Join Transform 2021 this July 12-16. Register for the AI event of the year.


The conversion of London’s ExCel conference center into the 4,000 bed Nightingale hospital in just nine days is one of the few good news stories coming out of the current COVID-19 crisis. The Chinese led the way, with Wuhan’s 1,000 bed hospital built from scratch in 10 days.

There’s growing evidence that the world’s small- to medium-sized enterprises (SMEs) need their own emergency room. Despite SMEs accounting for around 50% of the global workforce, many typically operate with cash reserves of just one month, meaning that previously viable businesses are on the brink of collapse.

In response, governments around the world have introduced tax relief, debt repayment freezes, grants, and emergency loan schemes. Yet the money is not reaching small businesses fast enough to save them.

And it’s the banks that are in the firing line: Despite being bailed out by taxpayers’ money following the 2007/8 financial crisis, banks have consistently failed to digitalize and streamline their business lending processes. Now faced with call center disruption and staff working from home, they’re unable to process SME applications as swiftly as the world economy needs them to. This situation is compounded by a “banks behaving badly” rap sheet of unfair restrictions, complicated application processes, and demands for personal guarantees for government-backed loans.

Does it really have to be this way?

What if a global task force of fintech and digital technology businesses channeled the collaboration and urgency behind the COVID-19 hospitals, and built a dedicated digital SME fast lending solution from scratch?

This solution would not be a new lending bank — simply a tactical mechanism for funneling money from banks to SMEs more rapidly by breaking the funding logjam that threatens to put so many SMEs out of business, radically accelerating the approvals, onboarding and payment processes.

This digital fast lending concept would use globally available technology and platforms potentially allowing it to be adapted and rolled out to different markets across the world.

Once mandated by governments using emergency powers, this new approach could go live within 3-4 weeks with the help of a top team working round the clock.

Here’s a blueprint for how it could be done:

The objective/set up

The “Nightingale lender” would be a digital fast lending solution to funnel bank funds to SME customers, bypassing the bottlenecks that exist around banks’ understaffed call centers and their lack of agile digital infrastructure to onboard customers quickly.

The Nightingale lender won’t lend directly to customers — it only channels government-backed bank loans. As such it does not require any kind of bank license and so avoids any regulatory hold-ups in obtaining one.

Despite the urgency of the project, the design and build would prioritize a seamless customer experience aimed at making the process as easy as possible for stressed SMEs to quickly apply for and receive the funding they so badly need.

Resources

A team of 100 to include designers, engineers, product managers, and customer service specialists. Properly resourced, it should enable SMEs to access funds within hours — not the weeks that some are waiting.

Front of house

The Nightingale lender would need a front facing responsive website to host the entire customer experience where SMEs can enter their details, find out if they are eligible and quickly go through the  process online, from inputting their name to being approved. This could be accessed via links from government, central bank, and commercial bank websites — all of which have COVID-19 gateways.

Behind the scenes

A back office operation would manage the end-to-end process from application to initiating final payment.

The Nightingale lender’s website interface would need Know Your Customer software such as Onfido or Jumio to verify the customer’s identity, together with a customer service platform such as Zendesk or Intercom to handle high volumes of SME queries.

Additional components of the back office would involve creating an underwriting algorithm to assess the risk profile and creditworthiness of SME applicants. (This is easy to do, even allowing for different variations from market to market, as the criteria for the loan are likely to be straightforward.)

Other elements would include a scalable database that maintains a record of who the SME customers are and how much they have borrowed/repaid. Again this could be set up relatively simply using Amazon DynamoDB or Google Big Table.

The Nightingale lender solution would also need servers flexible enough to manage a high volume of applications such as Google Compute or AWS EC2. Serverless technology is also an option here as it has almost no limits when it comes to scaling the platform.

The build

The first task would be to design the process — both how to build the platform and the steps that SMEs need to go through to apply for a loan. This stage would involve clarifying what data is required for underwriting; for example, an SME’s annual accounts and its profit and loss data. For speed, the data requirements would need to be kept as simple and streamlined as possible. The platform would need to select third party providers to supply the data (e.g. Validis) and incorporate open banking so that the lending solution can connect to banking/accounting software.

Another key aspect of the build is the need for a robust DevOps process that can release software several times a day to make sure the team is able to continuously refine and iterate the build. Embracing a DevOps culture — which promotes shared responsibility and collaboration between developers, IT operations, and the project owners — would be essential to this fast turnaround project.

As a final step, the Nightingale lender platform would also need to liaise with banks to authorize and initiate payments using the banks’ API (application programming interface) endpoints.

The cost

Pricing a concept is difficult to do accurately. However, this lending solution uses relatively inexpensive off-the-shelf platforms and technologies. The overall cost will be a tiny fraction of the $2.7 trillion that coronavirus is forecast to cost the global economy this year or of the amounts banks have previously spent on failed transformation projects.

The outcome

This Nightingale lender concept is designed to combat a devastating short-term threat to SMEs across the globe by bypassing banks’ sclerotic SME lending processes with an accelerated lending solution that has customer experience and SME needs at its core. In the same spirit as the ambitious fast-build COVID-19 hospitals, its aim would be to demonstrate that “where there’s a will, there’s a way.”

One potential longer-term benefit is that, after facing this kind of disruption, banks would have the opportunity to implement learnings from the project around the need for agile, seamless customer-centric experiences,  boosting their capability to deal with any future mass emergency lending scenarios. If they don’t seize this opportunity, they may find themselves sidelined by fintech businesses that are nimbler, more responsive, and ultimately more reliable in a crisis.

Leon Gauhman is Chief Strategy Officer of digital product consultancy Elsewhen.

VentureBeat

VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative technology and transact. Our site delivers essential information on data technologies and strategies to guide you as you lead your organizations. We invite you to become a member of our community, to access:
  • up-to-date information on the subjects of interest to you
  • our newsletters
  • gated thought-leader content and discounted access to our prized events, such as Transform 2021: Learn More
  • networking features, and more
Become a member