People-powered lending: why technology can’t beat the personal touch

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.

Customer journey

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.

Security

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.

For more infor­ma­tion, vis­it Ulti­mate Finance