Growth of SMEs at the intersection of credit and banking
When small businesses lend FinTech Blue Vine unveiled its banking offer last October, the solution appeared to be a natural extension of the company’s existing offer. After all, lending and banking are intrinsically linked – in theory.
In reality, however, various financial services have historically been siled and disjointed for many end-users of SMEs, according to Steve Allocca, who joined the company as COO earlier this month, sharing experiences at LendingClub, PayPal, Wells Fargo and other finance and tech heavyweights.
BlueVine’s introduction of its business banking offering came at a time of urgency and desperation for many small businesses in the United States, who wanted greater access to robust financial services. The availability of credit was certainly the key to meeting this need, as Allocca told Karen Webster in a recent interview. Yet to truly meet the needs of SMEs, financial service providers must rethink how loans, banking, and payments can work together – and not only deliver money to businesses, but foster long-term growth. term.
Change with the tides
As a veteran of financial services, Allocca has witnessed the changes in the industry that continue to reshape the way providers connect. small businesses to financing. Among the workflows particularly affected by innovation is the subscription process.
“Historically, credit reporting has not been very sophisticated, but technology is changing that,” he said, highlighting his experiences at PayPal Credit at a time when the company was exploring other ways to use it. data to finance SMEs. The disruption of FinTech has challenged the idea that underwriting must rely on a relatively small set of traditional small business financial data to be successful.
But the small business lending industry has struggled at times with this area of focus, with the rise and fall of Alternative FinTech lenders which envisioned new data strategies reflecting an experimental approach to drive progress.
Today, Allocca said, there is an opportunity to deepen the link between banking and credit in a way that allows financiers to access stronger, richer information about a small business borrower.
“There are so many other signals that we could use as we continue to digitize our lives, to be able to dramatically and exponentially improve credit reporting and small business management,” he said. said, adding that “helping businesses at this intersection of banking and credit makes the possibilities of this data even greater. Fostering this intersection, however, requires rethinking the relationship between banks and small businesses.
Emphasizing his time at Wells fargo, Allocca recognized the understanding of the so-called “invisible medium”. That is, the small business customer base is too small for enterprise services, but too large to fit the profile of the consumer. As a result, SMEs have been forced to work with traditional suppliers who not only lack the resources to finance them adequately, but may often lack an understanding of that particular business in order to support the growth of that customer.
Long term support
At the intersection of banking and credit, there is an opportunity for financial service providers to take a new approach to supporting small businesses. According to Allocca, this could mean fostering a more confident relationship with SME among bankers who take the time to understand the business and its needs. This trust can allow a business owner to unlock valuable data from other sources to strengthen underwriting operations.
“The future will increasingly be based on permissions and credential-based data access,” Allocca noted. “As rich as the bank account, transaction and behavior data is, what is even richer is if you are in the position of a trusted advisor … This trust allows a business owner to be able to provide credential-based access or permissions to all kinds of other data sources.
It’s a open bank A trajectory that enables financiers not only to build the capacity to connect small businesses to finance, but also to fuel the overall long-term growth of that business – a win-win scenario for financial service providers and SME clients. After all, Allocca said, when credit scoring is done correctly, it takes into account the context of the nuances and needs of the individual borrowing business. Only then will credit scoring and the financing it facilitates be most successful.
With the launch of BlueVine’s business banking services at such a vulnerable time in history for many small businesses, the company seized the opportunity to be the first to embark on initiatives such as the Facilitation of the Check Protection Program. payroll (PPP) ready. With a little more stability in the market today, Allocca enters his role at BlueVine by focusing on cultivating this concept of banking and credit interweaving. This will be key to putting more capital in the hands of SME owners who need it, and for cultivating an ecosystem in which small businesses have better visibility and understanding of their finances, supported by the support of their service providers. .
“Small business owners should have a very clear idea of what they need to do to improve the health, stability, growth and ultimately the creditworthiness of their business,” Allocca noted. “Making this path more transparent will continue to give us access to all kinds of signals that help small businesses be more successful. “