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By · March 29, 2021
6 minute read

How Can SME Lending Be Future Proof: The FintechOS Approach


There is no silver bullet that will solve the pain points of traditional SME lending. FintechOS offers an approach to start small, scale fast, and gradually move away from outdated infrastructure.

What’s known as the SME “financing gap” – their need for external finance to stay alive or fund expansion plans – was €400 billion ($481billion) in 2019 in Europe, according to research from Allianz and EulerHermes. But last year’s crisis brought a major threat to their own viability. “Despite their importance, SMEs are exposed to a major vulnerability” these days, says the International Monetary Fund (IMF).

As countries look to come out of lockdown and return to growth, the race to provide faster, more flexible, more personalized lending solutions for SMEs will gather pace. Fintech lenders – agile, digital, innovative, and unconstrained by legacy systems – have the advantage here over established banks. CTOs and CIOs in traditional banks are aware that there is no silver bullet that will solve the challenge of digital modernization to keep up with new entrants. The big bang overhaul of banking systems has been tried often enough for banks to understand that it is too risky, too costly, and not worth the trouble.

The FintechOS approach: start small, scale fast

The right question to ask, therefore, is what phased approach banks should choose. FintechOS offers an approach to start small, scale fast, and gradually move away from outdated infrastructure. “The key to solving the SME lending challenge has two pillars: personalization and automation”, thinks Catalin Dediu, VP, Product Management, FintechOS:

  • Personalisation: Offer bespoke products and services that are contextually relevant to SME’s needs.
  • Automation: Achieve true process automation. This will improve customer experience while lowering costs. Banks should aim to redesign back-end processes to eliminate manual input and enable real-time decision-making.

This whitepaper explains what innovating with FintechOS means for SMEs:

 #1 Personalized banking

The FintechOS platform is a digital-on-top platform that allows SME banks to create new products that are smart and personalized and bring them to market quickly. With the FintechOS platform, SME banks can retain their existing core banking system and innovate to unleash their full potential for SME lending.

The FintechOS platform is built on the premise that better customer experiences start with better data. All the data needed for a single customer view is stored right alongside the traditional banking data, so all the necessary information to build and market smarter products is always available together in the same place. This place is called the Evolutive Data Core. Now SME banks can set up customer segments and inclusion criteria at the heart of their financial services and create products that are more relevant, more targeted, and offer a better experience to the customer.

#2 Short time-to-market

The FintechOS platform helps SME banks build most customer journeys out of pre-built, productized functionality called Automation Blocks. These contain necessary and often reused technology for things such as security, identity and access management, business logic for scoring and rating, workflows, and digital documents and signatures. Building with Automation Blocks is fast, reliable and allows SME banks to focus on the elements of their customer experience that need to be unique.

The FintechOS Innovation Studio helps SME banks build that unique experience for their target audience. It offers business users a low-code approach to configure new customer journeys and financial services, or to build bespoke business logic.

 #3 Operational efficiencies

Better customer experiences also result in lower operational costs for SME banks. Particularly in small banks that still rely on paper-based processes and manual handovers, automation can bring time savings and cost savings. To name a few examples, fully digitized operations that eliminate paper-based processes increase the speed of business processes and increase their reliability. Digital document creation and electronic signatures make sure that loan origination can be completed in a single session for standard applications and drastically reduce time-to-money for customers. Face recognition, liveness technology, and OCR help streamline KYC checks that otherwise slow down operations and create friction with customers.

Whitepaper extract 2 1 293x760 1 FintechOSFintechOS’s technologies 

  • The Evolutive Data Core

FintechOS brings together data from the bank’s legacy systems alongside third-party data and ecosystem services in its “Evolutive Data Core.” This is an API-driven extensible data model that can be updated continuously with new data and connections. This means that FintechOS enables the bank’s systems to grow and learn over time to keep pace with business changes. It also offers pre-configured integrations with over 150 external sources, such as TransferWise, Onfido, and Dun & Bradstreet.

  •  Customer journeys

FintechOS provides pre-configured functionality in Automation Blocks that can be combined in many configurations to meet diverse product needs. For a loan application, for example, a bank might put together blocks addressing KYC, workflows, scoring rules and credit decisioning, document generation, and digital signatures.

  • Innovation Studio

Within the creative playground of FintechOS’ Innovation Studio, lenders can create and deploy financial services and customer experiences in a low-code environment. This is faster, more direct, and more user-friendly for finance experts than the traditional approach of working with IT teams. It allows the bank’s product developers to use their experience and knowledge to innovate, even if they do not have deep technical expertise.

FintechOS Lighthouse 1 1024x794 1 FintechOS

Agile banks will benefit all

The pressure on banks to address the of SMEs is only going to increase over time. Governments who have put up billions to support small businesses threatened by the impact of the pandemic are now looking at ways in which to ensure these companies recover and drive growth. They expect their country’s banks to play their part.

The OECD has already called for action, pointing out that SMEs were “deeply affected” by the economic effects of the pandemic, especially in their ability to access finance for cash flow needs and longer-term investments. The OECD said it would be “crucial” to monitor SME financing developments. Small businesses, it warned in an April 2020 report, might not be able to leverage digital technologies enough to obtain the external finance they need.

Banks can and must help and to do so will need smarter technology and more actionable data. These are the kinds of solutions offered by digital technology providers and the kinds of technology already being used by nimble newcomers in the SME lending market.

Without these changes, traditional lenders in the sector will be left behind. New arrivals will continue to snap up customers and eat into market share. And, perhaps most importantly, the future for millions of SMEs will remain uncertain.


MAIN PHOTO Credit: Shutterstock


For more findings on SME lending,  ➡️download our whitepaper from here.


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SME Banking: Weathering the Storm

What’s Gone Wrong with Traditional SME Banking

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