How lenders need to wrap their arms around SMEs

By Ronan O'Dea, Head of Product

As global businesses struggle to deal with post-Covid supply chain and resource challenges, compounded by a volatile financial environment, the UK Customer Satisfaction Index (UKCSI) has recorded its highest ever level of customer complaints, rising this year from 11% to 13%.

Commenting on the report, Jo Causon, CEO at The Institute of Customer Service highlighted how, by contrast, the strong financial performance from the companies topping the UKCSI, reflected the impact of customer satisfaction on market share and called on organisations to address their service offering to aid the nation’s economic recovery.

For all of us within the financial services industry who provide SMEs with a service, this is an important rallying call. It’s clear that looking after our customers, not only allows financial organisations to flourish but it also enables our customers’ businesses to flourish too. Providing customers with the highest standards of care and service therefore is not simply advisable, it’s the lifeblood of thriving businesses and a means of resuscitating the global economy.

The recent report of the forthcoming launch in the UK of a new Consumer Duty by the Financial Conduct Authority (FCA) very much supports this line of argument. The new Consumer Duty has been developed to fundamentally improve how firms serve consumers and will set higher and clearer standards of consumer protection across financial services as well as requiring firms to put their customers’ needs first. By doing this the FCA believes that it will encourage more flexibility, competition and innovation in the interests of consumers.  

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0
UK small businesses impacted
by the cost of living crisis

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0 %
US small businesses have
experienced inflationary pressures

This is most certainly a step in the right direction. But we need to be quick. Millions of SMEs on both sides of the Atlantic need banks and financial services companies to wrap their arms around them right now. The Chair of FSB Retail and High Streets Policy Unit Michael Weedon recently warned the cost-of-living crisis is expected to impact up to 700,000 small businesses in the UK, and in the States many small businesses only have cash reserves to sustain business operations for 15 days with 41% reporting that they have experienced inflationary pressures.

So what can be done to provide immediate support to the SMEs who have survived the Covid storm but remain extremely vulnerable to economic pressures?

The FCA’s press release on the new Consumer Duty mentions it’s “transformation to becoming a more assertive and data-led regulator” and it’s bang on.

Data is the single most important factor that has the firepower to provide support and revive the fortunes of businesses and the world-wide economy.

At Validis, we give lenders access to an unprecedented and transformative depth and breadth of data. Our API extracts and standardises the accounting data of a lender’s customer and feeds that data straight through into the lender’s own origination software. The data can be frequently refreshed, enabling banks to monitor live, in real time, everything about that customer’s business from its general health, it’s commitments and where exactly they are on any loan repayment schedule, right through to its inherent risks and opportunities.

Quickness

Quickness

A business with 15 days of cash reserves may very well need access to a fast loan, so speeding up access to finance is a crucial way in which lenders can support SMBs.

Unfortunately, many banks are still dependent on receiving multiple financial statements, profit and loss statements and AML documentation and, thanks to antiquated administrative systems, that often requires SMEs to locate, scan and email pdfs until the bank is satisfied it has all the information it requires. I have plenty of anecdotal evidence that this process can take up to 10 hours of a business’s time. Contrastingly, the Validis API can access all that information at a keystroke. A 10 second task. By integrating with the software customers use to run their business, the Validis API allows a lender to gain instant, real-time access to the management accounts and transactional data required to underwrite a loan, in a standardised format. For a vulnerable SME that could very well be the difference between sink or swim.

A business with 15 days of cash reserves may very well need access to a fast loan, so speeding up access to finance is a crucial way in which lenders can support SMBs.

Unfortunately, many banks are still dependent on receiving multiple financial statements, profit and loss statements and AML documentation and, thanks to antiquated administrative systems, that often requires SMEs to locate, scan and email pdfs until the bank is satisfied it has all the information it requires. I have plenty of anecdotal evidence that this process can take up to 10 hours of a business’s time. Contrastingly, the Validis API can access all that information at a keystroke. A 10 second task. By integrating with the software customers use to run their business, the Validis API allows a lender to gain instant, real-time access to the management accounts and transactional data required to underwrite a loan, in a standardised format. For a vulnerable SME that could very well be the difference between sink or swim.

Quantity

Quantity

Quantity of data provides lenders with a much broader brushstroke picture of a business’s health, which in turn gives them more opportunities and confidence to provide the support an SME might require.

Access to live accounting and transactional data, means that a lender is not restricted to the traditional end-of-year tax filings – a restricted data set which could already be 12 months out of date when it’s reviewed. Instead, with Validis, the quantity of accessible data is virtually limitless, as lenders can tap into their customers’ management and bank accounts in real time, providing minute by minute profiles as to the business’s performance. Often, for customers, this gives them the opportunity to demonstrate their creditworthiness. It might be that they are able to show a positive picture of payment windows, credit lines, cash-flow position and upcoming orders that can quickly provide a lender with the reassurance they require. But, whilst there is a wealth of financial data that can be accessed, we allow full flexibility to only retrieve what is needed.

Quantity of data provides lenders with a much broader brushstroke picture of a business’s health, which in turn gives them more opportunities and confidence to provide the support an SME might require.

Access to live accounting and transactional data, means that a lender is not restricted to the traditional end-of-year tax filings – a restricted data set which could already be 12 months out of date when it’s reviewed. Instead, with Validis, the quantity of accessible data is virtually limitless, as lenders can tap into their customers’ management and bank accounts in real time, providing minute by minute profiles as to the business’s performance. Often, for customers, this gives them the opportunity to demonstrate their creditworthiness. It might be that they are able to show a positive picture of payment windows, credit lines, cash-flow position and upcoming orders that can quickly provide a lender with the reassurance they require. But, whilst there is a wealth of financial data that can be accessed, we allow full flexibility to only retrieve what is needed.

Quality

Quality

Quantity of data provides lenders with a much broader brushstroke picture of a business’s health, which in turn gives them more opportunities and confidence to provide the support an SME might require.

Access to live accounting and transactional data, means that a lender is not restricted to the traditional end-of-year tax filings – a restricted data set which could already be 12 months out of date when it’s reviewed. Instead, with Validis, the quantity of accessible data is virtually limitless, as lenders can tap into their customers’ management and bank accounts in real time, providing minute by minute profiles as to the business’s performance. Often, for customers, this gives them the opportunity to demonstrate their creditworthiness. It might be that they are able to show a positive picture of payment windows, credit lines, cash-flow position and upcoming orders that can quickly provide a lender with the reassurance they require. But, whilst there is a wealth of financial data that can be accessed, we allow full flexibility to only retrieve what is needed.

Quantity of data provides lenders with a much broader brushstroke picture of a business’s health, which in turn gives them more opportunities and confidence to provide the support an SME might require.

Access to live accounting and transactional data, means that a lender is not restricted to the traditional end-of-year tax filings – a restricted data set which could already be 12 months out of date when it’s reviewed. Instead, with Validis, the quantity of accessible data is virtually limitless, as lenders can tap into their customers’ management and bank accounts in real time, providing minute by minute profiles as to the business’s performance. Often, for customers, this gives them the opportunity to demonstrate their creditworthiness. It might be that they are able to show a positive picture of payment windows, credit lines, cash-flow position and upcoming orders that can quickly provide a lender with the reassurance they require. But, whilst there is a wealth of financial data that can be accessed, we allow full flexibility to only retrieve what is needed.

There’s no doubt that SMEs are hurting just now. When they turn to their lenders for support, it’s going to be the banks which understand them best who can help them the most. And perhaps ironically, it’s technology that will allow banks to provide that most human of comforts – to wrap their arms around them.

Ronan O'Dea, Validis

Ronan is Head of Product at Validis. Meet him and more of our experts at the FinTech Talents Festival in London, 14th-16th November 2022.

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