How Banks can harness data science to continue delivering vital support to SMEs post CBILS

In his budget, the Chancellor announced that CBILS will be replaced by the Recovery Loan Scheme (RLS). Structured along the lines of a traditional loan, this new scheme is targeted at businesses that can demonstrate growth.

That’s quite a tough ask for SMEs. Restrictions may be easing, and many are feeling optimistic about the chances of a swift economic rebound. But the challenges faced by SMEs as they recover from the pandemic will mean they might be travelling a bumpy road for some time to come.

The urgency to support SME banking customers

99.9% of British businesses are SMEs (with 250 employees or less) and these organisation generate 51% of all UK business turnover.

The profitability of the SME sector is vital to the UK economy as a whole. But they are facing a struggle to survive as the CBILS cushion comes to an end, despite still having to contend with the worst UK recession in over 300 years.

According to the Office for National Statistics (ONS):

• 79% of SMEs cited profitability as a major challenge in 2021
• 64% of SMEs are focused on reducing operating costs over the next 12 months to conserve cash
• 38% of SMEs are concerned about their ability to generate new business
• 75% of SMEs say cash flow is a major issue
• 61% of SMEs report cost management concerns

So it’s not surprising that they are turning to their SME banking services providers for support.

83% of customers believe banks have a moral obligation to help society during this crisis.

The good news is that, with support, 93% of SMEs expect to be able to bounce back.

3 important ways technology can help banks to help SMEs post-CBILS

1. Responding to the dynamic risk environment

The need to be agile is becoming more and more urgent for banks. How do banks stay agile enough to respond effectively to new developments, opportunities and threats with SME customers?

How, for example, does a bank assess the prospects of an indoor leisure business when it’s unclear how long they will stay open with the ever-present risk of another wave or virus mutation, or without a clear picture of what the appetite for indoor activity will be?

Undoubtedly data holds the key.

Moving forward, those banks that optimise their approaches based on better data and smarter analytics will be best placed to respond to a dynamic risk environment.

Eliminating silos by combining everything a banks knows about its customers, business and market, and leveraging the latest advances in data science to layer on top of that ‘know-how’ millions of structured and unstructured data points.

Banks can achieve an increased understanding of evolving risk profiles, and an enhanced ability to harness impactful customer insights and risk intelligence for smarter decision making and the development of personalised solutions aligned to changing consumer needs.

“What excites me the most about Artesian Connect is the opportunity to combine our deep know-how with advanced data science to deliver truly market-leading asset finance customer experiences.” Ian Isaac, MD at Lombard.

2. Frictionless onboarding

Onboarding processes for SMEs are often very complex. But it’s essential to get this all-important first step in the customer journey right.

Many banks are coming to realise just how imperative it is to both their customers’ success and their own, that they reimagine the onboarding process to ease complexities, speed up due diligence and KYS, and minimise pain points.

Banks must set aside traditional ways of working and focus on building great customer visibility and control end-to-end (through the front, middle and back-office) in order to make the customer onboarding experience as frictionless as possible.

When relationship managers have the right level of risk savvy and insight, and their colleagues in operational and risk roles have the right level of commercial awareness, everyone benefits.

Metro Bank has reported that automating many aspects of its operational process for onboarding new customers it’s been able to achieve frictionlessly, onboarding at scale – in some cases 94% quicker than previously achieved.

“We started working with Artesian to explore ways we could introduce greater efficiency to the customer onboarding journey. We loved the idea of being able to aggregate data from a number of different sources and map our risk appetite to Artesian’s rules framework to flag issues immediately. The result meant we could deliver a process which in some cases was 94% quicker than our existing process.” Ronan Heeran, Financial Crime Risk & Control Manager at Metro Bank

3. Smarter lending

Banks will continue to walk a delicate tightrope between supporting tens of thousands of UK SME businesses attempting to recover from a huge social and economic crisis, whilst at the same time operating lending criteria and managing risk priorities to protect both themselves and the taxpayer, all whilst controlling their own cost to serve – after all, banks have also been directly adversely affected by the pandemic.

Data science once again holds the solution. Banks can expedite the loan application approval processes by implementing advanced triaging capabilities.

Harnessing data and insights to carry out smart accelerated pre-screening on loan applications will allow them to quickly validate and prioritise resources on the most viable options.

Utilising credit risk data and company financial data via APIs, and using a series of bank-approved decision rules, banks can access an immediate summarised view of risk, flagging any potential problems that may arise based on their own parameters regarding acceptable risk thresholds.

“When times are hard, cash flow is of vital importance, we were experiencing increased demand for our services and needed a way to scale and automate in order to meet that demand head-on. Artesian Connect combines our knowledge and know-how from sales, marketing, underwriting and risk and combines it with advanced data science and data intelligence to industrialise that know-how to deliver an enterprise-level solution.” Owen Thomas, Chief Sales and Marketing Officer at Premium Credit.

Find out more about how Artesian is breaking the bottleneck for approved CBILS lenders.