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In financial circles, there’s a lot of buzz around the concept of “digital transformation”, as open banking and digitalisation enable businesses to evolve, improve operations and deliver greater value to customers, according to GetCapital’s SME Insights series.
At a time when SMEs have suffered massive disruptions and been forced to radically change their way of doing business, GetCapital brought together industry leaders to share perspectives on where digital transformation is taking the marketplace in 2021, with particular emphasis on the use of bank statement retrieval technology in lending.
GetCapital CEO Jamie Osborn discussed the topic with Simon Bligh, CEO of data-driven financial services company illion and Andrew Dodwell, Director of full-service brokerage firm Magnolia Lane Financial Services.
Australia’s SMEs experienced extraordinary challenges over the past 12 months. They were forced to bring forward years of development and business processes – a mix of resilience, digitisation and customer focus – just to survive. As SMEs across Australia took extraordinary efforts to transform their business operations, streamlining the loan evaluation process became an important step on the road to recovery.
illion’s frictionless BankStatements technology has radically altered the way business loans applications get processed and approved. It allows businesses, lenders, brokers and even customers to get better outcomes, faster.
“We’re seeing rapid adoption of this in consumer lending,” says Bligh. “It began with digital lending, but now it’s moved to ‘buy now, pay later’, and it’s moving into the mortgage market.
“If I think about mortgage brokers, there are 16,000 in Australia and 10,000 of them use it. If you’re one of the 60% of the market who use a broker, you’ll be offered this tech to show your income and expenditure and see who can offer you a good mortgage quickly. That’s good for everyone.”
GetCapital has been using illion’s BankStatements technology for some time, accelerating its use in the wake of COVID as conditions changed.
“We’re in our seventh year, and I think we might have been one of the first customers of the technology,” says Osborn.
“We’ve had a long partnership with illion. We’ve always had a bank statement product, and I think that is a fundamentally better proposition for everyone in the lending value chain.”
GetCapital’s journey has involved educating customers and the broader market on the benefits and security of the technology. Five or six years ago, the adoption rate of the technology was quite low, but GetCapital has seen a 10% year-on-year increase since then. For example, as recently as 18 months ago, GetCapital reported only about 65% of applications using digital bank statement technology. Now, that adoption rate is in excess of 95%. The chief catalyst was the pandemic, which drove an unprecedented upturn in terms of adoption.
“I’m sure we all experienced it as consumers: we got much more comfortable digitally registering for services, and e-commerce has come to the fore in recent months,” says Osborn. “We’ve seen broader adoption, growing confidence and value.”
In the equipment financing sector, the pandemic also had a direct impact.
During 2020, because of international border restrictions, no new equipment stock was permitted to enter Australia. As a result, the market shifted to used equipment through traditional finance statement lending instead of the quicker No-Doc loan process typically used for new asset purchases.
“Used equipment needs the kitchen sink, and it’s a two-week process,” says Andrew Dodwell. “The businesses are getting their equipment from auction houses, and if it takes two weeks to get that loan assessed, that auction closes and someone else gets the asset.”
To Dodwell, getting approvals quickly in such a scenario is therefore just as critical to a business as it is to a lender. And as a broker, he sees the tangible benefits of bank statement technology in the value it delivers to customers, as credit providers are able to quickly meet core lending obligations, verify key income and expense information, whilst providing a better customer experience.
“The two takeaways for me are that this is real data, and relevant data,” says Dodwell. “What that translates to for us and our customers is the speed in getting approvals and also the ease with which approvals are granted. These are the solutions that we’re trying to provide, and we’ve had some success. It’s a welcome product to bring to market.”
