Unlocking The Future Of SME Lending With Digital

Small and medium enterprises (SMEs) play a significant role in the nation’s economic growth. Supporting their financial needs promptly and efficiently should be key for every financial institution. Manual, paper-intensive processes are not enough to address the evolving needs of SMEs. Banks need to adopt technology for automating the end-to-end loan origination process. The current situation, when social distancing is the need of the hour, makes digital even more relevant.

While banks realize the importance of SME lending, here are a few challenges they face in the process:

• Lengthy onboarding time due to manual processes and legacy systems
• No defined process for credit and risk assessment or loan renewals
• Ineffective data monitoring and portfolio management
• Lack of customization to cater to a wide array of businesses
• Wasted time in merging data from various sources
• Siloed processes for document management and loan origination
• Manual management of regulatory and compliance policies
• Delays in handling unstructured process requests

The Role Of Technology

Technology enables banks to streamline their disjointed processes for SME lending and deliver value to their customers. Modern-day lenders rely on a solution that automates and streamlines the end-to-end lending cycle for the complete range of small business loan types – from prospecting and origination to underwriting, disbursement, and servicing.

Take a look at the 15 ways in which technology can transform the SME lending process:

1. Digitize the onboarding process and allow SMEs to upload documents and submit information online for a completely touchless experience
2. Leverage native low-code capabilities for faster deployment of new solutions and technologies
3. Bridge data and process silos with a unified digital automation platform to improve the flow of information and communication
4. Automate the workflow to enable distributed data capture from multiple sources
5. Create accurate underwriting techniques by taking advantage of big data analytics
6. Use pre-defined algorithms to optimize the loan approval process and reduce disbursement time
7. Decrease turnaround time and operational costs with the help of a rule-based process engine
8. Leverage emerging technologies, like artificial intelligence, robotic process automation, and machine learning, to automate mundane and repetitive tasks
9. Utilize a business activity monitoring tool with a real-time dashboard to accurately track the loan lifecycle
10. Offer lines of credit through digital channels to provide businesses with remote access to capital
11. Quickly process small-ticket, unsecured loans with minimal documentation over a virtual, contactless interface
12. Reduce discrepancies and human bias to accurately assess risks using new-age technologies
13. Adopt blockchain technology to support the encrypted transfer of information without any loss of data integrity
14. Mitigate overheads by managing the complete loan cycle online, thereby maximizing banks’ financial flexibility to offer better interest rates to SMEs
15. Deliver a seamless customer experience with customized offerings based on an SME’s requirements

The Future Lies In Digital

A glimpse of how banks can use the power of digital to deliver a superior experience to their SME customers:

Digital-First Model 

The ongoing pandemic has given rise to safety regulations that demand fully-digital operations. This has led to lenders migrating the end-to-end loan lifecycle to a digital platform. From processing the initial applications to disbursing the loans, everything is possible from a remote environment.

Digital Automation Platform

Digital automation platforms, with low code and cloud capabilities, can help financial institutions become fast, agile, and stay ahead of the curve by enabling end-to-end automation of lending processes.

Open APIs

Lenders will be able to better mitigate credit risks and anticipate borrowing needs by combining open APIs (application program interface) with real-time data to contextualize an SME’s credit score

Fintech Partnerships

Fintech partnerships help banks modernize their products by offering them a medium to directly tap into the SME lending marketplace

SMEs And Covid-19

Governments across the globe have announced relief measures and stimulus packages to support SMEs affected by the ongoing pandemic. This includes the SBA Payment Protection Program in the US, the SME Guarantee Scheme in Australia, and the CBILS Quick Loans Onboarding Solutions in the UK. A loan origination software can enable banks to process these loans quickly and efficiently for SMEs by automating the end-to-end loan disbursement and forgiveness processes.

Digital lending has been critical in empowering financial institutions to help their SME customers in their time of need. Technology is the bridge connecting banks and SMEs to ease the lending process through this difficult time. It’s time for banks to adopt a systematic approach to automate manual processes and digitize data-intensive tasks to stay current and competitive.