By Michael Pierce · June 27, 2022
6 minute read

Combined commercial: any flavor, so long as it’s vanilla, part 1

Combined commercial: any flavor, so long as it’s vanilla, part 1 - SME banking

Combined commercial banking and insurance, like all the best ideas, is simple. It’s merely a case of using the FintechOS platform as pipework to create a better environment for small and medium-sized enterprises (SMEs) to thrive in, by making better use of Big Data.

What do we mean by “better”? At the Digital Insurance Agenda event in Amsterdam (DIA Amsterdam) on June 29-30, Chris Kay, our sales director for insurance, will present a live demo of how the FintechOS Northstar platform can work for both banking and insurance providers to present properly tailor-made cover that goes way beyond the current offering for SMEs of any flavor, so long as it’s vanilla.

The benefits to SMEs, and by extension – simply because of how vast the SME industry is – the wider economy, both nationally and internationally, are significant. In part one of this blog series, we’re talking about the benefits of combined commercial banking to SMEs. In part two, we’ll be looking at combined commercial for SME insurance. If you’d like more detail on either, download our extensive report: Combined commercial – any flavor so long as it’s vanilla.

Download the full report: Combined commercial – any flavor so long as it’s vanilla

In a move away from traditional banking spheres, SMEs use and generate an incredible amount of data on a day-to-day basis. SMEs are inherently drawn to neobanks, disruptors, and innovative apps designed to cater to their specific, individual needs. The data is everywhere, from accountancy apps tracking daily transactions to the digitally-filed annual tax accounts that markets like the UK require.

This data isn’t just invaluable for the financial institutions providing products, and able to provide more-personalized services when and where SMEs need them, it’s also invaluable for the SMEs themselves.

The Northstar platform allows and encourages the data generated daily by SMEs to be used intelligently and boils down to making life easier and simpler for SMEs. The KYC and KYB (know your customer and know your business) processes are similar for both banking and loan applications, and insurance, so it makes a huge amount of sense to combine those scenarios into one money-saving, time-saving bundle.

Michael Pierce, Commercial Director of Banking at FintechOSHistorically, it’s been quite difficult for SMEs to get access to finance from the banking service because the banks have a habit of being too expensive or risk-averse, and because SMEs don’t, generally speaking, have access to unlimited cash flow, are newer to the industry, and are more volatile through economic downturns.

Michael Pierce, commercial director for western Europe at FintechOS

Combined commercial for SMEs: making better use of the tools

Making better use of the Big Data generated through combined commercial insurance applications combats this, and allows financial institutions to be smarter in how they make their loan decisions and what criteria they can base them on.

Michael Pierce, Commercial Director of Banking at FintechOSFor example, a key way to optimize this data is by connecting to an SME’s ledger to get real-time insight into how their cash flows are operating and leveraging that with certain industry vertical trends. From there, an in-depth profile can be created that really gets to the heart of the SME, and at the same time allows financial institutions to make better decisions on how to lend to and do business with them.

Michael Pierce, commercial director for western Europe at FintechOS

Taking this one step further, the use of Big Data syncs with the move away from the traditionally distinct roles of corporates, SMEs, and banks. We’re now seeing a more blurred approach, as SMEs look to introduce financial services into the lives of their consumers, perhaps by launching their own BNPL proposition. Offering their own customers point-of-sale financing helps increase conversion of their own sales and ultimately increases revenues, thereby making the SME a more attractive loan prospect.

Big Data is a big opportunity for SMEs

The combined commercial use of Big Data that Chris presented at DIA Amsterdam also opens up new routes to funding for SMEs. One of the pain points of being an SME is they can’t get access to funding unless they can show at least 12 or even 24 months of consistent cash flow. If instead the predictability and artificial intelligence (AI) that Big Data allows can be used, then you can use factors of consumer demand for that product together with your costs to manufacture potential industry or country vertical elements to take a more-informed risk.

Michael Pierce, Commercial Director of Banking at FintechOSA bank would be able to tell from the data that it was okay to lend to this SME for inventory against purchase because the data would show the probability of that being converted to profit is high.

Michael Pierce, commercial director for western Europe at FintechOSIt’s a perfect example of how both in the insurance world and in the banking world it’s necessary for that data to become universally accessible. As the world recovers from the pandemic but further economic uncertainty looms, the role of Big Data will also play a crucial role in helping SMEs to better survive the upheavals of recession and ride out tumultuous cash flow journeys.

Combined commercial needs to react to market demands

Michael Pierce, Commercial Director of Banking at FintechOSBanks will have to be more reactive. Particularly in the sense that if there is a recession it’s better to not let businesses go under, but to use Big Data and think smart when it comes to how they will lend to these institutions to ensure they remain alive and in turn profitable once the economy starts moving again.

Michael Pierce, commercial director for western Europe at FintechOSBig Data allows for a new approach of alternative, unique personalized lending, and instead of loans being classified as deferment, and SMEs going out of business, a loan may simply be rescheduled, or refinanced, or restructured to better support the SME.

This comprehensive approach to better-combined commercial, as will be presented at DIA, shows a new world of options far beyond the existing financial personalization offered to SMEs of any flavor as long as it’s vanilla. The future is properly personal products tailored to SMEs, and smarter, easier processes.

To find out more about what we demonstrated at DIA Amsterdam, and what FintechOS can do to enable digital SME combined commercial banking and insurance, download our report.

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