Forward-looking business models for commercial lending in 2022

"Brands that put the customer at the centre of propositions through the intelligent use of data and technology will gain market share from those that remain focused only on ‘digitising’ an old process."

- Janet Jones, Strategic Client Director at Microsoft

Janet says: “There’s a pressing need for banks to change their business models to meet the evolving needs of customers and compete with new digital native challengers and fintechs."

Deeper collaboration, partnerships, technology, and data from more sources, will all help to power this change. In particular, more effective use of data will ultimately enable banks to serve businesses better through a deeper, real-time understanding of their requirements.

From embedded finance to Pay by Loan

Current trends suggest a continued increase in embedded finance and Buy Now, Pay Later (BNPL) for business — providing fast, easy access to short-term funding. For merchants and retailers, embedding finance and lending is very attractive: it allows them to deepen relationships and secure sales, while taking a cut of the fees that used to go to brokers.

In this vein, Simon Torrance, Founder of Embedded Finance & Super App Strategies, anticipates that 'Pay by Loan' will be a new thing in 2022:

"It will be an alternative way for SMEs to interact with merchants, to be able to access what they need."

There’s an opportunity for alternative lenders to get more entrenched in this space. "They will have to partner with a BNPL organisation that provides the platform and marketplace, and in return they’ll get data on how the merchants perform with the finance, and then be able to offer that finance with more confidence," says Helene Panzarino, Fintech and Banking Subject Matter Expert for Vacuumlabs.

Towards sustainability

It seems inevitable that a post-pandemic wave of insolvencies — combined with a tightening of credit and interest rate rises — will impact the affordability and availability of money to SMEs in 2022.

Lucy Hasson, Co-founder and Chief Operating Officer of Esme Loans, believes the banking industry should respond by "building inclusive journeys, products and technology, that are accessible and easy to understand, to help people build sustainable careers, businesses and lives in advancement of better and more sustainable communities."

Doing so could involve learning from alternative finance business models, such as Islamic finance, in which funding involves shared risk and rewards (rather than interest), and avoids industries deemed harmful to society.

Get more predictions for 2022

This article is based on Business Finance Predictions 2022, a Trade Ledger report, in which a range of industry experts share their insights into what lies ahead for 2022. In addition to digital transformation and tech partnerships, find out their views on:

• Customer-first lending journeys
• Better, more cost-effective credit decisions
• Forward-looking business models
• Building a sustainable future

Look out for more articles in this series, or download the report now.

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