Is artificial intelligence the key to better access to funding for business and consumers alike?
Although the UK ranks third in the world for numbers of new business start-ups, it sits at a less impressive 13th place in the number of successful business scale ups[1]. Access to finance is widely argued to be a contributing factor with traditional banks having become more risk averse in recent years, and focussed heavily on security rather than a borrower’s ability to pay. Consumers, too, know first-hand how frustrating this can be, especially those held back by the seemingly inflexible approach taken by credit ratings agencies.
Change, however, is coming
Financial disintermediation, or more direct links between providers of capital and borrowers, has been a major feature of the financial landscape for the past two decades. Digital advances have seen this trend accelerate and the proliferation of non-bank lenders continues to increase. In fact, according to recapitalnews.com, 18 of Europe’s 40 largest real estate lenders are non longer banks.
And whilst some might argue that it really doesn’t matter where borrowers gain access to the funding they need to grow, there are increasing signs that both sides of the lending equation are benefitting significantly from new, highly advanced, technology solutions being deployed in the sector.
Elsewhere, comparison websites, taxi or ride-hailing apps and online supermarkets have all helped to show us the convenience of going digital. We feel more in control of our choices, and have the information we need at our fingertips. We have become used to instant gratification, and processes that are simple to use (even if they are massively complex to run). So too, we are starting to see this in the world of FinTech - where finance and technology collide to produce new and innovative activities in the sector.
Houston we Have is one such company that has developed an innovative solution that produces the strangely non-binary, or win-win, situation where a lender risk and operating costs are reduced and borrower convenience and access to funding is actually enhanced.
Based on the company’s proprietary prescriptive intelligence software platform, Houston we Have developed a credit risk assessment model for a Sydney-based SME lending platform that combines leading automation, the best of human expertise (without bias) and more than 70 information variables to produce an online application tool that’s easy to use, and fast to run.
Prior to the implementation of Houston we Have’s solution, the credit risk decision support system in place at the business was manual, resource intensive, reliant on third party providers and exposed to flawed systems. Typically a fast decision would take several hours. Today, the business can produce a decision within seconds.
Risk has also been reduced with a far better understanding of a borrower’s ability to pay and the removal of human bias in the decision making. Delinquent loans have been an astonishing zero since the system was introduced. And as for changes in legislation, lending frameworks or appetite for risk; these can be easily factored into system updates, as can revised versions for the regulatory environments in different countries and jurisdictions.
All this points to a more efficient industry that benefits lenders and borrowers alike.
Houston we Have is a boutique technology business that combines data science, software and artificial intelligence to deliver the kind of information that allows their clients to make better decisions and thrive. Their proprietary software was initially developed for military intelligence agencies, an environment where it is still very much in use. Gartner has identified the company as a Cool Vendor describing the value proposition as “unlike that of any vendor we have seen.”
[1] www.smallbusiness.co.uk, June, 2018
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