Fintech, or financial services technology, is certainly not a new field. But the pace of technological advancement is moving faster and faster as the 21st century marches on.
Today, commercial lenders are getting more and more resources to draw on in servicing clients and structuring deals. Big data and advanced technologies can speed up applications and underwriting, and potentially create financing opportunities for a wider range of businesses. Here are three top commercial lending technology trends to watch in 2020.
1. Robotic Process Automation (RPA)
Robotic process automation is the most useful emerging tool for lenders and borrowers. The newest form of business automation, RPA not only can automate manual rules-based tasks like entering data or producing reports, but it is specifically designed to integrate into existing workflows and interact with existing user interfaces. This means that RPA-automated processes can be integrated easily with those still done by humans.
Instead of the regular API programming approach to automation, a company uses RPA tools to configure software, or a “robot,” which in turn develops an action list by watching the user perform tasks. The system then “learns” to repeat those tasks, which could involve processing a transaction, manipulating data, triggering responses and/or communicating with other digital systems.
RPA can reduce processing time and free up human team members to devote more time to serving customers or to other high-value strategic work.
2. Artificial Intelligence (AI)
One exciting development is the use of RPA robots in conjunction with AI algorithms to complete tasks like filling out and filing digital documents. This technology can help speed up and simplify otherwise arduous customer applications and lender reports.
However, the biggest use of AI in commercial lending comes from its capacity for processing immense amounts of data and supporting more advanced modeling techniques. These capabilities can help reduce risk in lending and enable more companies to access financing. More and more credit underwriters are using AI to supplement traditional underwriting methods.
A third emerging use of AI is in chatbots, which can be created to deal with simple customer service issues in a startlingly human fashion. As more and more customers come to prefer typing a message about a simple issue over picking up a phone for a human-to-human conversation, the fast, polite and accurate service of a chatbot becomes an increasingly popular solution.
3. Business-to-Business Payments and Trade Finance
As digital payment solutions prove their worth, and paper is left further and further behind in the race for effective cash-flow management, electronic payment processing is becoming more critical to small and mid-sized businesses. Today’s digital AP payment systems can automatically input invoices received from vendors or contractors via email, send them out for approval according to predetermined processes, create an audit trail, send automatic payments and automatically sync to popular accounting software.
Digital payment solutions are now also opening up opportunities for financing companies to integrate into the payments process. Supply chain finance is a new cloud-based type of trade finance.
Supply chain finance is a set of technology-based business and financing processes that link the parties in a transaction—buyer, seller, and financing institution. It optimizes cash flow by allowing buyers to lengthen their payment terms to their suppliers while providing the option for suppliers to get paid early by cashing in their invoices.
Registration is digitally automated and quick. Suppliers can go online from any device to accelerate accounts receivable payments, while buyers use the online portal to choose which accounts receivables to finance. Detailed reporting is automated and payments are made electronically. Unlike some other forms of trade financing, this low-cost short-term credit option is accessible by small and medium size businesses.
The upcoming year should see more trade finance innovations. Fintech innovations that eliminate the need for paper documents and introduce paperless trade finance processing are currently limited in use. However, emerging technologies, including supply chain finance and distributed ledger technology, have the potential to redesign the entire trade finance process.
