Feeling The Urgency: How New Technology Will Reshape Asset-Based Lending

In a Q&A for ABF Journal, experts from technological companies explore how the asset-based lending industry’s relationship with emerging technologies is evolving.

The technology landscape in the asset-based lending sector is shifting, and even if the industry hasn’t always been hyper-focused on future developments, embracing change and incorporating new platforms will be critical to enhancing the lending process. To take the temperature of the current technology environment in ABL, ABF Journal spoke with Billy Quinn, CODIX USA General Manager, and other respondents.

What is the asset-based lending industry’s relationship with current and emerging technologies?

Bill Quinn: Traditionally, technology has been the backbone of asset-based lending. From an emerging technology point of view, it provides the ABL community with opportunities to rethink some traditional ways of performing ABL. New technologies provide the opportunity to optimize processes. Overall, this can provide a better user experience and reduce costs while increasing compliance. There is certainly the mindset across all organizations to improve their processes utilizing both existing and new technologies.

What are the bare essential technology solutions an asset-based lender should be using today?

Quinn: There are many different types of software and technologies in the industry. The bare essential would be to have the appropriate product technologies along with the “front to back” end processing capabilities. Ideally, this should be in one system to reduce risk and costs and allow cross-product offerings due to having all the entity data in one source.

How can and why should the usage of emerging technologies be accelerated in the ABL industry?

Quinn: It depends on point of view and different organization capabilities. What can accelerate usage is removing old ways of thinking, such as a paper-driven approach. When true ROIs are established, it is clear how much cost saving is possible with investment in technology. Also, the COVID-19 pandemic has democratized the use of technology, like electronic/digital signatures, for most contractual engagements, which is important to integrate throughout the commercial lending process.

Which part of the lending process is best suited for automation and how can companies make this a part of their operations?

Quinn: There are opportunities for automation across the board in general. However, areas such as onboarding, credit decisioning, automatic funding/payments and automatic payment matching have experienced major efficiencies with automation. Companies can make this part of their operations by having the appropriate technology to support the automation, including advanced expert systems where users can define their business processes dynamically without going through the traditional development/test/deploy process.

Will emerging technologies like artificial intelligence, machine learning and blockchain become more standard in the ABL industry in the next few years? Why or why not?

Quinn: I think digitalization standard and electronic formats will become more standard. There is always a challenge when standardizing ABL, but the move toward a standard is always an ongoing topic of conversation. For topics like blockchain, there are many different fabrics and it will be more challenging to standardize technologies like these.

What is one area of technological innovation that is not yet being discussed in relation to the ABL industry but could (or will) be a major force or trend in the next decade?

Quinn: Capabilities to do availability/milestone-based financing and the continuing merging of the physical and financial supply chain. This will provide opportunities in finance for underserved finance opportunities and de-risk trade transactions using data visibility. There is also the possibility of the ‘internet of things’ playing a part in giving information to financiers to bring them closer to their clients.

Read the whole Q&A of ABF Journal.