Financial technology could bridge the financing gap for small and medium enterprises (SMEs), a white paper from the World Economic Forum’s Global Agenda Council suggests.
SMEs, especially start-ups lacking a credit history, can struggle to secure funding from traditional lending institutions. Assessing the level of risk SMEs carry can be hard and the loan amount tends to be smaller. For lenders working to satisfy internal safeguards and external regulatory mandates the effort can outweigh the reward.
Plugging the gap, we see services built around technology solutions. Innovators working with the latest technology can build solutions specific to particular finance needs. They are unencumbered by legacy infrastructure and the ongoing need to support a wide ranging product set and customer base. Resulting innovations have been used to good effect, underpinning services such as peer-to-peer lending and e-commerce solutions. They have created an alternative, viable option for SME financing.
Through financial technology, traditional lenders can similarly deliver solutions that enable them to compete in their established markets, as well as helping to improve their own processes. Cloud-based software services free up institutions from building and maintaining everything themselves. Sourced from specialized solutions providers, they can support not only the processes that underpin credit and lending, but also the entire credit lifecycle.
There are compelling reasons for cloud-based lending solutions:
1. Investment – cloud-based solutions remove the need for a significant capital investment in hardware/infrastructure to get up and running
2. Customer focus – resource within the company is freed up to focus on customers rather than IT which is not the core business
3. Innovation – through specialized services from niche providers who innovate for the cloud companies can stay relevant with new, improved services
4. Scalability – with a reduced need to maintain and support a complex IT infrastructure, scaling up and down as needed becomes simpler, increasing capacity at times of high demand and scaling back down at low demand instead of having hardware that is under-utilized
5. Analytics – the processing capability to make use of big data can reside in the cloud. Tapping into the wealth of information from the data held on customers, products and repayment models can provide a granular level of detail previously unattainable.
“Provenir’s no-code visual tools let us design and configure our business process and go live quickly” Michael Gramz, Chief Risk Officer, Yapstone
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