While technology and digitalisation have prompted transformation in the lending markets there is little question that the events of the last 18 months have accelerated this trend.
Our reliance on technology has been highlighted over this time and efficiency, security, and improved customer experience have become some of the top priorities for lenders.
At the same time, UK firms borrowed more than £100bn last year. While this was predominantly driven by government-guaranteed lending, demand for borrowing is likely to remain strong as SMEs recover and government schemes are withdrawn. Many will return to non-borrowing ways but there is also a case for businesses who may have had their first taste of borrowing and will seek finance to thrive rather than survive - particularly as the cost of borrowing remains relatively low.
Other forms of lending will come to the fore to supplement mainstream solutions such as overdrafts and term loans - asset-based lending is one such model set to play a significant role in offering support to businesses. To meet the rising levels of demand, lenders should be prepared to leverage their digital capabilities to streamline customer journeys, improve risk mitigation and enhance transparency between lender and borrower.
Operational excellence: customer experience and business value
The demand for lenders to create frictionless digital journeys for their customers was growing well before COVID-19, but there is no doubt that the need to streamline communication and digital interaction between lenders and borrowers has become increasingly important and is often the preferred channel for many businesses. With the advent of cloud computing and the drive to greater transparency, led by the Open Banking initiative, the business community is more minded to share data with trusted partners.
But leveraging digital capabilities to improve customer journeys goes beyond just enhancing the customer experience and while borrowers benefit from faster access to working capital, lenders themselves are better able to reduce risk and make informed judgements about the businesses they lend to. For lenders, the access to enhanced data provides superior insight into how they can support customers now and, in the future, and ultimately improve margins.
Greater visibility driven by open accounting
In an increasingly data-driven world, lenders are looking towards “open accounting” to provide greater visibility on the financial performance of the businesses to which they are lending. Lending decisions can be made much more quickly by an asset-based lender if they have the trading history of the borrower, with full transparency of sales, purchase ledgers and cash movements at their fingertips.
Open accounting can provide information vital for the lender to manage risk and optimise the funding available. Checks and assessments are completed in a fraction of the time, and with much less friction than with manual processes. Lenders who have access to their clients’ accounting data are in a far stronger position to streamline operations and deliver customer satisfaction.
A modern solution
Taking advantage of such digital capabilities offers clear appeal to asset-based lenders, but they must ensure they deliver holistic solutions to meet their needs and customer demands, rather than delivering quick fixes which overlook the overall experience and entire digital infrastructure.
By utilising online solutions that allow clients to self-serve their funding needs, lenders can achieve excellent operational efficiencies and high levels of customisation, also delivering reliable and secure solutions that offer customers a better overall experience and financial support at the click of a button.
Overall, digitalisation has been both a natural solution to reducing friction and increasing efficiency for lenders and clients alike and a key tool in dealing with the intense demands placed on lenders during a challenging economic cycle.
In an increasingly competitive environment lenders need to continue providing advanced digitalisation offerings, such as ever-evolving streamlined journeys which build trust, speak to customer needs, and accelerate outcomes, and look to leverage open accounting to enhance insight into business performance and inform lending decisions. This evolving digital landscape is a benefit to lenders and borrowers alike as they tackle the challenges of a post-pandemic future.
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First appeared on: Finance Monthly