Technology and finance. Where are we going?

People love a buzzword. In 2000 during the dot com bubble it was common place to add “.com” to your business name to get a higher valuation. Of course, eventually these things die out and investors regain their mental faculties, prices stabilize and we plod along until the next big thing comes along.

Fast forward 24 years and we have more buzzwords than we know what to do with. “AI”, “Fintech”, “crypto” are just some that spring to mind. From a lender perspective I thought it would be interesting to look at these buzzwords and what they potentially mean to both lenders and borrowers alike. How does one marry a concept like lending, that is as old as time itself, with the latest technological trends? Is there a place for technology in lending? And what are the implications for the borrower at the end of the day?

The fees you charge as a lender are directly proportional to the risk you are taking. Either you have a product that is inherently risky (like an unsecured loan) or you’re pricing according to the likelihood of a client paying you back, or not. There is no crystal ball that can tell the future, so lenders use as much information as they can find to make decisions on whether to lend to a particular client. With the digitization of information, lenders can not only gather much more information from clients given third party sources but also process this information a lot quicker to make informed decisions.

For the borrower it means quicker loan approval times, better rates (as more information allows to more accurately price for risk) and a more convenient customer experience.

The big drawback to digitizing everything is of course...no more humans. Lending gets reduced to a click of a button and the softer qualitative elements get largely ignored. This is extremely detrimental to business finance where the client relationship, to us anyway, is extremely important.

At Preference Capital we don’t see ourselves as a pure fintech. Rather, we are a lender that uses technology to supplement the credit decision and the customer experience while keeping the face-to-face client relationship at the centre of our offering. Considering the fact that the first records of lending date back to 4000 years ago, we believe that while technology improves the lending experience, the client relationship will remain the most important aspect of lending