How to Accelerate

Digital Lending with

Data & Automation
The smart use of data, automation and analytics
can accelerate digital lending in the post-COVID
environment, according to panelists at a recent
webinar hosted by Ezbob and moderated by
Finextra Research.
 In a wide-ranging discussion moderated by Finextra’s
Tomer Guriel,
Head of Research, Gary Wright, Ezbob’s CEO Tomer
Ezbob Guriel was joined on the panel by Paola Papanicolaou,
Executive Director and Group Head of Innovation,
Intesa Sanpaolo, and NatWest’s Lucy Hasson, who co-
founded and served as Chief Operating Officer (COO) COVID-19 has created a platform for banks and financial institutions to
at Esme Loans, the bank’s standalone digital lending accelerate their digital transformation, shifting it from a trend to a necessity
platform for SMEs. as the pandemic highlights the benefits of automation.
Paola Papanicolaou, The question of how to service SMEs as we emerge “Last year was challenging,” said Guriel. “The pandemic hit unexpectedly and
Intesa Sanpaolo
from the pandemic is a pressing one, with the banks had to cater for both existing and new customers, and provide them
industry anticipating a spike in demand. In a poll of with access to capital. Through the government-backed lending programmes,
the webinar’s attendees, 72% stated they expect the banks have been able to establish stronger relationships with SMEs. Now,
demand for SME borrowing to be stronger than pre- in 2021, they need to decide how they will expand and build on these
pandemic levels. relationships.”
Lucy Hasson,
NatWest

Implementing the right digital lending solutions can help banks and
other financial institutions to scale their business, make it more profitable,
personalise their services to the customer, and ultimately cross-sell other
products at the time the customer needs them.

– Guriel
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Ramping up digital transformation
Intesa Sanpaolo is the largest Italian bank, with around 12 million customers.
It started its digital journey a few years ago, but has seen things ramp up
sharply amidst the pandemic.
“We decided to digitalise our bank,” explained Papanicolaou. “There were two
main drivers: the need to reduce manual labour and boost cost efficiencies,
and the desire to provide a great service to our customers, which wasn’t
limited by the opening hours of a physical branch.”
Papanicolaou and her team met Ezbob and the two companies started work
on the bank’s Smart Lending product, which was launched in July 2020 and
has helped Italian SMEs to access the finance needed to keep them afloat
in these tough times. It’s a fully digital lending process that’s powered by
automation and real-time access to multiple, third-party data sources.
“We worked with Ezbob to develop a system that translates real-time data
into inputs and makes it easier for an SME to complete the application,” said
Papanicolaou. “We’ve changed the way we evaluate applications.
Thanks to PSD2, we’re able to base evaluation on a company’s cash
flow rather than just its balance sheet – which is at best a year old.
This is fresher, more dynamic, and allows us to get a better picture of
affordability.
– Papanicolaou
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We’ve also introduced new elements like web sentiment, which is a good way to
get further insight into a company’s prospects.”
“It’s fantastic for our customers. They no longer have to spend time inputting
lots of data themselves, and our new model brings greater transparency to
the process. In the past, the evaluation of a ‘yes’ or a ‘no’, or the amount
and price, was seen as a dark secret hidden by the financial institution. But
with PSD2 and Open Banking, the customer knows the information we will
evaluate and has more chance of getting the right price, the right amount
and a fairer product based on their true, real-time financial situation. It’s
also very quick, under 10 minutes, which is crucial – SMEs need that quick
answer. You can’t keep them hanging for weeks.”
The success of the Smart Lending project has confirmed Guriel’s belief that
the future of lending is inextricably linked to artificial intelligence (AI) and
analytics that can unlock the rich data available in the digital world.
– Guriel
“Between 2010 and 2015, the first stage was taking all the paperwork
and making it electronic,” he said. “Now, thanks to the abundance of
data sources, whether its personal, business or social media, financial
institutions can pull all the necessary information together and apply
machine learning and AI techniques to make quicker, better and
smarter decisions. Once we realized that in 2016, we made the decision
to focus on helping our clients to make that transition.”
 “It requires a change of mindset at the banks.
You suddenly have a lot of data that’s never been
assessed before, and you need to start thinking
about new digital channels, like price comparison
sites, that you need to engage with to originate
your business.”
It may require a shift in culture, but it’s a win-win
situation for the banks and their customers because
the limitations of the physical world are removed
and replaced with a solution that’s available
24/7. Digital solutions provide banks with more
information on the customer and enable them to
make smarter and more profitable decisions.
“Issuing a loan the traditional way would cost
around £3,500 and take 5-7 days of actual
work within the institution, and then weeks to
fully process,” added Guriel. “The latest lending
technology can cut up to 80% of this cost,
depending on the volume you’re putting through
the system – the higher the volume, the less it costs
you per loan.”
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One of the first lenders that Ezbob worked with after it
pivoted from lender to lending technology specialist in
2016 was NatWest’s Esme Loans, created to give SMEs
more choice and a smoother experience when it came
to borrowing.
“In 2016, we looked at the SME lending market and
saw that 10-15% was in the P2P space with the likes of
Funding Circle,” said Hasson. “We wanted to respond
to that demand. Over a 12 month period, we designed
and built an end-to-end proposition with Ezbob, which
was also transforming its business model at the time,
and launched the business in 2017.”
“We did that independently, with an independent
brand. In many ways, we were a sandbox for
NatWest, using data to automate Customer Due
Diligence (CDD) and onboarding, credit decisioning,
affordability, and indeed to manage customers.”
– Hasson
 Turning the dial up on Open Banking
Over the last 4 years, Esme Loans has issued loans in under an hour,
serving SMEs in minutes rather than days. This has unlocked significant
cost savings with automation doing the heavy lifting. Hasson recognises
that the data-rich Open Banking environment is crucial and points out it’s
only just getting warmed up.
“Open Banking has been really interesting for everyone, because pre-
pandemic it was the dream,” she said. “The industry thought it would
change everything but it had terrible PR and people didn’t really know
what it is. Most still don’t, but the pandemic has poured fuel on the fire and
adoption is rising.”
Open Banking has been really interesting for everyone…the
pandemic has poured fuel on the fire and adoption is rising.”
– Hasson
To illustrate Hasson’s point, in January 2021 more than 2.5 million
UK consumers and businesses were using Open Banking-enabled
products, according to figures from the Open Banking Implementation
Entity (OBIE). This was up from one million in January 2020. Awareness
is growing, but there’s a long way to go.
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In the webinar’s second poll, 38% of attendees said that Open Banking data has
improved their institution’s lending risk and affordability analysis, but 59% said their
company doesn’t actually use such data in the analysis. In response, Guriel said the industry
needs to talk more about the value that SMEs get from data sharing. “Post-COVID, when
we surveyed our customers, 80% would now link their banks accounts to support accurate
affordability assessments, but most still don’t know exactly what Open Banking is,” added
Hasson.
“It’s important to continue to educate the market about the benefits of data-sharing. It’s
certainly been crucial for us. Through Ezbob, we get real-time data from multiple sources –
some traditional, some non-traditional – and we back it up with additional data to build
scorecards.
We’re empowering our underwriters with instant data, enabling them to make
decisions on the spot. That’s the future of decisioning.”
– Hasson
Papanicolaou agreed that Open Banking has become something of a slogan and it isn’t
always clear what it means for customers. “We started a project on Open Banking as a
Group a couple of years ago,” she said. “We decided what it meant to Intesa Sanpaolo
was the ability to extend our network and offer more banking services to both customers
and prospects. At the end of the day, it’s a point of access to better customer experience;
it’s a huge opportunity that needs to be managed by financial institutions in a serious way
because it’s rooted in customers trusting you with their data.”
 Drilling for data: the new oil
The panellists were all quick to point out that we’re just at the beginning of what’s
possible in terms of harnessing data to improve financial services.
“Smart Lending is the first component of a larger product suite,” said
Papanicolaou. “Our focus is now on further expanding our relationship with SMEs
and pushing ahead with our digitalisation. We’ve tested things out with our SME
customers that are a little bit more digitally-mature, but we’re very aware this is
just the start.”
“We’ve been working with the bank’s compliance and legal teams to understand
what it means to bring offline projects online, discussing legal constraints and
interpretations that need to be reviewed. It’s a very profound transformation that
you have to go through – it’s not just a case of buying a solution, putting it in
place, and off you go! It’s a journey.”
“The data is not only about managing risk and calculating credit appetite,
it’s about understanding your customers and helping you to acquire more
customers”
– Guriel.
“The more data that a financial organisation collects and analyses, the more
it understands its customers and the more it’s in a position to offer the right
product at the right time.”
With this ethos in mind, Esme Loans has helped to guide the NatWest family
on its digital journey, providing lessons on how to leverage the wealth of data
available in the Open Banking environment.
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Hasson explained how her team has shared its data with the NatWest Group and
regularly talks to them about how further digitalisation can improve other elements, like
how to acquire new customers via the initial lending touchpoint and what they can build to
deliver the types of Net Promoter Scores (NPS) that the challengers and alternative finance
platforms enjoy.
“We’re exploring wider banking relationships,” she said. “When you start to really look
at the data, you identify things you can do that are going to be much more valuable for
the customer. One of the things that NatWest champions is looking at how we solve the
real problems coming up for this generation. How do we draw on data to help shape
behaviours that put our customer on the path to a carbon-free future?”
The webinar came to a close with the panellists advising financial institutions to keep a
close eye on the likes of Amazon and its fellow big techs. “They’re less interested in risk and
balance sheets,” concluded Hasson. “For them, data storage is the gold mine and having
lending-as-a-service on top of that is just another product. We’re in for an interesting few
years with the market transforming and new entrants coming in from adjacent sectors.”
The banks and financial institutions that embrace digital transformation now will be the
ones who stay competitive when these digitally-savvy, data-rich firms take the logical step
into the financial services arena.
Transform your lending Contact us for more information
Ezbob provides a digital lending solution that enable 120 New Cavendish Street
financial institutions to accelerate customer acquisition London W1W 6XX
and automate their operations. The company is a
United Kingdom
pioneer in using advanced Al-powered analytics
+44 (0) 2037 693 128
and Open Banking data to streamline the end-user
application process, resulting in increased sales and
significantly reduced operating costs. www.ezbob.com