Key discussion points from our SME lending breakfast
Earlier this month we ran a breakfast briefing in London for all our UK lending clients, brokers and partners. I’m pleased to say it was an informative and engaging session and the feedback from those that attended has been overtly positive.
We were lucky that an excellent selection of our friends in the industry were available to speak and the themes covered ranged from digital transformation, to Open Banking, and from the “value” of data to more informed lending.
Critically, there was wide acceptance in the room that the lending industry is evolving rapidly in the UK and that now is the time to pull all the pieces of the puzzle together to ensure customer experience is maximised and that “time to decision” and “time to cash” are reduced as much as possible.
Below are some of the highlights from the session.
Commercial lending struggling to digitise
It’s hard to move far these days without the words “digital transformation” being mentioned in regard to financial services and more specifically lending. Gerald Chappell, Partner at Mckinsey, led our first session at the breakfast, and he highlighted that almost 70% of banks have earmarked digital credit as a priority for the next 12-24 months.
He also discussed how the small business and commercial lending are lagging woefully behind their retail cousins when it comes to digitisation and there is now renewed focus and with that comes investment.
Certainly, these are themes we are seeing at Validis. We’ve seen a distinct increase in the appetite levels of UK lenders to create more efficient, digital journeys for their applicants and speed up the delivery and interpretation of financial data feeds.
Open Banking a slow burner with a bright future
There seems to be a broad divide in the market regarding the potential and progress made by Open Banking over the last 24 months. Rightly the development focus has been predominantly on the consumer side due to the volume requirements and public visibility.
Emma Steeley, CEO at AccountScore, spoke passionately about how the Open Banking infrastructure was becoming more robust and shared tangible examples of how Open Banking has been used to date in a commercial context. She also talked about adoption levels and the speed of uptake. All of which are improving dramatically month on month.
I think to have expected more from Open Banking in its first year is a little far-fetched. If we think back to the birth of contactless technology for payments, the technology existed for years while it waited for the infrastructure to catch up. Now we use this technology without thinking. Once in place wholesale adoption took weeks and months, not years, albeit without the hearts and minds exercise that’s required when sharing data. It’s exciting to think where we’ll be with Open Banking in three years’ time.
More informed lending
Over the last few months we’ve been listening to many of our customers and future customers tell us their key reasons for improving the SME lending journey through digitisation. The four core themes that repeatedly come up are; improving the UX for businesses, increase applications to increase conversions, understand applicants and clients better, and improve prospects for cross-selling other products.
But digitising isn’t easy or else everyone would’ve done it by now. At our breakfast we discussed the core challenges facing lenders:
- Competing priorities
- Budgetary constraints
- Implementation timelines
And these internal challenges aren’t easily overcome. A lender must take a careful look at their digital priorities and ascertain the value of implementing each initiative on its own merit. After all, we all know that those who shout loudest for investment aren’t necessarily always right.
It all starts with data
We wrapped up our breakfast thinking about the current state of the market and how data is an underutilised asset within a lender. We continue to see that accessing the right data at the right time can drive significant efficiencies and an increased loan book but we understand change is difficult.
New processes are rarely met with joy but never has the opportunity been more obvious. On a simple level, making things easier for an SME and your staff seems like a good idea. But when the lid is lifted, accurate, coherent data can actually power insights that free up hundreds of millions in capital that can be used for future lending.
Breakfasts on us
A big thank you to all our speakers and guests. If the energy of these types of sessions is a gauge for the appetite to evolve then the future of UK lending is pretty bright. Look out for the next session later in the year where we’ll dissect some of these topics more deeply.