The US Government’s Paycheck Protection Program will stand as a game-changing achievement in catalyzing the digitization of commercial lending to small businesses. Federally backed loans worth 14 years were distributed in just 14 days by the participating banks and credit unions, leading to large-scale savings of small businesses and jobs. FinTechs worked in close partnership with banks as they applied their technology expertise to offer relief to a record number of businesses with speed, even as legislation was being figured out to achieve this.

This is a great pointer to the future of sustainable partnerships between FinTech companies and traditional banks. With their peer-to-peer lending models, alternative data to establish a more realistic version of creditworthiness, unique financial products and speedy loan processing, FinTechs have completely re-defined commercial lending services. The question is, how can banks collaborate with FinTechs to raise the levels of their commercial lending operations?

Hitting the Sweet Spot with Technology

Expectations of commercial customers have dramatically changed in the past few years. They demand retail-like levels of service and experience, and are willing to switch to where they can have them fulfilled. Relationships in commercial lending will thus need to be adequately infused with technology such as Artificial Intelligence (AI), Machine Learning (ML), data analytics, intelligent automation and hyperautomation. The WNS-Corinium Intelligence 2021 global survey underlines the importance of these technologies in digital transformation and predicts that hyperautomation, data analytics and AI-powered business models will become ubiquitous in the coming years.

Success in commercial lending will hinge on how banks leverage technology to provide a modern and consumer-grade lending experience by minimizing time, effort and risk across the lifecycle of origination, decision-making and closing of loans at the back-end. In turn, this will enable their front-end team to build stronger relationships with borrowers.

Here is where banks can score high with FinTech partnerships. FinTechs’ innovative lending solutions can enable banks to make their existing processes simpler, smoother, faster and more secure across the lending value chain. For example, Virgin Money has partnered with Trade Ledger, a FinTech company, to expand its banking business. Trade Ledger’s Lending-as-a-Service (LaaS) platform helps banks create the right lending products on the right channels. On the other end, it supports businesses with access to both secured and unsecured lending.

Top Priorities for Successful Partnerships

The commercial lending space offers great opportunities for growth for banks and traditional financial institutions. To do so, they have to transform operations by leveraging the following with the help of FinTechs:

  • Data analytics for insight-driven hyper-personalization and improved risk modeling

  • Intelligent automation and hyperautomation to break down silos, integrate operations and achieve faster decision-making with greater security

  • Software-as-a-Service (SaaS) solutions to keep technology investments low while achieving scale

  • Process re-engineering and standardization for scaling, higher process efficiencies and reduced cost of operations

Beyond the technology mapping, however, cultural fit is a crucial requisite for a successful and sustained partnership between banks and FinTechs. Banks must understand and accommodate FinTechs’ relentless pursuit of innovation, entrepreneurial and risk-taking attitude, and simplification of complex and tedious processes. FinTechs, on the other hand, must respect the operational maturity of banks to achieve the required regulatory compliance, and their scalability to grow and expand. Agile operating models and integrated business processes will power innovation and growth. A mutual understanding of interdependence will enable successful large-scale deployments.

FinTechs might have been the cause of disruption in the commercial lending space, but they are also the answer to the challenges faced by banks in this area. Sharper insights on customers, greater ability to manage risks and compliance, and reduced cost of managing operations will benefit both banks and FinTechs.

Know more about WNS’ solutions for commercial banking
Know more about WNS’ solutions for FinTechs

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