How do you handle the tradeoff between streamlining business loan origination, and protecting yourself from fraud?
Business loan origination consumes a lot of time and effort for lenders. This is part of why there’s such a big unserved market – the demand for working capital is £1.2 trillion more than lenders will lend.
It’s even more so the case for invoice finance, which is arranged against anything from a single invoice to a whole sales ledger.
Streamline the process, and you might miss the warning signs of significant risk or fraud. Which data matters, how do you validate it, what can be automated? What tradeoffs are reasonable?
We’ve brought together an established bank, and a new bank with no legacy systems, to discuss their different approaches to risk and automation. John Oliver, Head of Client Management and Audit for Open Account Products at Barclays Bank Plc, and Conrad Ford, Chief Product and Strategy Officer at Allica Bank, debated with Rob Harris, Director at Loxbear Advisory, and Roger Vincent, Managing Director, UK and Ireland, at Trade Ledger.
After watching the discussion, you’ll have a clear understanding of:
- How to use data and technology to empower your relationship managers and risk teams
- Whether the pandemic has made on-site audits a thing of the past
- Foresight vs hindsight: how technology is helping lenders to proactively manage risk and fraud
- The future of risk management for invoice finance
Watch on demand
Head of Client Management, Open Account Products Barclays Bank Plc
John is the Head of Client Management for Open Account with a team of 120 people, looking after 2500 clients and £4bn of limits on a global basis, the product set covers Off Balance Sheet Financing, ABL, CID and Factoring. John is a career banker having worked within various Barclays Trade and Corporate Relationship departments for 31 years, his most recent roles have included Head of the Structuring, Execution & Delivery Team for Barclays Trade & Working Capital products on a global basis, Origination and Structuring of bespoke Trade and Working capital solutions for Investment bank clients and Head of the London Asset Based Lending Team.
Chief Product Officer at Allica Bank
Conrad Ford is Chief Product Officer at Allica Bank, which is bringing relationship banking back to the UK’s established SMEs, using the latest technology. Previously Conrad founded leading fintech Funding Options – named in the 2021 Financial Times FT1000 list of Europe’s fastest-growing firms – before stepping down as CEO in 2019. More recently, he has advised a number of the UK’s flagship fintechs, including Starling Bank, iwoca, Coconut and Trade Ledger.
Director at Loxbear Advisory
Rob co-founded Loxbear Advisory in 2018 to provide product, technology and operating model support and advice to the secured lending market. Prior to setting up Loxbear, Rob spent over 15 years at Close Brothers – latterly as COO of a new start Consumer Finance business having previously worked as COO and MD of Close’s Invoice Finance portfolio. Over recent times Rob has written extensively of the opportunity to significantly grow the UK Receivables funding sector through a focus on improved – more thoughtful – product design.
Managing Director, UK and Ireland at Trade Ledger
Roger is a specialist innovator with experience in driving open banking strategy, data-driven product innovation and commercialisation programmes across both global corporates and fintech start-ups.
Roger has a background in strategy consultancy, data, analytics and business development across the Retail, SME and Corporate lending sectors with a proven track record of delivering pioneering innovation in some of the worlds largest banking and financial institutions. This includes the delivery of the world’s first live use case of open banking in the UK for lending.
How lending platforms take risk expertise to the next level
There is a huge stock of practical risk management expertise in the UK invoice finance sector. The banks and other lenders who provide working capital are readily capable of identifying attractive flows of invoices to fund, they’re alert to the credit risks both of clients and underlying debtors, understand the pitfalls that flow from excess customer concentrations, and recognise the ever-present possibility of both opportunistic and pre-planned fraud.
However the risk tools that they deploy have evolved little over the last two or three decades. There is a reliance on physical site visits, on the collation and circulation of calendar-driven audit reports, on data streams that enable hindsight but not predictive analytics, and on credit agency and bureau data that’s a snapshot of the past. Risk parameters tend to be applied uniformly and so may not be well matched to the borrower.
Clients typically carry a credit limit, an Invoice Payment %, a concentration restriction, frequently individual debtor limits – often irrespective of the prevailing risk they present and as part of portfolios where average exposure is c. 50% of assigned debt.
Now there is an opportunity to take the accumulated industry knowledge and apply it to the systems used to run receivables facilities. This will have a huge impact, driving improvements in both facility design and the efficiency of risk decision making.