Alternative Data Transforming SME Finance

Alternative Data Transforming SME

FinanceGlobal Partnership for Financial Inclusion Forum

What data? A world awash in data – unprecedented volume, variety, and velocity – means more data can be SME credit data; and rapidly escalating processing power matches smart algorithms to massive data streams at plummeting costs

Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

Global shifts: how much data and where? The digital universe is more than doubling every two years; importantly, digital data will

switch from 60% in mature markets to 60% in emerging markets by 2020

Source: “The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet of Things” (April 2014). IDC.


Fintech transforming the SME lending status quoA rapidly growing crop of technology-focused SME lenders are putting customer needs, big data, and advanced analytics at the center of their business models.

P2P SME lenders Supply/trade financing Online balance sheet SME lenders

Online invoice financing


Global SME ‘operating systems’ moving onlineEvery time SMEs use cloud-based services, make digital payments, browse the internet, use their mobile phones, engage in social media, buy or sell electronically, ship packages, and manage their receivables, payables, and recordkeeping online, they create and deepen the digital footprints they leave behind.

Payment acceptance + much more

Making payments Cloud accounting + much more


Emerging digital SME lending ecosystem New analytic firms help lenders analyze big data; telco, bank, and technology firm convergence is fueling new mobile data-lending and financial services; and new marketplace aggregators help SMEs make sense

of their growing lending options.

Big data analytics Mobile data lending graduating to SMEs

SME loan aggregator marketplaces


Fintech and banks 2016: more friend than foe

Advantage: banks• Captive, large customer base/ positive

selection in applicant mix

• Brand

• Distribution coverage

• Valuable, “free” internal data (but underutilized)

• Low cost, stable source of funds

• Regulatory certainty (mostly)

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Advantage: fintechs• Customer service oriented

• Simple and often friction-free applications

• More credit data sources

• Enhanced risk models

• Underwriting costs

• Pricing for risk

• Less regulation in many markets (but the future is uncertain)


Scaling up: partnership business models

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Banks

SME Solutions

Online Lending

Government/Associations

Investing FCIF FUNDING CIRCLE SME INCOME FUND

Banks

SME Solutions

Online Lending

Payment/Processors

Lending as a service (LaaS)

• Focus on technology/embedded analytics a game changer

• Can scale very, very quickly

• Enables partners to expand core solutions /value added services

• U.S., Australia, Canada

Acquisitions + referral partners

• Acquired Lending Endurance Network to expand to U.S.

• Acquired rival Zencap to expand into Europe (Germany, Netherlands, Spain)

• Multiple referral partnerships


Licensing the platform to scale globally

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Licensing technology to lenders globally

• Turnkey platform, fully configurable

• Rapid global deployment

• Rapid processing and decision making can be fully automated

• Works across all channels

Banks

SME Solutions

Platform LendingPartners

Network Acquirers

Institutional Partners

• Short online applications; automatically, painlessly link data sources

• Uses power of SME’s own real-time, verified business data to get working capital



Alternative data: policy issues and challenges

• Data privacy and consumer protection issues

• Opt-in vs opt-out models

• Credit reporting sharing and access

• Cyber security

• Transparency & disclosure

• Balancing integrity, innovation and marketplace competition


http://smefinanceforum.org

Alternative Data Transforming SME Finance

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