Gavin Haycock
Friday, August 14, 2020

The Future of SME Financing

  • Data is where banks really struggle
  • Alternative data is useful if you can access and validate it
  • Open Banking has a really important part to play for SMEs

The Centre for the Study of Financial Innovation (CSFI) recently hosted a webinar on the Future of SME Financing and how new technologies and alternative data could help small businesses. Leigh Pepper, Director of Product & Engineering represented 10x in the discussion.

Joining Leigh on the webinar panel moderated by CSFI co-directors Andrew Hilton and Jane Fuller were Atom Bank Chairman Bridget Rosewell, Martin McTague, Policy and Advocacy Chair at the Federation of Small Businesses, and Gordon Milne, a senior relationship director at the London Institute of Banking and Finance.

Here are some of Leigh’s perspectives shared during the discussion …

Legacy Challenges

“… the processes around being able to get money out to small businesses is absolutely down to the technology stack that a number of the incumbent banks will be sat on.

“It will seem very simple because a lot them will have put a very good digital layer over the front of their core banking system so it seems very simple to go in and make an application for a loan. But, the complexity of actually processing that loan both in credit decisioining initially but then secondly, actually in the fulfilment of that process is actually very human driven still for many of the banks."

Banks & Data

Leigh Pepper

“Data is where banks really struggle. Banks have tonnes of data, often kept in different siloes depending on whether the customer has a savings account, a loan product or an asset finance or an invoice financing facility. A lot of that data and transactional data will be sat in different systems.

“Banks struggle to connect that data together. It is not impossible and they do a good job in many cases. But, it is not as easy as you would think to join that data together."

Alternative Data

“Alternative data sources are only useful if you can consume it which is the first stage - can you actually bring it into your banking platform? Can you then actually validate that data, so can you trust that data, and can you triangulate it against the data that you have got on your platform to effectively validate that it is trustworthy, that it is truthful? …

“So you have to bring the stuff together and you have to have a platform that enables you to do that.”

Open Banking & SMEs

“For open data and open banking there are clear consent models for sharing that data with other providers … However the take up is low and the take up is probably low because people either are not aware – small businesses are not aware – or they don’t trust or understand the process …

“The challenge … about the smaller businesses not being able to switch from the bigger banks, particularly in lending, is actually where open data and open banking data can really help.

“I think Open Banking has a really important part to play and platforms like 10x where they are built with Open Banking first and API first can really help to transform the industry in that direction.”

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To watch the full discussion on The Future of SME Banking hosted by the CSFI click here.

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