If the ‘rule of the robots’ from banks ever comes to pass, it will be because we allowed it to, by believing that technology can never be wrong, and that insights and recommendations from a ‘black box’ should always override human decision-making.
If you’ve ever had to deal with an intransigent customer service agent, someone who denies details about yourself or your experience because their software says the opposite, you’ll know what I’m talking about.
The ‘Computer says No’ attitude already pervades so many areas of our lives, but it’s nowhere so prevalent as in the bank decision-making around corporate lending.
Everyone knows business lending is in crisis, with loans to (especially mid-size) enterprises turning into a trickle in recent years, especially to businesses with highly seasonal and often unpredictable cash flow like those in the recruitment sector.
It’s not just the post-credit crunch culture of risk aversion that’s turned off the lending taps to the mid-market. Banks and other legacy credit providers persist in antiquated methodology for assessing lending criteria; they tend to look only at surface-level business metrics and once you fall into those very rigid buckets, it's almost impossible to get out of it. Meanwhile, when recruitment firms can get a loan, the decision (and the amount, and the payment terms) are invariably dictated without any human involvement, and instead by algorithm alone.
This hurts everyone: when lending dries up businesses cannot access the capital they need to invest, grow or pay their bills; as a consequence, liquidity evaporates from the global economy. The results are particularly pernicious when it comes to the recruitment industry, which plays such an important role as an engine of growth and job creation.
Technology: a tool, not a master
The ‘rule of the robots’ is strangling recruitment firms’ growth ambitions. How can we restore fairness to lending and ensure they get the credit they’re entitled to, on the most flexible terms, and available instantly to every employee or department that needs to make business-critical purchases?
First, remember that technology isn’t an omniscient oracle that must always be obeyed. Artificial intelligence and analytics can provide a wealth of insight to inform lending decisions. But that’s the key word: inform. For all tech’s number-crunching capabilities, there is a range of factors that computers simply can’t or won’t quantify. These include critical, contextual information about businesses’ needs, their repayment capabilities, future market conditions, or the potential ROI of investment.
Moreover, technology loves putting businesses into ‘buckets’ rather than looking at their operations (and ambitions) holistically.
This insight can only be gleaned through a direct, trusted relationship between lenders and the businesses they serve. The question, however, is not the health of the relationship between recruiters and their lenders, but whether there’s a relationship at all. When was the last time you had a proper chat with a dedicated loan manager at your bank who knew your business?
We know people who utilised millions of pounds-worth of credit a year through one of the major global credit card providers, yet still didn’t have a dedicated account manager. (One of them joined our team!)
Restoring fairness through humanity
The financial industry needs urgently to reappraise how it judges recruiters’ (and other businesses’) creditworthiness, and take into account the full spectrum of factors that affect their ability to repay.
That’s only possible by weaving together the best of tech with the all-important human factor. Advances like AI and instantly-issued virtual payment cards offer incredible opportunities to assess individual recruiter’s circumstances, enable them to give selected employees instant credit, and fine-tune lending limits and payment terms in real-time.
Artificial intelligence engines should enable financial services providers to provide dynamic credit, flexing to the working capital cycle of a business and ensuring ultimate flexibility across credit amounts drawn, repayment terms and financing costs. When combined with insight drawn from relationships with our customers’ CFOs and other leaders, we’ve found this hybrid approach opens between three and ten times the amount of credit available from traditional lenders.
If we want to fix the broken lending market and restore fairness, we need a much more sophisticated assessment of risk and reward than tech alone can provide. Ironically, if the traditional financial industry continues to ignore ‘old fashioned’ relationships, they’ll lose market share to the fintechs that combine humans and computers to say “Yes” to their customers.
