Experience required: Why client onboarding is lenders’ hot topic for 2020

Body blow for the sector or a short-term crisis? While working capital experts remain split on the long-term impact of the COVID crisis, there’s one thing we can all agree on: that lenders are under pressure to adapt to the new world, fast.

The focus of dozens of blogs, studies and whitepapers, client onboarding is recurring topic of debate in conversations on the future of working capital and B2B lending. Here’s why so many firms are focused on customer onboarding in the light of coronavirus – and why you should be, too.

1. Increased competition; shifting expectations

2020 has seen a new chapter in the war between banks and fintechs, as both compete to take on the wave of new credit applications unleashed by COVID-19. There’s no clear winner in the duel, but working capital providers of all types should take note: the moves made by banks, lenders and intermediaries to digitise their onboarding experiences have shifted client expectations for good.

Natwest’s Rapid Cash; Funding Options’ comparison engine; PayPal’s Working Capital service. Each is focused on making the first step of the borrower experience fast, simple and digital.

For many businesses, 2020 will be their first time applying for receivables funding. For lenders, offering a winning onboarding experience is therefore a great opportunity to impress applicants and demonstrate how effortless and efficient working capital funding can be for the long-term. 

Good news for forward-thinking lenders. The flipside is that clients now expect fast, simple and satisfying onboarding experiences when applying for credit. One recent study found that 75% of businesses would choose a bank with a digital onboarding process over one without. 

Business don’t only want funding; they want lenders to take away the hassle associated with applying for credit. Lenders that fail to provide easy-to-use digital onboarding experiences will now find themselves lagging behind their competition in terms of customer service. 

2. Money, money, money

No-one is immune to the rising costs of doing business. Traditional paper-based onboarding is notoriously slow, complicated and expensive – making it a key target for lenders looking to cut costs.

Our research shows that here in the UK, onboarding new clients can take up to 90 days and £3000 in staff costs, from application to first-funding. For many clients driven to receivable finance as a last resort, that’s simply too long. For lenders, it’s an expensive cost-of-sale which renders clients unprofitable for their initial borrower term. Worse still; when a borrowers’ application is unsuccessful, the money is wasted.

Digital onboarding systems like our f3 tool cut this process down to hours and can reduce the time-to-lend to just days. With f3, new prospects simply input their borrowing requirements into their lender’s portal, submit a short application form and connect up their accounting system. This provides their lender with the information it needs to make credit decisions fast, including the borrower’s ledger information pulled straight from their Xero, Sage, Quickbooks or other accounting package. 

In this way, lenders using digital onboarding tools like f3 slash the time and complexity associated with taking on new clients, cutting their up-front costs considerably. That’s never been more important than in 2020.

3. (Less) risky business

Fraud is the business-killing bogeyman in every lenders’ basement. This year, the risks are scarier than ever. 

Others have written at length about the rising risk of fraud in receivables. Desperate borrowers are arguably more likely to make fraudulent claims for credit. Dishonest ones are likely to be emboldened by increased access to Government credit via emergency schemes like CBILS here in the UK.

The problem looks set to get worse before it gets better. That’s why many lenders have chosen to digitise or at least add digital technology to their onboarding process following the pandemic. 

Digital onboarding tools of this type provide reassurance for lenders that are unable to perform their usual on-site visit to new borrowers, when assessing applications. They also help lenders access more accurate, more verifiable data on borrowers’ accounts. 

In f3, we do this by ‘extracting’ borrowers’ sales and purchase ledger data straight from their accounting system. This does two things. First, it reduces the risk that the borrower will amend their accounts when applying for credit, because they’d have to manipulate their own accounting system to do so (NB. It doesn’t not remove the risk of this happening.) Second, it prevents the lenders’ own employees from making errors when keying in application details. We also enable lenders to perform KYC and AML checks on their applicants using third-party systems to corroborate their decision-making. The result: lenders can make faster decisions with increased confidence in their data.

All aboard?

The medium- and long-term outlook for the working capital sector remains to be seen. But whether application volumes rocket suddenly or rise gradually, lenders know they must equip themselves for the road ahead.

Digital onboarding tools are a key part of lenders’ armoury for 2021 and beyond. And those offering the simplest, fastest onboarding experiences for clients will pull ahead of the competition, helping new customers when they need it most. 

The stakes are high. 

Is your onboarding experience as good as it could be?

Our f3 system makes client onboarding faster and simpler for borrowers and lenders – slashing the time and cost associated with taking on new working capital customers. To see the system in action, contact info@dancerace.com. 

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