The 20-year Challenge: Commercial Lending Then & Now

Commercial Credit, Small Business Credit, Enterprise Risk Management, Digital Lending

2019 marks PayNet’s 20th anniversary, and I am excited to celebrate this milestone with the people who propelled us to where we are today. We’ve evolved from a one-person company with no customers to having over 125 employees, 450 customers and a database with 25 million businesses. While we’ve grown, our core mission of fixing the broken credit system with reliable, transformational Main Street credit assessment solutions has remained the same.

Recently, a social media craze called the 10-year challenge went viral, sparking people to post then vs. now pictures. Social media followers were able to see the poster’s physical transformation over the last 10 years.

Seeing this challenge inspired me to reflect on how the commercial lending landscape has transformed over the past 20 years. By analyzing and learning from past trends, we can anticipate and prepare for the future.

Transformation of Technology

Much of the technology we relied upon in 1999 is now obsolete, both in business and our personal lives. We had a device for every need – a home phone, a cellular flip phone, CD player and computer. Data was stored in spreadsheets. In 1999, these technologies and processes were considered transformational; however, many end-users didn’t realize the lack of security, efficiency and effectiveness associated with these isolated solutions. Now, integration and collaboration have become the norm, as many services have been consolidated into one platform, on one device, with instant access.

Michael Bloomberg, CEO and founder and of Bloomberg, Inc., was a visionary who recognized the financial industry’s need – and its willingness to pay – for high quality business information that could be delivered quickly across many different platforms. Utilizing fast internet and high processing speeds, Bloomberg was forging a path to create a better credit processing system.  

Clearly, Bloomberg’s vision of speed and efficiency has become a reality. As mobile and cloud capabilities continue to impact the way we do business, we seek technologies that streamline internal processes and enable a secure, frictionless and transparent user experience. By incorporating software in combination with biometrics, artificial intelligence and IoT, the commercial lending industry can access scores of data in real-time. This commitment to innovation will help small businesses gain access to capital and, over time, we will get closer to the ultimate goal: a one-click-credit solution.

Innovation Makes Risk Acceptable

Relatively, absolute risk has stayed the same over the last two decades. However, there weren’t instantaneous shifts in risk as there are today. Instantly-accessible information has changed our perception of risk. We are able to see day-to-day associated risks, and people are becoming numb to these shifts. For example, investors don’t get upset if their stocks fall 5 percent in a day. Why? Because we now have access to higher quality, real-time data and insights. This may uncover risk, but it also uncovers opportunity and allows us to make better, more informed decisions.

Digital Disruption Brings New Services, Solutions and Players

Organizations across all industries are experiencing digital transformation, and this paradigm is no different for commercial lending. Capital is needed for small businesses to grow; that has not changed. But the way lenders market and offer credit is dramatically shifting. We used to live in a transactional-focused industry, where lenders held the power. Now, digital disruption has transferred that power to the borrower. Small business owners now have choices, and demand fast, better experiences. According to a recent Raddon Report, Top Three Trends from Raddon’s Annual Small Business Study, 57 percent of small businesses are impacted or strongly impacted by an institution’s technology resources. 

With over 48 percent of small businesses planning to borrow in the next 12 months, lenders need a technology-first approach in order to capitalize on this opportunity. This will enable them to be more resourceful and collaborative – ultimately making a more meaningful and sustained impact on their customers. When lenders implement solutions and processes that streamline the loan process, customers gain quicker access to capital, easy-to-use digital services from the device of their choice, and a paperless—and safe—experience.

Best of all, your organization will be able to reduce manual processes, increase operational efficiencies, and provide better decision-making solutions when it comes to evaluating risky and/or profitable industries.

Looking Forward to the Next 20 Years

Although relics like the manila folders in steel-cased filing cabinets still exist in our industry, the commercial lending market has considerably transformed in the last twenty years, and we are at the forefront of an exciting future. Yet even as we celebrate these changes, we maintain that some practices should endure. While technology is a foundational component to our business strategies, values such as trust and integrity are also vital. When it comes to conducting business, customers need confidence in your transparency and clear intentions, no matter what technology you use. Staying connected to your company’s core values will guide your business as the industry evolves—and ensure confidence from your clients, employees and partners.

The financial space is at the forefront of an exciting future, and PayNet is helping to fill the Main Street credit gap. Twenty years has allowed us to experience digital transformation first-hand, gaining invaluable knowledge to help shape the solutions and services we deliver to our customers. Starting from the ground up, and evolving as a company, we’ve been able to realign our brand with the values we live and breathe, including innovation through technology and creative ideas; integrity via transparency and a commitment to follow-through; a commitment to always share our best thinking with our customers; quality of data and work; resourcefulness – leveraging knowledge, data and connections to make a meaningful impact; and collaboration through shared goals and mutual support. As we face the next 20 years of innovations, we are committed to remaining true to those values.

If you want to talk about the digital lending revolution, please don't hesitate to contact us.