"Throughout the last year, many fintech commercial finance intermediaries have found that they may have struggled to support businesses to access the finance they so desperately need."
It is very clear that we are currently in the middle of a technological revolution. Across all industries, there is a race to embrace tech and digital transformation – whatever that might look like.
There are many ways that technology can improve upon a product or service, including providing analytical data that can streamline a process — such as improving delivery, increasing transparency, or increasing customer choices — as well as reducing the need for manual labour.
The financial services sector is no exception, and in fact has adopted tech at such as rate that it has given rise to the growth of a brand-new vertical industry — fintech.
And, as with any technology, although it has many benefits to an organisation, the one common negative factor is the removal of the human element from business operations and processes. Although needed for programming, system design, and the user experience, technology often comes at the cost of eliminating the in-person interaction at the point where it can add most value — especially in a service-delivery environment.
A great example of this is the frustration caused by having to wait for a ‘real’ person to check your ID when purchasing alcohol at a self-service checkout. The need for this process to be carried out completely mitigates the benefits of the method of paying – the exclusion of human interaction – especially inconvenient during a pandemic.
The same can be said of fintech platforms in the commercial finance space, and in particular those that aim to act as intermediaries between lenders and the firms that need to access funds.
Stretching our minds back to pre-Covid days, commercial finance fintech platforms were hailed as the next big disrupter in the market, providing over six million UK SMEs with a service that is both transparent and seamless.
Designed to link companies with the funders that are most likely to be able to provide the finance they require, these complex platforms take data inputted and use sophisticated algorithms and APIs to turn this into cash. Although it does take a few more steps than this, the message is clear — ease and simplicity for the customer, and lead generation for the lender.
As with many things, the reality is often very different, and the financial uncertainty that the pandemic caused has served to highlight this. Throughout the last year, many fintech commercial finance intermediaries have found that they may have struggled to support businesses to access the finance they so desperately need.
The rise in government-backed schemes, and changes to lending criteria caused by increased debt on balance sheets, have meant that businesses need formal advice on their applications.
This is where the human approach is invaluable — the many variables in play mean that specialist intermediaries are needed, that can structure finance applications and support cost reductions. These experts have an understanding of the changing market conditions affecting the needs of UK organisations.
Whilst the consumer markets have seen a marked rise in the uptake and use of fintech for personal finance reasons, this is more difficult in the commercial space, where the process is much less linear and much more complex.
In the consumer space, a number of easily quantifiable variables — income, expenditure, assets, credit score etc. — can be used to calculate affordability. In commercial finance, the variables can be infinite, interlinked and layered – making the funding application intricate, even for what is seemingly a simple transaction.
This is why fintech is failing businesses as the fall out from the pandemic continues, and why more firms are turning towards expert intermediaries to access a range of options to find the right fit for their long-term strategy.