Componentised banking will up-end business lending
Global technology provider for the commercial banking and financial services industry, Trade Ledger, has published its Business Finance Predictions 2022 report, bringing insight from a wide variety of industry experts.
Leading the predictions, Martin McCann, co-founder and chief executive officer of Trade Ledger, believes that business banking is playing a serious catch-up game and he anticipates that within the next three years the business model will be totally up-ended using componentised banking.
“Business banking isn’t a cost-sensitive market – it’s an experience-sensitive market. Yet, currently the experience isn’t fit for purpose. A typical commercial loan takes 90 days to process today, and that’s if the firm even qualifies to apply. What we need to happen is for the banks to stop thinking about products, and start thinking about the customer. To do that they need to componentise each aspect of their operation – from KYC and AML to CTF – and build an ecosystem of specialists to deliver those components.
“Think about the automotive industry: carmakers don’t make cars, they assemble them with the engine coming from one supplier, the gearbox from another. The carmakers differentiate what they sell by how they specify the sub-assemblies to the sub-assembly providers. The cost advantages have been huge as each part of the supply chain has optimised its output and costs.
“The business banking industry needs to do the same. Specialist capabilities can be created by the people who do it best, and then supplied to the business banking ecosystem. Add to this a more data driven service: a borrower simply connects their data to a bank or third party where it is analysed, coming back with recommended actions and even connecting them directly to the application process.
“Business leaders will no longer spend days researching the right borrowing product for their firm. Instead new data sources, better decisioning systems and deeper insights will mean the headache of loan application will become an altogether more positive experience.”
Leading fintech figures agree:
Anna Jones, chief of product, managing director, Financial Supply Chain Strategic Advisory “In 2022 banks will own or invest in working-capital fintechs to support an advanced user experience for their clients.”
Halvor Lande, chief executive officer, Aprila Bank “Instant gratification is a great value proposition. Data-driven, digital, automated business lending, using machine learning to predict risk, is a massive opportunity and need, because the SME sector is very much underserved.”
James Varga, founder and chief executive officer, DirectID “Banks have historically been fairly slow at innovating. In the past, the risk of relying on third parties was too much. But digitisation has changed that, and there are now deeper engagements, with specific tasks being taken on by specialist suppliers.”
Janet Jones, strategic client director, Microsoft “There’s a pressing need for banks to change their business models to meet the evolving needs of customers and compete with new digital native challengers and fintechs. This change will, in part, be powered by the use of technology and data from broader sources, combined with deeper collaboration and partnerships.”
With increasing pressure from governments across the world to meet global sustainability targets this was also a popular theme in Trade Ledger’s 2022 Predictions Report:
Chris Jaggard, managing director commercial banking, Accenture Australia “We anticipate acceleration in the way commercial banks measure their sustainability initiatives, using different data sources, such as the carbon footprint ratings of their customers.”
Helene Panzarino, innovation pioneer, fintech and banking subject matter expert for Vacuumlabs and fintech partnerships lead for London Institute of Banking and Finance “When it comes to environmental, social and governance (ESG) factors, we’ll need a data measuring and monitoring system that’s standard and universally accepted.”
Other subjects addressed in Trade Ledger’s 2022 Predictions Report include the financial vulnerability and mental health issues of business leaders post pandemic, the growing recognition of Islamic Finance and the increasing market availability of variable recurring payments which look set to transform ecommerce for SMEs.
To view the full report please click here