IBS Journal May 2018
39
The foundations for the front-end demands
For consumer lending, the “bigger challenge”, as Danilkis puts it, is the many ways of lending available: the aforementioned point- of-sale financial products, direct loans and so on. Mambu’s CEO believes that alongside “the data problem”, the industry must tackle the way in which it communicates with customers. Both in terms of transparency and financial management, as well as easy-to-use, intuitive, multichannel platforms designed for customer acquisition and retention.
Taylor explains that Duologi is focused on enhancing the customer experience throughout checkout and the application of the financial product, but that all this is based on how they gather data from the retailer’s site and prepopulate the data forms that they need to make the assessment.
“After that, we ask no more than five questions to finalise the underwriting, a process that is done swiftly and in real-time, bypassing the slow, clunky and cumbersome approach of other lending platforms,” he adds.
On the corporate side we are seeing a very similar development. Morcombe says those front-end demands that had been traditionally seen in the consumer area are now reaching the corporate and SME segment, meaning that people want a transparent, digital and real- time experience.
“You can’t put a pretty front-end when you don’t have a data back- end to support it,” Morcombe points out. Erni tells a very similar story – SMEs are moving towards digitalisation, but for him, there is a slight difference. When it comes to lending, business can get much more complex than consumer, and he believes there is always a need for a more human intervention, even though it is diminishing.
On the edges
Consumer lending has traditionally faced more barriers than business lending, as there is so much data from individuals that it can be less reliable at times, although more simplified through credit scoring. But for banks, whose systems are designed to admin large loans, they are simply not well-positioned to admin short-term, small loans. As an alternative to a change of tech and a revamp of the system, smaller companies are popping up to fill in those gaps. In fact, where we see that many of these companies are starting to eat away the bank’s market share, technology firms like Divido are stepping up to allow more traditional lenders to keep up with the changes and challenges.
data in business lending, but there is still a lot of data that banks aren’t using
“ It is true that there is less
Actor Michael Sheen has founded the End High Cost Credit Alliance, which aims to minimise the cost of lending
Oakam is one of the companies that have found a demographic niche they can serve through new digital technologies. It claims to have enormously reduced its operational cost by getting rid of doorstep agents and relying solely on digital channels to grant and collect money. This has gained it a good amount of adopters in migrant communities throughout the UK.
One of the banners leading this rally is the End High Cost Credit Alliance, an organisation founded by the actor Michael Sheen, that aims to minimise the cost of lending for borrowers with poor credit rating. This initiative brings together politicians, charities, tech companies and of course, lenders, to offer a more affordable alternative than what has dominated the industry in the past few years. To name a few, some of these organisations are Moneyline, Scotcash and Toynbee Hall, among others.
At the core of this shift in the way lending is carried out, there is the aforementioned change in technology that brings down costs and thus allows companies to provide more affordable rates. Oakam is a perfect example that has been able to leverage that technological shift riding on the back of regulation. As a digital microlender, it has been able to extend its reach into other areas, and change the practices that have made lending so expensive and predatory.
In other parts of the world, such as Asia, we find that the industry is facing the same issues that the US and Europe were struggling with in the 1980s and 1990s, like credit auto loans. In Frederic Nze’s view, this is a sign that these markets are maturing, and that it is only a matter of time until we see these geographies catch up with the UK, for example. In Africa, however, the landscape is slightly different, as access to the technology and the ability to reach certain areas is limited. Plus, there is a substantial lack of middle class throughout the continent, which impedes the lowering of risk in lending. However, new technologies can find ways to make it across Asia and Africa, in spite of the different circumstances and regulations that pre-condition each region. For example, in Asia, the ubiquity of 4G access makes mobile and online solutions a great option to expand the market, which in turn, makes the market very attractive for companies with similar profile to Oakam’s, since loan origination can be one of the main obstacles.
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