How Network Finance is Accelerating SME Lending in Europe
Tanuj Pasupuleti (Bankify), Alfred Gruber (Fulfin) & Alex Mueller (Holvi)
Network finance accelerates SME lending in Europe by leveraging partnerships to overcome onboarding, risk management, and funding challenges across diverse markets. SMEs struggle to secure financing between €10,000–€50,000 due to fragmented, complex processes varying by country, regulatory constraints, and lack of unified KYC/data sharing. Customer demand centers on speed, simplicity, transparency, and cost, favoring consumer-like digital experiences. Successful network lending requires clear role definitions, regulatory compliance, explainable AI for credit decisions, and specialization through collaboration to deliver seamless, scalable, and customer-centric financing solutions.
"There will always be a better one. Look for that one and partner with that one. Specialize in what you do. Go deep and narrow instead of wide and shallow."
Summary
- SME financing in Europe faces challenges in onboarding, risk management, and funding, especially for loans between €1,000-€50,000. - Faster, simpler, and more transparent processes with consumer-like experiences are crucial for SME satisfaction. - Network lending offers a collaborative approach to share data, KYC, and leverage strengths across providers for better service. - Cross-border SME lending presents opportunities but also regulatory and data ownership risks needing clear agreements. - AI’s role in lending must remain transparent and explainable due to regulatory demands, improving decision-making while ensuring compliance.
Article
Network finance: How collaboration is transforming SME lending across Europe
At the Nordic Fintech Summit held last week in Helsinki, financial technology leaders gathered to discuss one of the most pressing challenges for European small businesses: access to capital. The panel "How Network Finance is Accelerating SME Lending in Europe" brought together Tanuj Pasupuleti from Bankify, Alfred Gruber from Fulfin, and Alex Mueller from Holvi to explore how collaborative approaches are reshaping SME financing.
The funding gap trapping European small businesses
Small and medium enterprises (SMEs) across Europe continue to face significant obstacles when seeking financing, particularly for loans between €10,000 and €50,000 – a critical range that falls into what panelists described as a "black box" of lending.
"For our customers, their financing needs fall into a bit of a black box. It is not microfinancing, which can be quite accessible, but not the more lucrative loans that larger banks issue," explained Alex Mueller from Holvi, the Finnish digital business bank. "In this €1,000–€50,000 range, getting financing is quite hard, even though it's the main need for the tail end of the market: the millions of SMEs and micro-SMEs in Finland and Germany."
The challenge is compounded by Europe's fragmented financial landscape, with drastically different regulatory environments and banking infrastructures across its 27 member states. What works in Finland may be impossible in Germany, and solutions that scale across borders remain elusive.
What SMEs actually want: speed over price
Perhaps surprisingly, the panel revealed that SMEs prioritise speed and simplicity over competitive pricing when seeking financing. Alfred Gruber from Fulfin shared insights from customer research: "We have interviewed our customers, and 78% said the most important factor for a bank is speed. For small customers, next is the simplicity of the process, then transparency, and price comes fifth."
This represents a fundamental disconnect in the market. While traditional lenders focus on interest rates and terms, small business owners are primarily concerned with getting capital quickly through a straightforward process.
"SMEs expect a consumer-like experience in financing—fast, simple, transparent—yet reality is often a broken process," Gruber noted. Today's entrepreneurs, accustomed to the seamless digital experiences provided by consumer services like Spotify or Klarna, find themselves navigating byzantine lending processes designed for much larger corporations.
Network finance: specialisation through collaboration
The core premise of network finance is relatively simple: rather than trying to excel at everything, financial institutions should focus on their strengths and partner with others who complement their weaknesses.
"My ultimate belief: There will always be someone who does a specific thing better—find and partner with them. Specialise and go deep, rather than wide and shallow," Gruber argued during the panel.
This collaborative approach enables companies to share costs and infrastructure while delivering better experiences to customers. For example, a bank with strong customer relationships but limited lending technology could partner with a specialised lender to offer credit products without building the capability in-house.
Mueller from Holvi emphasised this point: "If Holvi embeds lending in its product, a seamless experience can grow customer trust and encourage their natural demand for more services."
Regulatory challenges remain the biggest hurdle
Despite its promise, implementing network finance across Europe faces significant regulatory obstacles. Each country maintains different requirements for customer onboarding, data sharing, and lending practices.
"With our technology, we can do digital onboarding and signing across the EU, except for Germany, which remains an outlier," one panelist noted, highlighting how even within the supposedly harmonised EU market, substantial differences persist.
The panel stressed that successful network lending requires exceptionally clear agreements about data ownership, process responsibility, and compliance obligations. "In Europe, regulatory compliance and clear definition of roles in data management are critical to minimising risks in network finance," warned Pasupuleti.
The careful balance with artificial intelligence
As financial services increasingly rely on AI for decision-making, the panel discussed important limitations – particularly in lending contexts where regulatory scrutiny is intense.
"On AI, the focus should be on explainable AI," Gruber noted. "In lending, especially, regulators want transparency on how decisions are made. Fully transparent models are necessary, which limits the use of self-learning models for now."
This reflects the broader European approach to AI regulation, where the ability to explain how algorithms reach decisions is increasingly mandated by law, especially for decisions that impact consumers' financial lives.
The customer remains the focus
Perhaps the most insightful moment came toward the end of the discussion when Mueller reminded the audience: "We often talk about the challenges we face, but we don't acknowledge enough how little the customer cares about those issues—they just want money, fast."
This customer-centric perspective cuts through the technical complexity of network finance to its essential purpose: delivering better financial services to European small businesses that have been chronically underserved by traditional banking.
As the panel concluded, the vision for network finance in Europe is not just about technological innovation or regulatory navigation – it's fundamentally about matching specialised providers to create seamless experiences that meet the real needs of Europe's millions of small businesses.
The Nordic Fintech Summit continues to showcase the region's leadership in financial innovation, with discussions that look beyond technology to the practical realities of serving customers in a complex, fragmented European market.
Part of Nordic Fintech Summit