which they never recovered (with large numbers closing down permanently, and almost no new ones opening up). Then a double whammy occurred, with newer regulations making small-scale community banks less profitable, and driving a wave of consolidation and increasing bank sizes. Again there were less community banks to make small business loans.


  2. Ian: Allow me to chime in, belatedly. I was Frank’s co-author.

    It’s funny, because I do actually own and operate a small business ($1.5MM revenue; 15 employees). But outside of running my own small business, I work for a consulting firm; and there, among other things, we do large-scale surveys of SB owners on things exactly like this. (I can share some of the data with you if you’re interested.)

    The truth is that the vast majority of small business owners, if asked, could not name a single innovator identified in the article; a few could probably name LendingTree, LendingClub or Prosper. But they all know the name of their bank, and despite a few gripes, they generally think well of their bank and their banker. And when they want credit, their bank is by far the first place they turn. They also switch primary bank extremely rarely – – roughly every 12-14 years. That simply isn’t consistent with the idea that owners feel put upon in the way you say you once felt. Perhaps your bank was worse than average? Perhaps you were a more demanding owner than average?

    I’m not starry-eyed about the brilliance of banks’ small business services. I spend a goodly amount of time and energy telling my banking clients how to improve their small business strategy; and I do think banks need to pay attention to these innovators, lest they start to gain material business share (and especially if the innovators were to focus less on credit and start attacking the parts of the business that are actually profitable: checking, credit cards and merchant services).

    But I am equally not starry-eyed about the innovators, who strike me as having a long way to go before their threat materializes in a substantial and damaging way.

    All the best,


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