Presentation on the paper "Alternative Data Transforming SME Finance" presented at the Global Partnership for Financial Inclusion 2017 forum in Berlin, Germany #GPFI Special thanks to my co-auithor, Lisa Wilhelm who provided substantial inputs for this paper and presentation.

2. Alternative Data Transforming SME
Finance
Global Partnership for Financial Inclusion Forum

3. What data?
A world awash in data – unprecedented volume, variety, and velocity – means
more data can be SME credit data; and rapidly escalating processing power
matches smart algorithms to massive data streams at plummeting costs
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

4. Global shifts: how much data and where?
The digital universe is more than doubling every two years; importantly, digital data will
switch from 60% in mature markets to 60% in emerging markets by 2020
Source: “The Digital Universe of Opportunities: Rich Data and the
Increasing Value of the Internet of Things” (April 2014). IDC.
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

5. Fintech transforming the SME lending status quo
A rapidly growing crop of technology-focused SME lenders are putting customer
needs, big data, and advanced analytics at the center of their business models.
P2P SME lenders Supply/trade financing Online balance
sheet SME lenders
Online invoice
financing
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

6. Global SME ‘operating systems’ moving online
Every time SMEs use cloud-based services, make digital payments, browse the internet, use their mobile
phones, engage in social media, buy or sell electronically, ship packages, and manage their receivables,
payables, and recordkeeping online, they create and deepen the digital footprints they leave behind.
Payment acceptance +
much more
Making payments Cloud accounting +
much more
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

7. Emerging digital SME lending ecosystem
New analytic firms help lenders analyze big data; telco, bank, and technology firm convergence is fueling
new mobile data-lending and financial services; and new marketplace aggregators help SMEs make sense
of their growing lending options.
Big data analytics Mobile data lending
graduating to SMEs
SME loan aggregator
marketplaces
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

8. Fintech and banks 2016: more friend than foe
Advantage: banks
• Captive, large customer base/ positive
selection in applicant mix
• Brand
• Distribution coverage
• Valuable, “free” internal data (but
underutilized)
• Low cost, stable source of funds
• Regulatory certainty (mostly)
10
Advantage: fintechs
• Customer service oriented
• Simple and often friction-free applications
• More credit data sources
• Enhanced risk models
• Underwriting costs
• Pricing for risk
• Less regulation in many markets (but the
future is uncertain)
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

9. Scaling up: partnership business models
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Banks
SME
Solutions
Online
Lending
Government/
Associations
Investing FCIF FUNDING CIRCLE
SME INCOME FUND
Banks
SME
Solutions
Online
Lending
Payment/
Processors
Lending as a service (LaaS)
• Focus on technology/embedded analytics a
game changer
• Can scale very, very quickly
• Enables partners to expand core solutions /value
added services
• U.S., Australia, Canada
Acquisitions + referral partners
• Acquired Lending Endurance Network to expand
to U.S.
• Acquired rival Zencap to expand into Europe
(Germany, Netherlands, Spain)
• Multiple referral partnerships
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

10. Licensing the platform to scale globally
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Licensing technology to lenders
globally
• Turnkey platform, fully configurable
• Rapid global deployment
• Rapid processing and decision making can be
fully automated
• Works across all channels
Banks
SME
Solutions
Platform
Lending
Partners
Network
Acquirers
Institutional
Partners
• Short online
applications;
automatically,
painlessly link data
sources
• Uses power of SME’s
own real-time, verified
business data to get
working capital
Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017

11. Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017
Alternative data: policy issues and challenges
• Data privacy and consumer protection issues
• Opt-in vs opt-out models
• Credit reporting sharing and access
• Cyber security
• Transparency & disclosure
• Balancing integrity, innovation and marketplace competition

12. Global Partnership for Financial Inclusion Forum | 2 - 3 May 2017
http://smefinanceforum.org