How software technology can help grow SME lending

Small business lending, finance

Together with regulation and market demand, technology has played a prominent part in the rise and growth of SME lending among multiple industry leaders.

Research by Ernst & Young suggests rapid growth in SMEs adopting FinTech, thanks to their willingness to share data. 70 per cent of SME adopters will (selectively and securely) share banking data with other financial services companies if it helps them get access to better deals. Only 46 per cent of consumer adopters were prepared to do the same.

This willingness to share data creates significant opportunities for FinTechs to develop products built around open Application Programming Interfaces (APIs); central to the “open banking” trend global markets are now experiencing.

Many SMEs will share data digitally, usually by uploading their information to cloud-based platforms. As open APIs become more widespread, providers are offering more services to SMEs more efficiently, including overdraft protection, factoring and supply chain management, bookkeeping, and expense management.

Open APIs are prompting new financial management tools development, to make SMEs acquire credit significantly easier, necessary for their ongoing growth. SME financing can be elongated and frustrating, so lenders everywhere can make faster, better-informed underwriting decisions with access to open data.

Enrich your data

Data enrichment is a crucial part of data management, giving users confidence in the information they receive. Data enrichment processes incorporate new information into existing records, improving a database’s accuracy, timeliness, and value. Massive volumes of data are collected and distributed every day. Through connecting this information to known entities, we can contextualise these insights, perpetually improving and enriching the data.

Enriched data and real-time analytics have enabled modern, comprehensive risk profiles, leading to new customers, lower Customer Acquisition Cost (CAC) and faster loan underwriting.

Try automation

Automation of the numerous regulations and policies as part of the CI/CD process has enabled continued adherence and faster implementation. CI/CD, meaning continuous integration/continuous delivery (or continuous deployment) is a method used to deliver apps to customers by introducing automation into the app’s development stages.

CI/CD is a solution to issues integrating new code often causes for dev-ops teams. CI/CD introduces ongoing automation and continuous monitoring throughout an app’s lifecycle.

Be agile

Agile software development is a set of structures and methods stemming from the manifesto for agile software development and its foundational 12 principles. Having enabled quick action on market changes (like interest rates), agile essentially delivers work in small, but consumable increments, instead of betting everything on a single big launch. Requirements, plans, and results are continuously evaluated for teams to quickly respond to change.

This project management response and software development helps teams deliver value to their customers faster, and with fewer obstacles.

Embrace APIs and their interoperability

If you’ve ever used Facebook or sent an instant message on your phone, you’ve used an API. An Application Programming Interface is a software intermediary allowing two applications to communicate. The implementation of language-agnostic APIs (including Simple Object Access Protocols, or SOAP; and Representational State Transfers, or REST) enables faster integration between the numerous internal and external financial systems and faster data consumption by downstream, or external consumers.

APIs provide companies with better customer experience solutions without significant cost increases. They can also streamline businesses operations, and simplify and facilitate integration, allowing different software types to reorganise their interrelationships as needed. A good API will expand a brand’s market presence.

With financial institutions widely leading the charge with new technology, business should follow suit. While complex for the layperson to navigate, with proper guidance and insight, everyone can benefit.

Chen Lahav, CEO, Chen Lahav Consulting