Many banks still work the same way they did fifty years ago — their processes are outdated and riddled with legacy problems. They struggle to get beyond pen and paper applications, and they have difficulties even collecting data from across their branch network. The personal touch has gone too — by outsourcing relationships to distant call centres and banning direct telephone numbers, customers are vocal in how they view the shoddy service (bank net promoter scores tend to be negative). The whole experience has become tedious, distant, and not fit for our modern economy.
Users today want financial products built around their needs — which is all about ease of experience, speed of delivery and transparency of cost.
Technology can change all this, and slowly new models are eating away at many of the problems that have made the banking experience so painful. We’re seeing the unbundling of banking products across the financial spectrum with many upstarts taking a totally different approach in using technology to deliver better products.
Here at MarketInvoice (just one example of this movement), we’re using data and technology to solve a bunch of bottlenecks in how businesses apply for and access cash flow finance. Our mission is to create an entirely digital, online experience, and we’ve gone about building our company with this driving all our product choices. We’re also structured completely differently from banks in that we are providing a peer-to-peer model that links borrowers directly with investors, who connect and interact online.
Technology allows us to deliver an entirely online application process for customers, with no need for laborious physical meetings or paper forms. We simplify the user journey, minimising the steps from first contact to moving funds into an account, by integrating with third parties through APIs which allow applicants to gather relevant company data in just a few clicks. Examples of this include our integrations with e-accountancy platforms such as Xero, Sage and Kashflow, as well as connecting to credit bureaus, Companies House, legal databases and social media platforms.
Banks are notorious for their slow response times, taking weeks, sometimes months to get back to applicants — often only to reject funding requests. We feel that when a business applies for funding, the decision — yes or no — should come quickly; there’s nothing worse than a long, protracted no. We crunch large datasets quickly, analysing the performance of our historical funding decisions and pool of rejections to evolve our risk model over time. Our current model incorporates 93 data points to provide an accurate and rapid decision to applicants. This spans checks on the financial stability of a business, the sector it operates in, the people in the business, as well as the trading relationships it has with end customers. Our engineering team works together with our data insights team to automate the pulling of this data to deliver a timely response, which also iterates over time. This way the more a business uses us successfully, the more funding it can access, often at cheaper rates. Traditional bank facilities often have fixed terms that can only be bargained down on renewal of the facility every few years. We don’t need to arrange office visits and committee meetings; we use technology to replace all that.
Once funding decisions have been made, it’s crucial that finance is delivered seamlessly to end users. At MarketInvoice, we have to reconcile repayments, ensuring principal and interest are split and sent back to investors and borrowers. We’ve built a payment gateway that plugs into the general banking infrastructure and reconciles all transactions, with currently as much as £50–60 million flowing back and forth, from investors to borrowers each month. When investment is opened up to the retail sector, this complexity will step change.
Peer-to-peer models must also cater for the modern investor putting their capital at risk via a website. Our platform lets investors allocate their funding across the different risk bands, with both manual and automatic bidding, the latter according to their pre-set preferences. By setting limits, investors can spread their capital across a wide number of loans, ensuring good diversification. Ours is an asset class that has been inaccessible for decades, now opened up in a way that allows investors to make attractive, risk-adjusted returns. Our full loan book has been made available for public viewing online, allowing investors to study the history of transactions made with MarketInvoice in full. Digital transparency grants investors more in-depth access to our data, and helps builds more trust in our product.
And how do we get businesses interested in our product? Well we don’t have branches in every town high street and never will (who do you think pays for that through higher fees!). So we do what other tech companies do and go online to target business owners and drive awareness for our product. Our data team segments populations of businesses across the country using public data-bases (e.g. Companies House) and applies machine-learning techniques to narrow down our target groups. Analysing this data is crucial to improving the reach of our marketing. Despite the good press in recent years, alternative finance is still largely unknown amongst many business owners across the UK. But our belief is that business owners and managers will start to act more like consumers, turning to the internet to research the different funding options, and shopping around before making a final decision.
The above provides just a snapshot of how we at MarketInvoice are harnessing data and technology to create a financial solution with practical, real-world impact. There are many other peer-to-peer platforms out there doing similar things across foreign currency, consumer loans, business loans, mortgages, and student loans. Where banks have fallen behind and refused to evolve, it’s in our DNA to ask how we can make things easier, faster and more data-driven.
Technology is going to completely reshape our financial services, making them easier to use, cheaper to access and more easily understandable.
In just a few short years you’ll find it unthinkable that people had to wait weeks to hear back about a borrowing application, or had to go in branch to cash a cheque, or that people used just one bank for all their financial products. The unbundling of banks is well under way.
Co-Founder of MarketFinance