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How Technology is Driving Transformation

Today the UK's biggest bank, HSBC, announced it will increase lending to small and medium-sized UK businesses by more than 25 per cent to £8bn this year. In tandem with its pledge to ramp-up lending, the bank also announced it would be waiving certain fees on business loans.

Both moves are, of course, fantastic news for SME businesses in the UK – firms that we know have suffered from the impact of banks reducing lending in order to repair their balance sheets. SMEs have struggled with this reduction in bank finance over recent years but, encouragingly, lending to SMEs (excluding overdrafts) rose by £465mn in the quarter to March, according to the Bank of England, up 1.9 per cent over the first three months of 2015.

As they begin to bolster SME lending, banks will be focused on developing a sound understanding of their SME customers to ensure the lending decisions they make are solid, sensible, and based on highly-accurate and reliable data. Technology has changed rapidly in recent years and there are now innovative solutions for many of the financial services sector's challenges, not least how banks obtain clean and consistent financial data from their customers.

Banks are now also coming under pressure to innovate from an emerging group of challenger banks such as Fidor and Shawbrook, as well as peer-to-peer online lenders. The financial services landscape is changing and old certainties are slowly crumbling – perfect conditions for disruptive technology to play a beneficial role in its transformation.

UK banks have faced criticism that they have not embraced investment in cutting-edge technology as rapidly as they should have, but I believe this situation is now changing. At Validis, we are witnessing first-hand how the banking sector is undergoing significant transformation.

It has never been more important for banks to hold one, consistent view of their SME customers in order to make sound lending decisions. Pulling a bank's data into a single cloud-based structured system is one of the most compelling ways to achieve this. As technology evolves and the industry's understanding of it increases, implementing such systems becomes far more secure and straightforward – perennial excuses that change is "too difficult" simply don't hold water any more. These are exciting times! 


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