Covid, Lending and The Road Ahead

As we approach 2021, access to money represents both a challenge and opportunity. Companies need access to capital and in the short term, to loans. The latter may be required at increasing frequency if healthcare problems on the ground overwhelm societies. Resilience and responsiveness are key.

There is a general consensus about digitisation. But what the industry needs is not just applications and portals. COVID has brought home the reality that calamities may not just be headlines about events in far-off places. It has also informed us that the fall off a cliff can be almost instant. So businesses-and people-need parachutes. Forgiveness or deferment of loans and payments is one way. Ready access to cash-more readily than ever before- is another. But in an economic crisis, the challenge will be to lend readily and rapidly in a situation of heightened risk, when the prospective borrowers fortunes may change very quickly.

When we thought of a lending product, it was clear that an end-to-end automated system for loan origination was needed for that high level of responsiveness.  The relationship managers required mission critical, timely inputs to make decisions. While a high degree of automation is possible within the product stack, data has a different challenge. The quality and source of data as well as-more to the point-the way data is seen, become very important. This may require a re-appraisal of the way knowledge is generated and structured by the lending organisation. A few things to think about- a. predicting borrower behaviour; b. target segment psychographics and it’s bearing on inclination to borrow; c. the relationships and context that enhance or mitigate risk. This is the deep end of digitisation. The product deployed by the  financial institution can and should become a catalyst.

In the fog of anxiety, what might have escaped deserving attention is the relationship between the lender and  the borrower. Would a lender who responds rapidly, get long-term loyalty from a borrower? Given the times we live in, that is quite possible.  It may also be a powerful incentive for pushing the boundaries on where digitisation can take us.