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SME markets: How to streamline decisioning and onboarding to unleash potential.

Blog Post04/01/2021
SME markets: How to streamline decisioning and onboarding to unleash potential.

Leveraging technology to remove barriers and unleash potential

According to a 2019 survey by the Trade and Industry Department, there are over 340,000 SMEs in the Hong Kong market. This large segment’s business development and financing needs present quite an opportunity for the loan industry. But SME loans can be difficult and aren’t always cost-effective, leaving lenders hesitant. So, how do we remove barriers and unleash the potential of the SME market segment?

At TransUnion’s recent 2020 Hong Kong Financial Services Summit, Victor Yim, Head of Fraud and Identity Solutions, Asia Pacific, and Abhay Kelkar, Vice President Research & Consulting. CIBIL, tackled the subject. In their their session — Streamlining Decisioning and Onboarding for SMEs — they dove into the challenges lenders face when serving SMEs, and how the latest digital authentication technology can help update and streamline processes.

Preventing cumbersome processes from eating into profit margins

How important are SMEs to lenders? Taking Hong Kong as an example, 2018 data from the Trade and Industry Department shows SMEs contribute 41% of Hong Kong’s GDP (2018), and employ 55% of employees (as of Q1 2020). Another example of this segment’s potential is seen in the Greater Bay area: In 2018, Shenzhen SMEs account for 48% of the local GDP, and in the first five months of 2020, loans to SMEs in Guangzhou increased by 274% compared to the previous year.

Yet, SMEs have routinely encountered challenges in securing credit approvals and opening accounts. As recently as early 2019, SMEs faced a credit approval rate of 5%. Another 2018 survey revealed SMEs felt in the 12 months prior to the survey, the difficulty of opening a bank account in Hong Kong had increased. For SMEs, the most daunting challenge came down to satisfying document requirements and a lack of process transparency, leaving them looking for answers when applications were declined.

Introducing technology to the onboarding process for increased efficiency

For lenders, complicated regulatory and compliance requirements create challenges in pursuing the SME segment. Whether it’s document collection and verification, identity verification or compliance checking for financial crimes like money laundering, the onboarding process can be tedious and drain resources.

For lenders to feel comfortable about tapping into the SME market segment, they’ll need to overcome the following three onboarding hurdles:

  • Challenge 1 — Lengthy and manual onboarding process for SMEs
  • Challenge 2 — Operational burden in complying with demanding, dynamic regulatory requirements around identity verification and financial crime compliance
  • Challenge 3 — Lack of transparency that negatively impacts the user experience

The first step to addressing these challenges is utilising an integrated system which leverages data sources and artificial intelligence systems to automate the process. Hong Kong SMEs can expect an average of 26 days to complete the traditional onboarding process, but this can be reduced to as little as 15 minutes with the help of an integrated system.

Overcoming Challenge #1: An integrated platform can connect to the Company and Business Registry database to collect the applying company’s relevant documentation, eliminating the need to do so manually. It then automatically uses the information collected to reveal the company’s structure, shareholder and Ultimate Beneficial Owner (UBO) discovery — all while completing identity verification and financial crime compliance checks.

Overcoming Challenge #2: Manual background checks can present additional factors that interfere with information gathering — such as bias from search engine optimisation, amongst other things. Leveraging the latest technologies can ensure searches are focused and come from reputable sources. When checking for financial crimes, technology can help deliver precision screening (after relevant parameters and comprehensive filters on risk types have been set). This way, regulatory requirements can be met faster, and more accurately and efficiently.

Overcoming Challenge #3: An end-to-end, integrated digital onboarding platform can help provide more transparency and consistency. Combined with greater overall efficiency, it leads to a much improved, friction-right user experience in general.

In addition to covering these topics in the session, the speakers also shared several case studies from SMEs in India, including how a leading lender was able to reduce default rates from 18.5% to 0.5% by increasing usage of credit reports and score. To learn more, watch the full on-demand session recording and download the presentation materials. Contact your sales representatives or click here for password


For more information about the latest TransUnion solutions for SME onboarding, visit our webpage.

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