APAC Update: How Lenders can Improve Support for Local Businesses through Coronavirus Challenges

Author: Patrick Tan

More than 300 Chinese firms from various industries, including ride hailing, food delivery, and large manufacturing companies, are seeking bank loans totaling at least 57.4 billion yuan to soften the financial impact of coronavirus.

China's dominant ride hailing service providers have been hardest hit as authorities cordoned off cities and shuttered facilities where crowds gather. Extended factory closures slow manufacturing and weigh on global supply chains, creating cash flow problems and hampering economic growth.

For the rest of Asia Pacific, the new strain of coronavirus poses a “significant downside risk” to the region’s economic outlook. Countries such as Hong Kong, Singapore, Australia and other parts of Asia have seen their sales and revenue hit by the novel coronavirus (COVID-19) outbreak, with issues stemming from the expected reduction in Chinese tourists to the region.

Supporting Local Businesses through Coronavirus Challenges

This uncertainty created a large economic cost to restaurants, retailers, and tourism sectors with many businesses wondering how they’ll survive the months ahead. Analysts have predicted a potential growth in the lending business in Asia-Pacific, even amid an economic downturn, as businesses look for the funds to bridge the gap until the global health scare is resolved. Banks should be prepared to facilitate the influx of credit and loan applications in times like this to support especially hard-hit sectors.

To facilitate an exponential increase in loan applications, lenders need to balance the needs of their clients with risk management. To do this lenders urgently need to deploy processes that deliver speed and credit risk accuracy, while delivering a world-class customer-experience.

Digitizing the lending experience to balance risk and customer experience

Digitalization offers huge potential to improve credit risk management. It allows banks to make rapid assessments of the creditworthiness of applications quickly without the long and manual processes. With the emergence of more open API platforms, banks are able to gain access to a huge amount of financial data and integrate new data sources into risk processes. This can enhance the visibility of changing risk profiles and reduce default risk in the future. Fully leveraged internal and external data can improve risk models for quicker and more accurate credit analysis and decision making.

Long-standing lending policies and decision processes often depend on manual reviews and cross-checks to assess risk in traditional financial institutions. This process is usually extremely time consuming and costly. Instead, to support SME’s during this turbulent period, lenders should look to introduce an agile automated decision engine. Decisioning technology uses data-driven assessments and a structured credit decisioning framework to not only reduce decision time and cost but also enable banks to modify and update risk models anytime with minimal intervention. Customised machine learning models can also better predict default risk with more consistency over time.

Traditionally, the average “time to decision” for small businesses and corporate lending is between three and five weeks. In times like this, businesses facing cash-flow issues require quicker approval and cash disbursement to tide through the downtime. As digitization rapidly proceeds, it is becoming the norm for the credit process to be fully automated and digitalized. Banks should treat SME lending as a digital priority, it gives the bank a chance to acquire new corporate clients and significantly improve the customer experience. Best-in-class customer experience, ease of use, and speed of service delivery are critical factors in supporting businesses and retaining loyal customers.

Preparing now sets the stage for strong business growth in the future

As lending businesses grow, risk technology and modeling rules need to be future-proofed and configurable to allow for fast customer onboarding and instant credit decisioning. Technology needs to allow rapid data access and integration to both internal and external systems to ensure that risk tolerances are met without sacrificing the consumer experience. While making these changes now is essential to support your business’ clients through a period of crisis, it also prepares your organization for the future. Having the technology in place that delivers on functionality, flexibility and agility are paramount to enable the processing of hundreds of transactions per second, so you can easily cope with periods of spiked activity and rapidly evolving markets.