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Esme and the Bank Manager - a spicy tale?

22nd Feb 2017
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Adam Tavener of Alternative Business Funding asks if Esme will be your new love, or will she lead you on, only to let you down? 

I guess it was inevitable that a major bank would break cover and announce a foray into the ‘tech’ end of FinTech. In this case it's NatWest, who really are trying to re-engage with a community of SME owners left feeling somewhat bruised by the last eight years or so of RBS antics.

So what have NatWest brought to the hottest table in town? Well, they have launched a piece of SME loan processing kit puzzlingly named Esme (I’m sure there’s an acronym in there, I just don’t know what it is). This piece of online wizardry allows SME owners to apply for and, crucially, get a decision about, loans of up to £150,000 very quickly. Now, whilst I am not sure what ‘very quickly’ means in practice I am pleased that they have addressed one of the main problems SMEs have faced when applying for bank support - the ‘slow no’. At least in this instance, if they are going to knock you back you should know about it pretty quickly.

It’s also interesting that, instead of developing their own tool they have chosen to partner with Ezebob, whose algorithm-based decision system has been around for a while, and is essentially very similar to a number of technologies which combine customer input information with instant ‘soft footprint’ credit checks and a number of other data gathering points to paint an instant creditworthiness picture of the applicant. To be honest there is not much new in this; there are several very good models of this tech supporting various SME loan aggregator sites. In truth, however, many loan applicants need to be able to tell you their story, so a fully digitised process will always be limited in its usefulness.

If we look at what obstacles await this new entrant into the online lending space the one that most alternative lenders face, deal flow origination, probably does not apply as I assume NatWest have applicants coming out of their ears.  Successful conversion of those applicants is another matter, however.

In comparison to SME alternative business funding sites which often list over 100 different funders in one place, NatWest’s Esme will have a very limited product range and a risk appetite that is, presumably, matched to that of the bank.  Thus, even with a torrent of new style online applicants, one could reasonably assume that conversion rates will be painfully low (or at least without some human intervention to ‘tell the story’) and thus the possible outcome of this would be turning a lot of ‘slow no’s’ into ‘fast no’s’ without much increase in net new SME funding. That kind of experience could ultimately serve to put small business owners off tech-based funding solutions altogether, which would be a shame.

Even when NatWest look beyond their own product range to a solution that they cannot provide, their ambition is very limited. Currently their ‘Capital Connections’ programme, which refers SMEs to other, mostly P2P funders, has a mere five products listed, most of whose risk appetite will not be massively different to the bank, so they’re hardly tearing the arse out of it at this point.

So, have they put some real spice into the mix? Will Esme be your new love, or will she lead you on, only to let you down? Who knows? Clearly there is an increasing emphasis on efficient and fast funding for small business, and digitisation is playing a part in the process of speeding things up, so a tick in the effort box I suppose, but if I’m honest, the adoption and rebranding of what is some fairly old-style technology seems a bit half-hearted to me. 

Esme feels a bit more like your elderly aunt in fishnets and stilettoes than a sizzling siren spicing up the Strictly dance floor.

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