EXCLUSIVE: “The platforms taking business lending to a new level” – Martin McCann, Trade Ledger in ‘The Fintech Magazine’
The richness and ease of consumer borrowing online is driving demand for similar services in business. Martin McCann, CEO of Trade Ledger, looks at how lending platforms can help
All the way back in 2016, a Moody’s Analytics Report forecast that ‘emerging technology, innovative use of data and expectations of an enhanced borrower experience will drive significant change in small business lending in the coming years’. Those changes are still unfolding. Mobile, the Cloud and data are the norm in consumer services – but, in business lending, they are still lagging. For once, the solutions won’t cost more – and could head off the competitive threat from Big Tech.
Martin McCann, CEO of Trade Ledger, whose lending platform is used by some of the world’s biggest banks, says: “There are six key things we think lenders could use technology for, so that they can lend more, control risk and expand into new products and markets.”
McCann’s first recommendation is to make it easier for borrowers to apply for credit. Instead of asking applicants which products they want (such as asset finance or invoice finance), and getting them to apply for each separately, lenders can recommend the right loan by assessing the prospective borrower’s assets, accounts and invoices together. Consumers are familiar with being offered a pre-approved credit card; the same convenient journey could be made available to business borrowers across term loans, debtor finance, overdrafts and more.
Next, lenders need to have their data on tap, says McCann. “Current lending processes involve paper or electronic documents that provide only static, historical evidence of a borrower’s situation. But today, data is available on- demand, in near-real time, whenever a decision needs to be made.”
Lending systems can collect data from borrowers’ online banking and accounting systems, credit reference agencies and official sources such as national registers of companies and directors. This information is delivered via API feeds, avoiding effort for customers, and manual errors and reworking for back-office staff. Obtaining data like this enables lenders to improve analysis, risk assessment and lending decisions.
Big Tech companies are already in on the act. They use their proprietary data resources to assess the risk of potential business borrowers. Many are offering credit at the point-of-sale and becoming intermediaries. But traditional lenders also have proprietary data that they can make greater use of.
McCann’s third recommendation is to get all departments to work from the same dataset, so that they get a single customer view – harmonising the use of data across departments, eliminating silos and accelerating processes. That makes reporting and analytics easier, enabling lenders to check their KPIs and identify bottlenecks, as well as helping customers to manage their borrowing via dashboards.
Fourth, lenders – which have historically found the SME market too costly to serve – need to respond to market pull with new offerings, he says.
“The streamlined processes available from a lending platform mean lenders can now take on complex products, like invoice finance,” says McCann. “They can also offer choice over the assets used as security, and self-service, so business owners can apply for a loan at midnight, if they want!“
Fifth, he urges providers to reconsider what they will accept as collateral in the service sector, which makes up 80 per cent of many modern economies, because tangible assets don’t reflect the health of a business. Instead, it’s shown by their sales strength – evidenced by invoices, which can act as collateral. Invoices involve admin, but a lending platform can take the strain. Six, look to the future. Supply-chain transaction services refers to digital contracts that serve a whole supply chain.
Within supply chains now, there is still a lot of work for people to do, bridging the gaps between computers and systems. For example, if a delivery van has an accident, the owner has to collect data about the vehicle, damage, insurance policies and more, to feed into the claims computer. Much of this can be collected automatically, making life easier for everyone involved.
So, how do we to bring about this shift? The key, says McCann, is how you put the data together to respond to customer needs. “And a really effective lending platform, such as ours at Trade Ledger, can do this for lenders today.”