Technology has changed the lending landscape, but it’s best used to enhance rather than replace human interaction
Businesses no longer need to visit a bank or even speak to a human being to take out a loan. Providing they can produce all the required information, an algorithm can assess and approve their application in seconds. But just because technology can be used for something, it doesn’t always mean it should be.
Ultimate Finance understands this better than most. It’s an independent asset-based lender to small and medium-sized enterprises, with a dedicated team who value long-term relationships. And you can’t build relationships purely with lines of code.
“Most of our facilities are long-term,” says chief executive Josh Levy. “We try to position ourselves as a partner to our clients.”
It’s a different model to unsecured lending, which has broadly embraced direct digital lending. The invoice finance, asset finance and bridging finance facilities Ultimate Finance provides are rather more complex. Its customer base is also two fold: the introducer and the underlying borrower. This means it requires more detailed data to make decisions and places greater stock on customer relationships.
In other words, the company’s technology strategy is not solely focused on how quickly it can get money out the door, but instead seeks to enhance the ability of its team to better serve its customers, and to improve the quality of interactions with both the introducer and the underlying borrower.
With that in mind, it has focused on marrying the individually tailored level of service personal relationships provide with digital technologies that can further enhance them. This allows Ultimate Finance to be customer led, while still offering a service that is as fast, frictionless and flexible as possible, says Levy.
End-to-end automation is therefore not part of the equation. “What such automation really means is a few bits of information go in at the front end and an algorithm spits out a decision,” says Levy. “It says ‘Yes, here’s 50k’ or ‘No, sorry, go speak to someone else’. And that’s seen as the perfect customer journey by some because it is frictionless. But what you’re actually doing is treating everyone as the same entity. You’re trying to narrow down every single business into a credit score.”
By contrast, Ultimate Finance treats every business on its own merits, taking into account everything from how they’re performing to what the underlying security for the facility is, which “you can’t really reduce to a single score”, Levy points out.
The different strands of the company’s technology strategy actually come down to two fundamental things. “It’s about making sure we have access to real-time data that will increase both the quantity and the quality of decision-making, particularly when it comes to assessing risk and giving fast approvals. But also reducing the need for manual information-sharing, which leads to a painful onboarding process,” he says.
To meet both these aims, the company has invested considerable time, energy and money in its data infrastructure. This has allowed it to shift from viewing paper-based documents and month-end accounting spreadsheets to a more granular, real-time view of its customers, an approach that has only grown in importance during the coronavirus pandemic.
Rather than relying on data that’s weeks or even months out of date, the company’s relationship managers have been able to see how clients are doing on a day-to-day basis and use this information as the basis for their decisions.
Much of this wouldn’t have been possible without the shift to Open Finance, which has allowed businesses to share their banking and accounting information securely with companies like Ultimate Finance. It cuts out the need for layer upon layer of manual processes, such as compiling and interpreting spreadsheets and checking they are accurate, and means Ultimate Finance can provide faster and more reliable responses to their client base.
Shifting to biometric ID verification has also provided staff with a simple “yes” or “no” answer to the question of whether or not a client has been able to verify their identity. But rather than a “no” being the end of the customer journey, as it might be in a highly tech-driven business, staff can chose to verify the customer’s identity in other ways. “We’re using biometric ID verification as a tool to aid decision-making, rather than leaving that decision to a computer,” says Andy McKee, chief information officer at Ultimate Finance.
The company has also worked with one of its partners to build visualisations that bring data to life for both staff and customers, he says. These visualisations enable relationship managers to quickly see whether the data reflects what they already know about a business or whether they need to dig into something further to better understand the story they’re being told.
McKee describes such tools as “an extra pair of eyes” that make sense of big data, which “needs to be visualised in a way that’s meaningful to a human being, otherwise there’s not really any intelligence to it”.
In addition, Ultimate Finance is exploring how financial data could enable its relationship managers to help clients look further ahead and figure out how to manage their money more effectively. But regardless of what new technologies and tools become available in the future, “the best lender will always be the one that seamlessly combines digital and human interaction”, Levy concludes.