Oct 2017 | Credit Decisions

Data sharing

Commercial customers are no different to consumers. The way they are serviced by financial services may lag behind slightly in regards to processes and technology, but they are still people.

I thought it would help by summarising three key areas that are currently influencing the SME lending market.

Streamlining the SME digital journey

A few years ago, most people used their smartphones to access their emails or to check their social accounts. Now, things have moved on, and small business owners are just as likely to be checking their accounts on their phones, looking for new suppliers, or even checking out customer feedback on their products and services.

This shift means that SME customers now expect to interact with their financial service providers the same way they do as individuals. The problem is that SME application processes typically start with either a list of products that the customer doesn’t understand, or request pages of information – and it doesn’t get much better from there.

The whole application process can be very frustrating for SMEs, but fortunately there is another way.
With many SMEs now managing their businesses online using tools such as accounting software in the cloud, data sharing from them will enable easier management.

The output of this would mean pre-population of application forms which will speed up the process and provide a seamless digital journey. It can also eliminate mistakes from mistyping.

Regulatory updates and supporting mandatory data sharing requirements

Under the terms of the SBEE Act, account and transaction-level data relating to SME customers will now be shared with banks and other financial services providers.

So how will this impact SME lending decisions and the availability of credit for them?

One issue is that only 5% of firms file full accounts, making credit decisions more complex. Firms that have a solid balance sheet and no negative public information may look like good prospects for lenders, but unreported liabilities may mean that they are very high risk prospects.

It remains to be seen if this intervention and others, including new rules in the 4th AML Directive, and the implementation of the new VAT Register, will diversify the competition in SME lending.

Complying with data protection rules through APIs

To manage the new data sharing requirements, while also complying with data protection rules, the development of APIs is important. These are standards-based interfaces that allow organisations to share data with each other in a controlled way, without costly systems.

Another key benefit of APIs is their ability to streamline the SME customer experience. It’s possible to perform authentication for customers and business customers, as well as conduct AML checks, all from within the same customer journey. Making the whole interaction faster and easier for them. Customer and account data can also be pulled in to pre-populate application forms.

On the back end, organisations can also use API integration to pull in data from multiple systems, enabling them to get a fuller understanding of a customer’s situation and support better credit decisions.
New data will inevitably help businesses with commercial credit decisions. But, like with any data – it needs to be understood. It needs to be secured and it needs to be relevant.

Choosing APIs, cloud based technology and solutions such as pinning data present an opportunity that can help you make better decisions.