How fintech parnerships can help banks unlock commercial lending

Access to large sums of money, shorter loan application processes and low interest rates have boosted the growth of global commercial lending, with the market size projected to reach $30 trillion by 2030.

SME lending is particularly underserved because it has not experienced the same pace of digital transformation compared to retail customers. Even during the pandemic, SMEs across the globe faced challenges to raise funds to stay afloat. Fortunately, banks are starting to realise the potential of this untapped market.

However, banks are struggling to roll out digital lending solutions and take advantage of this booming opportunity because of their inefficient manual lending journeys, complex data issues and legacy in-house systems. Not only are these legacy systems expensive to maintain, but these problems also make it difficult for banks to respond quickly to business needs.

Fintech partnerships are the answer

There is currently an opportunity for banks to better leverage fintechs to tackle these challenges by co-developing and enhancing their offering by building products and services to plugin to Fintechs. The outcome will be a faster, smarter lending process with a better customer experience that can help boost revenues.

In practice, banks can leverage fintechs in a number of ways, including to accelerate innovation, push through a culture shift or to co-create.

Accelerating innovation

Fintechs can innovate much faster than banks can. Cloud-enabled digital platforms, industry standard data models, open APIs and product expertise allow Fintechs to respond to the market quicker. Banks should consider partnering with one or more Fintechs to take advantage of their speed of innovation. This will help banks to focus on their business and customers which is their strong suit, rather than worrying about technology.

Fintechs help create a cultural shift

Banks should not only focus on leveraging a fintech’s tech platform, but also consider using the partnership as a catalyst to shift company culture. Fintechs can help banks to be more agile, nimble, “fail fast”, and challenge their current ways of working to break functional silos – moving from a platform IT to product mindset.

A purveyor of industry insights

Fintechs bring learnings from their peers across various dimensions including technology, operational processes, and business models. If banks are open to be challenged and ready to learn from fintechs’ industry experience, their solutions will be rich, and the digital lending journey will be accelerated.

Partnership and co-creation in commercial lending

Although most banks see the fintech proposition as an accelerator to deliver their lending platform faster, the real benefit is to tap into opportunities to co-create new solutions based on the most pressing business and customer needs. Most fintechs follow follow an agile approach to development, continuously developing their platforms and working closely with their clients to meet their requirements, which is why they are rapidly growing their customer base.

Read more: Transforming the commercial lending process in a digital-first world

It’s critical for banks to emulate this strategy by identifying the opportunities to co-develop business models and tech platforms with Fintechs to differentiate and compete in the market.

Barriers to a successful partnership

Developing fintech partnerships requires a significant amount of time and effort on the part of financial institutions — both to identify the right fintech companies with whom to partner, and to ensure the resulting partnership is structured so that both parties can achieve their desired objectives.

Given the market opportunity in commercial lending, it is worth the effort required. Banks failing to invest today will miss the opportunity to respond to this incredible market surge in commercial lending. However, to capitalise on this opportunity choosing the right fintech and delivery partner will be critical for realising return on investment.

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