Opinion: fintech taking business banking back to the good old days
John Davies, The Just Loans Group: “My favourite piece of customer feedback to date has been ‘this is what business banking used to be like’.”
John Davies, CEO of The Just Loans Group, an alternative lender to UK businesses, argues that rather than being disruptive, fintech is enabling a return to how business banking used to be: a business would have a dedicated account manager who was genuinely interested in a customer’s business and had the time to give it guidance.
Clever use of technology means more time and energy can be spent on understanding customers’ plans and needs – something that has been forgotten over the years.
The clear demonstration of support and encouragement for the fintech sector from Bank of England Governor, Mark Carney, in his recent annual Mansion House speech, will encourage investment and, I passionately believe, better service, facilities and access to finance for UK SMEs.
As a UK-based alternative lender, we have already invested millions in building a multi-language, currency and jurisdictional lending platform that allows us to lend confidently to UK SMEs – and shortly in Europe – using patented underwriting technology, which is invisible to the end customer but harvests information that enables smart lending decisions.
Smarter use of information means we get to know our customers better, which harks back to the traditional “first name terms” relationship between a business owner and his/her bank manager. It shows that in the technological age, fintech can be used as a vehicle to build personal relationships, and in turn accelerate customer acquisition through improved experience.
Our immediate focus is on the UK but our modelling strategy is designed to support full service banking and to be the springboard for European expansion. Positive initiatives like those announced by the Bank of England gives us the confidence to invest further and expedite these plans. Of course with the recent referendum decision to exit the EU we will need to see how the new European landscape unfolds and if this creates any regulatory hurdles. We are confident that however things pan out there is an excellent opportunity to export our business model.
Over recent years, we have seen the fintech landscape develop dramatically and enable alternative lenders, like ourselves, to become well established.
Traditional banks have been focusing on rebuilding capital buffers and have often been unable to provide SMEs with the finance they need to thrive. A move towards centralisation and continued dependence on clunky legacy systems have reduced banks’ ability to serve the market.
Now, a range of alternative lenders have moved into the space, offering a competitive advantage over traditional incumbents by using financial technology to make more informed lending decisions and provide seamless, flexible access to finance.
We also have the significant advantage of being able to focus solely on business lending and ironically the large investments being made in financial technology are taking business banking back to what can be described as “the good old days”; in fact, my favourite piece of customer feedback to date has been “this is what business banking used to be like”.
The technology allows us to make faster and more informed decisions; an initial qualifying decision for our finance facilities can be made in just over six minutes, analysing both historical and current enriched data points to determine the propensity for directors and businesses to succeed in the future. This includes data that traditional banks tend not to access. This then gives our business underwriters the time to show genuine interest in the SMEs that approach us and to really understand their business plans and need for investment.
We are on the brink of huge transformation in the banking sector, leaving space for challengers and alternative lenders to drive major success through technology, offering an enriched service for SMEs. I strongly believe that fintech will continue to make a major difference in the financial world and positive support from the government, Bank of England and regulators will only serve to accelerate this.
