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EQ Riskfactor Global Outlook Report 3

Standing Out With Technology

17 November 2021

The economic impact of the COVID-19 pandemic was immense, the nearest comparison coming in the form of the 2008 financial crash. Europe faced a unique challenge due to the integrated nature of the EU’s financial system and its complicated relationship with the UK as a major economic centre. Europe’s lenders certainly felt the effects.

Though the post-pandemic economy won’t be drastically different from the one which came before, there will be important differences which shape how countries and businesses rebuild. Namely, an increased shift towards and desire for digital processes.

The pressure facing lenders to recover both quickly and well is significant.  However, there are steps lenders can take to ease this process and even get ahead of the competition in the journey back to profitability – namely, implementing new and transformative technology.

Bad Data In, Bad Data Out

This process begins by ensuring lenders understand each client’s individual performance and trends by looking at data. However, it’s crucial that this is ‘good’ data – bad data in means bad data out, and inaccurate data can be a major blocker to digital transformation.

For example: using an incorrect debtor name or company number might reduce the ability to correctly calculate group exposure or identify contras. Failure to closely examine company structures might mean that blind spots of association are created or that KYC responsibilities are missed.

Comprehensive and accurate data enhances and supports lender funding processes and makes it more likely that the lender will make accurate funding and product decisions. This data can also be used to analyse and predict the client’s future needs and identify changes in behaviour. Planning for these within the initial credit deal, based on benchmark trends, can be aligned to forecasts, covenants, and limits.

Delivering Faster Decisions

When deployed in this way, data has the power to transform the client-lender experience and accelerate the entire lending process. Demand for slicker, quicker digital experiences have spread across both the business and consumer audiences, and data is integral in meeting this challenge.

Data can help deliver faster, more accurate lending decisions which create a frictionless borrower journey and also generate a smoother and more secure process for lenders. Furthermore, it has the potential to considerably reduce customer acquisition costs as data-led automation shortens the cycle time from initial meeting and application through to onboarding. Increased speed of decision positively correlates with opportunity conversion.

Our recent EQ Riskfactor research identified that European lenders currently still rely heavily on manual processes. We found that over 40% of the customer application journey is manual but this actually increases to almost two thirds of processes in KYC, risk scoring and final onboarding decisions. The opportunity for improvement is clear.

Laying The Foundations For Growth

With the right data and automated systems in place, lenders can establish proactive conversations with their prospects and customers on future financing. These conversations not only look at support for growth and recovery, but also help to protect the lender’s commitment going forward.

A lender should not just look at factual historical data, but also be able to gain insights into the client’s true-life business scenarios – and, just as importantly, how they are likely to change. It could be, for example, that the client is on course for significant growth, which could be missed by purely looking at historical data. Understanding the forecasted trading of the client is also a key area to monitor.

Overall there are a diverse range of benefits which can be achieved by digitising processes. Whilst this is commonly accepted across most senior stakeholder groups it is often a valuable exercise to agree the driving purpose for change. At the highest level these are likely to be customer, competition, cost, risk or scalable growth. By completing an internal review of their own business and local market lenders can benchmark and set priorities accordingly.

Read Finding Your Competitive Edge With Technology

Volume 3 of the Receivables Finance Global Outlook is now out.

Our international research report showed that 80% of global receivables finance businesses are not effectively using automation during the customer onboarding process.


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