Recently, we brought together senior leaders from across the UK’s Invoice Finance (IF) and Asset-Based Lending (ABL) industry for an in-depth roundtable discussion. The goal? To confront some of the market’s biggest challenges, explore innovations on the horizon, and align on how we can evolve to meet the needs of modern businesses.
A quick survey from attendees underscored the urgency – 56% of participants rated modernizing IF lending processes as “extremely urgent,” with the remaining 44% considering it “somewhat urgent.” Not a single participant viewed it as less than urgent.
The State of the Market: Decline, Disruption, and a Need for Change
The UK’s top banking executives were unanimous in their assessment: the IF/ABL sector is facing a notable decline – over 9,000 businesses have exited the market since 2015, with the steepest attrition seen among businesses with revenues under £10 million. Many SMEs that haven’t used IF remain unaware of the product’s true value, leading to a widening awareness gap.
Meanwhile, administrative burdens, onboarding delays, and increased competition from faster alternative finance options have further impacted adoption. The rise of fintech has brought customer expectations of immediacy and simplicity – expectations that traditional IF products haven’t yet caught up with.
This disconnect is reflected in our survey data, where 100% of participants reported it takes more than two weeks for new business customers to access funding. For context, McKinsey’s “Future of Business Lending” revealed that specialist lenders take 3-5 weeks for asset-based lending decisions, compared to 1-2 days for digital-first lenders with streamlined data requirements.
As one market leader starkly put it:
“We’re running out of road. Reimagining the product isn’t a nice-to-have – it’s essential for survival.”
Want to learn how Validis is helping lenders implement the vision these banking leaders described? Contact our team for a personalized consultation.
Where There’s Complexity, There’s Opportunity
Despite the headwinds, there’s a clear path forward. We identified three core opportunities:
- Simplify the Product: Demystifying IF for new users through clearer, more accessible education and UX.Our survey ranked “improved digital application experience” as the #1 factor that would most effectively attract new business customers, followed by “simplified documentation requirements.” This isn’t surprising considering that 74% of businesses report spending 15+ hours on paperwork when applying for working capital financing.
- Leverage Technology: AI-driven decision-making, embedded finance, and automation can streamline the experience from end-to-end.According to our survey, 63% of banks are prioritizing Open Accounting APIs for faster data sharing in their modernization efforts, with 38% exploring AI-powered credit assessments. As one roundtable participant noted:
“There is a big opportunity in hooking up to clients’ systems and collecting granular data.”
- Innovate Around the Edges: Rethink cash flow lending for businesses that don’t fit the traditional 85% coverage model.
One bank executive highlighted:
“Products have been designed as one-size-fits-all, but policing risks for them is costly. The 85% approach has proven to be too expensive.”
Ready to simplify your IF processes? Schedule a demo to see how Validis standardizes financial data collection.
Modernization Isn’t Just Tech – It’s a Mindset Shift
The biggest barrier to change isn’t necessarily technology – it’s institutional resistance. Many banks continue to rely on legacy systems and processes, which slows down innovation. Some key themes from the discussion included:
1. Products are Assemblies of Services:
The differentiator lies not in individual tools, but in how they’re put together. As one participant explained:
“Products are an assembly of services. The way products are assembled is the USP (unique selling proposition).”
2. Data Is Critical – and Underused:
From customer onboarding to credit decisions, data should drive smarter, more tailored experiences.
Our survey revealed that 38% of participants identified “lack of real-time data access for decision-making” as the primary bottleneck in reducing time to access funding.
3. Education is Essential:
Borrowers new to IF need guidance – and that takes time, energy, and empathy. One industry veteran noted:
“Modernizing IF products is an educational journey for customers, especially those new to IF. It requires considerable resources,”
4. Tech Won’t Solve Everything:
True transformation comes from aligning tech with strategy, not from tech alone. One roundtable participant observed:
“There’s an expectation that technology will solve everything, but the real differentiator is the way technology is assembled, rather than the individual pieces.”
Struggling with data quality issues? Book a consultation to learn how Validis standardizes financial data across accounting platforms.
A Cautious but Growing Appetite for AI
AI is on the radar for many lenders, but most are still in the exploratory phase. While it’s being tested for small tasks (e.g. meeting transcription, churn prediction), issues around data quality, governance, and ROI are holding back broader adoption. Still, the potential for AI in analysing receivables, automating risk assessments, and improving customer experience is substantial.
One participant shared a revealing insight:
“AI has been used for smaller tasks like meeting notes, surveys, and churn prediction, but there are challenges with data quality-only 60% of the data used for churn predictions was correct.”
This underscores the importance of clean, standardized data as the foundation for any AI initiative. According to KPMG’s “Lending Efficiency Report,” financial institutions spend $11,000-$16,000 on data collection, cleaning, and verification per commercial loan application.
The Race for Relevance: Time to Loan, Time to Act
While the loan processing timeline is no longer the primary bottleneck, getting to an indicative offer quickly is. Customers want fast, clear terms and the peace of mind that undrawn availability offers. Yet, manual underwriting, compliance hurdles, and fragmented data flows continue to slow the journey from application to approval.
Our survey highlighted that 25% of participants cited “manual underwriting processes” as a significant bottleneck, while 19% pointed to “inefficient internal workflows.”
As one participant explained:
“Time to loan isn’t the main issue; instead, speed of getting an indicative offer is the key factor for customers… Clients want to know what the terms of the loan will be upfront. There’s also a preference for undrawn availability, as customers want to feel secure in knowing they have access to funds if needed.”
To truly reduce friction, lenders need to move beyond layering tech onto legacy systems – they must reimagine the entire product experience from the ground up. As one executive said:
“Banks haven’t invested enough in the right technology. Simply layering new tech on top of legacy systems won’t work. The entire solution needs to be reimagined from the ground up.”
As the saying goes “Rubbish in. Rubbish out.” – and it’s never been more true when it comes to AI. Chat to the team about how Validis creates the clean, standardized data foundation needed for effective AI.
What Modern IF Could Look Like
Our roundtable explored what a modern, borrower-centric IF product might look like:
· True End-to-End Solutions:
From data ingestion to payment execution – simple, seamless, and automated. One tier-one bank participant observed:
“A genuine end-to-end solution would handle data ingestion, loan processing, writing credit memos, and making payments. It needs to be much easier; currently, it’s expensive and awkward to operate,”
· Always-On Credit Decisioning:
Live, real-time indicative offers based on actual data, not static applications. One forward-thinking participant suggested:
“Client self-declare. Can it be live? If you apply today, this is what you could get.”
· Integration with Client Systems:
Embedding within ERPs and accounting software to meet clients where they already operate. One provocative question raised:
“Why wouldn’t the ERP system handle the data and the bank simply integrate into it?”
· Digital by Design:
Not just “going digital,” but “being digital” – building natively digital experiences from scratch. An important distinction was made:
“Converting paper into digital format isn’t enough; truly digital means the form doesn’t exist at all.”
Chat to us today to find out how to get the real-time data needed for data-driven lending.
Sector Voices: Shared Challenges, Shared Purpose
A cross-section of industry voices echoed the same sentiment – while the challenges are steep, the urgency is real. Key reflections included:
- Tier 1 Bank see their role as leading the charge. They recognize the data opportunity and the need to move away from overdraft-driven models.
“Banks have a huge responsibility to drive industry change and lead from the front.”
- Specialist Bank acknowledges lagging tech adoption but are reinvigorated by shared understanding and momentum.
“Organizations are facing the same challenges, with similar/same conversations happening with IT teams.”
- Merchant Bank in early-stage AI exploration, bracing for a fast-paced change driven by Open Accounting.
“Although AI adoption is still in early stages for some companies, it will play a key role in the industry’s future. Open Accounting and the fast pace of change will lead to a ‘perfect storm,’ requiring rapid adaptation to stay competitive.”
- All Lenders are united in their focus: to attract new IF customers through better tech, reduced cost to serve, and a modernized experience. When asked about CAC (Customer Acquisition Cost), one participant noted:
“CAC is not decreasing and is even doubling due to brokers and salespeople.”
Final Thought: Reinvention Is No Longer Optional
The IF/ABL industry is at an inflection point. Legacy models no longer serve the evolving needs of the market.
Customers expect more – more speed, more clarity, more digital.
To meet those expectations, we must rethink everything from product structure to onboarding to the very role of the bank in the lending journey.
The data and sentiment throughout this article is clear on the urgency. But to repeat a quote from above:
“We’re running out of road. Reimagining the product isn’t a nice-to-have – it’s essential for survival.”
Ready to transform your IF operations? Contact Validis today to discover how we’re helping lenders reimagine invoice finance for the digital age through standardized, real-time access to client accounting data.
