Next-Gen SMB Lending: Why ‘Business as Usual’ Won’t Cut It

Abstract: The 2024 Canadian Lenders Summit panel, “Next-Gen SMB Lending: Why ‘Business as Usual’ Won’t Cut It,” explores the evolving landscape of SMB lending in Canada. Industry experts from SAP Fioneer, RBC, Driven Financial, and BMO discuss innovations aimed at enhancing client experience through AI-driven risk assessment, embedded lending, and open banking. They highlight challenges posed by regulatory constraints and the need for agility and collaboration between banks and fintechs to create seamless, integrated services for Canadian SMBs. 👉 Check out the full video here.   👀  

Global Innovations and Local Applications

Adeline: Thomas, Canada isn’t typically seen as a leader in financial innovation. Given your experience abroad, what global trends do you see that could benefit the Canadian SMB market?

Thomas: At SAP Fioneer, we’ve seen global innovations with potential benefits for the Canadian market. A major trend is using AI and data-driven underwriting to enhance operational efficiency, improve risk assessment, and personalize client interactions. Embedding lending products directly into platforms like e-commerce enables SMBs to access financial services seamlessly, which we see here with Shopify.

The Case for Simplicity and Integration

Adeline: Robin, you’ve talked about the importance of simplicity in your work at BMO. Can you share your approach and how it benefits Canadian SMBs?

Robin: At BMO, our focus is on simplicity for SMB clients. Canada may lag in financial innovation, but the need for simplified banking experiences for SMBs is urgent. The ecosystem should avoid fragmented solutions and aim to provide cohesive, integrated services.

Balancing Digitization and Risk Management

Adeline: Arina, at Driven Financial, you’re focused on innovation, yet the SMB sector has unique complexities. How do you balance digitization with effective risk management?

Arina: SMB lending is more complex than consumer lending, particularly with loan sizes reaching up to $500,000. Canada has less available data than markets like Europe or the U.S., which complicates fully digitized processes. At Driven Financial, we balance automation with manual controls to manage risk effectively. Open banking could help overcome data-sharing challenges and integrate services across platforms.

Reinventing Internal Processes for a Seamless Experience

Adeline: Sue, RBC has taken a client-centric approach to innovation. Can you share how RBC is rethinking internal processes to better serve SMB clients?

Sue: At RBC, we prioritize client-centricity, speed, and seamless experiences. Internally, we’re streamlining processes by organizing agile teams to make tasks like loan applications frictionless. Partnerships with fintechs, such as our acquisition of Dr. Bill to simplify healthcare billing, enable us to offer services beyond traditional banking.

Overcoming Regulatory and Partnership Challenges

Adeline: Partnerships between banks and fintechs are often complex. Robin, can you share your thoughts on how banks and fintechs can collaborate effectively despite regulatory hurdles?

Robin: Banks and fintechs need to view each other as partners rather than competitors. At BMO, we’ve seen that aligning around a common goal, such as customer experience, helps overcome the challenges of different organizational styles.

Adeline: Thomas, from your experience in European markets, what advice would you give fintechs when partnering with banks?

Thomas: Start small and iterate. Successful partnerships begin with a clear understanding of the problem to be solved. By piloting projects and growing together, fintechs and banks can navigate the regulatory landscape effectively.

Adeline: Thank you to our panelists for sharing their insights on the future of SMB lending. It’s clear that partnerships will be instrumental in advancing the industry, and over time, we’ll see these efforts translate into valuable services for Canadian SMBs. Thank you to the Canadian Lenders Association for hosting! 👉 Check out the full video here.   👀  

Sign up for our Finance Summit Series