The receivables finance market is rapidly evolving. From working with over 90% of the UK market, we have seen a number of challenges arise due to the industry becoming more competitive as its environment continues to change. In particular, the UK market has lots of new entrants (now in excess of 100 providers) but the number of clients seems to be static at about 40,000-45,000. In order to remain competitive, lenders are required to compete on price and terms, which increases their risk and often reduces their return.
In response to this, many lenders are looking to technology to support their products and offerings. In the UK, lenders are seeking technology-enabled solutions that increase back-office efficiency and optimise operating models to improve income ratios. Lenders are beginning to acknowledge that they can’t do things the way they have done in the past.
Traditional players are adapting their processes to facilitate large and complex receivables finance transactions. Where there is a chance of losing smaller scale clients to competitors, banks are looking to oversee cross-border transactions that can become complicated and carry higher risk.
Customers also have more choice in the market, in that they have access to working capital both from banks and alternative lenders such as peer-to-peer (P2P) platforms. Consumers are becoming increasingly aware of the non-traditional players in the market that are harnessing technology. The new generation of borrowers is more tech-savvy and more comfortable embracing P2P capabilities, which makes new players more attractive.
The P2P market is still fairly immature, and we have yet to see how it plays out in an economic downturn. At the moment, a lot of banks, which are established and experienced, are either partnering with lending platforms or creating their own platforms.
The question of how traditional lenders- and indeed alternative players- move forward has generated a lot of discussion and debate at Equiniti Riskfactor. We have met several platforms who consider themselves lenders who have invested in developing their own technology. We have looked to broaden the scope of our offerings, and have enhanced our EQ Riskfactor product to help lenders make faster decisions based on intelligent and detailed data so that they can improve their customers’ experience.
As a specialist in the receivables market, we have made it easier for lenders to acquire new business. The EQ Riskfactor software capabilities can also be applied to core bank customers where overdraft levels are underpinned by receivables. Core bank lenders can provide greater advances due to EQ Riskfactor’s enhanced monitoring capability across the receivable asset. Post-Global Financial Crash, banks are focusing more heavily on improving customer experience and maintaining good relationships and technology is considered a major factor in supporting this strategy.
Feedback suggests that users of receivables finance products find processes archaic and intrusive when applying and securing a facility. We believe that we can improve and add value to the process by enabling quicker decision making and providing valuable information that can help business owners make better decisions. Our aim is to use the data we collect and turn it into advice that we can give back to the client. The client can then use the data to improve business management and optimise relationships with their customers. In the long term, a strong relationship will increase profitability.
In tandem with many aspects of financial services, the receivables finance industry has become incredibly reliant on technology to provide good customer service. As a technology-enabled generation enters the market, customers are expecting more from receivables finance solutions. Ultimately, the client’s relationship depends upon the technology as much as the people, so a reliable technology solution is key.
The receivables financing/ABL industry is likely to go through a period of rapid change. This transition will harness technology to ensure players remain competitive in a crowded space without compromising on risk. At the same time, it will significantly improve customer experience. EQ Riskfactor is harnessing blockchain technology and testing a prototype which will demonstrate the key role technology will play in shaping the future of the industry. Watch this space!