Commercial lending has moved from the musty paper and desk settings of banks to embrace the cloud and software as a service. And for smaller businesses, the benefits are tangible ones, from increased funding options to flexible lending terms. Here’s how the head of one online platform, Germany’s Mambu, sees technology continuing to act as boon to smaller enterprises.
As the cloud increasingly becomes a preferred place to conduct business, ranging from record-keeping to Big Data to accounting, one industry that has been seeing increased demand has been online banking, and specifically commercial lending. Based in Berlin, Mambu offers a cloud-based banking platform that services financial institutions (FI) across dozens of countries globally. PYMNTS caught up with Eugene Danilkis, Mambu’s chief executive officer, to talk about the company’s position with FIs and his views about alternative lending in general.
PYMNTS: Mambu provides cloud-based tools for financial institutions so they can better serve their business customers. Why did you decide to enter the market as a SaaS provider to FIs, as opposed to the companies directly? What advantages does this give you?
ED: We see the MSME (micro, small and medium-sized enterprise) opportunity as a global one. There are over 250 million underserved MSMEs around the world, with a banking revenue potential of over $150 billion per year (much of this unmet need is actually located outside of Europe and North America). There are many ways to service these customers through different products, business models, funding sources and acquisition channels.
Our goal was to make the biggest impact possible in this space, making options more abundant while lowering costs of capital (and costs of time) for MSMEs. In order to do this on a global stage, we felt our most meaningful contribution could be by providing the engine that helps power these different companies and business models.
This gives us the ability to work with a wide variety of organizations across geographies (nearly 30 countries to date), including FinTech startups and P2P platforms, as well as microfinance organizations, online lenders and traditional brick-and-mortar banks. In some geographies, we are powering companies which are actually competing with each other.
PYMNTS: What are some of the biggest challenges that Mambu is looking to solve when it comes to corporate money management, corporate treasury and cash flow visibility? What aspects of small business finance are most exciting to you in today’s market?
ED: For Mambu, it’s important to ensure that the financial institutions that we work with are not limited by technology in regards to the types of products and services they can bring to market.
That means our business model and technology has to be very agile and flexible, allowing FIs to provide just the right products (and have their own flexibility) in how they address small business financing needs.
PYMNTS: Does Mambu work with both traditional and alternative FIs? You have visibility into both sides of the small business lending world. Should banks be worried about losing their market share? Or do you envision that businesses can find a balance in getting their financial services from both traditional and alternative FIs?
ED: Absolutely. We help alternative FIs expedite their entrance into the market and help traditional organizations to innovate by either transforming all or parts of their business or by expanding into new products and markets much faster and more cost-effectively than they could with their traditional business and technology approach.
Banks should absolutely be worried. Small businesses are looking for simplicity, flexibility and lower costs, all of which a digital-first organization can deliver much better than traditional banks. Traditional lenders might find themselves supporting the alternative FI market by simply investing in or funding their loan portfolios (as they have done in the U.S. P2P market), but this means they are sacrificing their relationship with customers, competing with other institutions for business and reducing their overall margins.
Businesses will seek out lenders who can provide them with the best services at reasonable prices, but [they] are also looking for lenders that understand their business objectives, can meet those needs and ultimately gain their trust.
PYMNTS: Cross-border payments and commerce are a hot topic right now in the world of B2B. As a company that works in markets across the globe, can you provide us some insight as to what trends you see happening there, and how cloud-based financial services might be able to ease friction in this area?
ED: Most of our customers are focusing on MSME lending products and work with various payment providers on that part of their business. I think technologies like blockchain can certainly ease costs and friction, but we have to remember that most traditional FIs are generating revenue as a result of that friction. They may not be financially incentivized to make a change unless they have to.
PYMNTS: A few months ago you struck a deal with Ferratum, which saw Ferratum integrating your cloud platform to connect businesses with working capital loans in the EU. Ferratum is known for its mobile lending services. Where does Mambu see the mobile lending and mobile banking space headed when it comes to business finance?
ED: Mobile for us is about ubiquity. The traditional branch-first banking model was very limiting and was highly expensive in terms of transaction costs in time for both the customer and the bank.
Internet-based banking reduced the need to visit a physical branch but was still limited by requiring access to a computer.
Mobile banking has taken that concept a step further, and we see the trend moving towards greater ubiquity: services wherever you need them, whenever you need them. This tends to have a bigger impact in areas which are high-volume of transactions, and MSME-focused products tend to be lower-volume. However, mobility is now expected as an excess channel and perhaps more importantly as a customer service/sales channel. An enhanced user experience can help set and build a relationship for businesses with a financial service provider and is how new FIs can seek to differentiate themselves from competitors.