Within the leasing and asset finance industry the underwriting and credit function has remained relatively static for the last decade if not longer. The traditional methods of looking at the relevant credit elements such as filed accounting information, bank statements and CAIS has formed the backbone of our industry and will always have a fundamental part to play.
Credit scoring for example has been increasingly used as all-encompassing ways to auto approve/decline an application and once again increase the turnaround times which in itself is not a negative. The advent of Fintech has perhaps taken this one step further and seen the biggest move away from the traditional underwriter. The trend being towards algorithms determining which funding source is the most viable for a given end user business.
Leasing brokers must continue to evolve without losing sight of our core values and what makes us an attractive alternative to the banking system – being approachable and accessible. A balance must therefore be struck between advancement of technology with the aim of providing a better service whilst not turning into faceless machines.
A new way to credit assess
We live in an age of social media – Twitter, Facebook, Instagram and LinkedIn being at the forefront with many more sites and apps within the market place. As an extension Social commerce platforms (customer feedback sites) such as Feefo, Trust pilot and Trip advisor have evolved and are often used and exploited for marketing purposes and promotion. They also provide a benchmark against competitors within the same sector or region.
Could such resources form part of a more holistic approach to underwriting? Banks statements and balance sheets will always form the nuts and bolts however as any business owner will tell you this often does not present the full picture.
From a practical standpoint due to the sheer volume of transactions it’s not simply not feasible to visit each and every applicant and nor do I imagine would it be welcome due to the time cost alone from both sides. Using social media and feedback sites could bridge that gap.
Could a business, with many consistently high ratings on trip advisor, secure an approval for credit when traditionally it would have been knocked back due to some minor credit issues or even loss making accounts? How about a hotel with recently poor ratings on trust pilot but conventionally strong financials, would a decline be advisable due to the fear over their longevity?
In conclusion, as SME’s become more IT savvy and digitally minded, drawing insight from non-traditional sources seems to be the way forward. Integrating these new channels of information should form part of a more rounded way to underwrite in the years to come.
Source: Leasing 360