Disruptive technology implications for lenders laid bare at Linedata event


The ways in which new technologies are beginning to change the finance landscape are many, varied – and accelerating fast!

The British Bankers Association (BBA) predicts that customers will use mobile devices to check their current accounts 895 million times in 2015, significantly more than the 427 million branch interactions.

By 2020 it is forecasting that customers will use their mobiles to manage their current account 2.3 billion times – more than internet, branch and telephone banking put together.

Speaking at the Linedata Exchange 2015’s Disruptive Technology and the Implications for Lending and Leasing within Banks and Financiers conference in London this week Matt Herbert, director of strategy & digital at the BBA (pictured below) said that UK customers downloaded banking apps on 22.9 million occasions by the end of March this year – a rise of 8.2 million in just one year. Customers moved amounts of £2.9 billion a week using banking apps in 2015 – up from £2 billion in 2014.

herbert matt

If old-established traditional banks are adopting technology at this rate then surely, Herbert stressed, new independent entrants into the finance sector delivery chain “should investigate the industry ever more deeply to find out what the customer really wants.”

Shrewd lenders

Discussing how new technologies and finance entrants have changed the financial landscape – and how mainstream lenders are fighting back – a range of presenters at the conference gave their own individual “progress reports”.

Lending Works is a peer-to-peer lending platform, formed in 2014, which matches shrewd lenders with creditworthy personal loan borrowers, so both receive a much better deal.

harding nick

Nick Harding, chief executive of Lending Works (pictured above) explained that by cutting out the large financial institution in the middle, lenders receive great returns and borrowers receive low cost, flexible personal loans. “There are no banks,” he said, “no big bonuses and no sneaky fees.”

“Lending Works,” he stressed, “was formed from scratch without the burden of legacy technology systems – unlike the current banks who largely have theirs still in place.”

He added that Lending Works “was founded with the belief that financial services should be fair again by giving the consumer control of their finances.” “Lending and borrowing directly from each other,” he added, “benefits real people, not the bank”.

The new “co-opetition

Although it is certainly not true that despite all their current travails the Big Banks are ‘finished’ Harding believes that some will become commoditized while some will work in a ‘co-opetition’ format with innovative lending platforms such as Lending Works.

Harding went on to say that peer-to-peer lenders bring to the marketplace some features that have been lacking in recent times – liquidity, “nimble” distribution, and the probability of impending mergers and acquisitions in the future.

saulat richard

Revolutionize the markets

Richard Saulet (pictured above) is director of Metro Bank’s asset and invoice finance business. “Metro Bank is the UK’s first new High Street bank in over 100 years,” he said, “and our stated ambition is to revolutionize the markets in which we compete. Indeed, our asset and invoice finance business has grown by more than 50% in the last year.”

In achieving this growth Metro Bank “removed termination fees from all new contracts, significantly reduced our collect-out fees and removed value-dating to create a clear and transparent relationship with our customers”.At Metro Bank’s 36 stores in “commuter-land London” a current account can be opened in 15 minutes. “Our busiest time at our Holborn branch is actually 7.00pm in the evening,” Saulet explained, “which gives an indication of the way in which the nature of customer demand is changing.”

“Again, in response to demand we have developed a mobile phone app which is capable of blocking off use of a customer’s debit card – and then on again – upon request. It is a service that is showing especially large demand by women shoppers in London!”

lindsay john

John Lindsay (pictured above) founded JLSR Limited in 2014 following more than 20 years in the asset finance, leasing and automotive industries with the aim of providing a cutting edge advisory, consultancy and management service to the asset finance, leasing, automotive and transport sectors.

He told delegates the business mobility landscape across Europe is on the move – driven by a number of factors including growing populations which are placing increasing demands on an already constrained transport infrastructure.

Traditional models of vehicle ownership and usage are unable to keep up with emerging requirements for seamless, integrated travel options.

“However,” he stressed, “despite the value of the business mobility market being worth around £9 billion globally at present, and this is predicted to grow to £900 billion by 2025, the growing need for mobility solutions is being largely neglected by existing automotive lenders.”

The drivers for change in the business mobility sector Lindsay explained as being:

• Generation Y. “This text-savvy generation of young people don’t like to be sold by traditional methods. They expect higher levels of service than ever before and are looking to rip up your current business plan. Also they are not very interested in hearing about finance products.”

• Collaborative Consumption. “There is a massive paradigm shift in how we live, work, play, travel, create, learn, bank – and consume.

However, the lack of creativity currently being displayed amongst auto lenders by these customer demands need to be addressed.

“The traditional new car sales model,” Lindsay added, “will have to change with the massive effect this will have on lenders at the point-of-sale. There will become far less opportunities for auto lenders to sell finance products in traditional ways.”

Unwilling to leave comfort zone

Karl Werner (pictured below) is head of sales and marketing at MotoNov Finance.

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“The UK new car market,” he said, “seems to be doing spectacularly well at present with 77% of new cars being bought on finance. However, as an independent finance company we see that much of these deals are subvented and promoted by the motor manufacturers.”

“Current records also show that some 80% of customers require auto finance, around 20% borrow money outside the new car space, and 90% would recommend car finance. So why are the numbers so disconnected?

“In fact, access to new car finance using traditional models is extremely limited in many ways. There is limited control in the process allowed to the customer, there is limited transparency in the method by which they acquire finance, and limited choice in the products they are allowed to have and how much they can borrow.”

Werner went on to describe the lack of willingness for auto lenders to leave their “comfort zone”. This is driven by:

• Focus on control. “Lenders feel it’s a process they must control and the customer is ‘honoured’ to be granted the loan;”

• Regulation. “Regulation is given as an excuse for dismissing change – ‘we can’t do it THAT way;”

• Blame culture. “Our dealers won’t like any change; and

• Generational self-interest. “There is no incentive to change.”