Key:

🔥 Hot take 🚀 Vision   🛞 In progress   👓 Our view 🏛️ Things we stand by

Set the stage 🕺

🏛️ Good financial products generate a positive NPV for its customers.

👓 Commercial bank relationship managers (“RM”) spend significant effort to calculate and market positive NPV products (”PNPs”). They focus this effort on large corporates to generate the most fees, usually charged as a percentage of notional.

👓 Small and mid-sized businesses (”SMB”) do not get marketed PNPs because it takes a lot longer to explain, recommend, sell, and support these customers.

Risky business 🧦

👓 SMBs generate considerably more accessible real-time data compared to large corporates.

🛞 Skilled fintech underwriters can (read: should) use SMB real-time data to improve risk measurement and reduce cost of financial products compared to traditional underwriters.

🔥 SMBs, on average, are paying considerably more for financial products than large corporates, even after adjusting for risk.

Something’s fishy 🐟

🏛️ SMBs pay more for financial products because they are a) not being properly underwritten (”real-risk premium”) and b) it is very expensive to properly market to them (”marketing premium”) compared to large corporates.

Let’s dream 😴

🚀🛞 Self-driving finance. We imagine a smart underwriting engine that can easily (preferably, silently) consume publicly and privately available information about an SMB and analyze it to reduce the:

Real-risk premium by accurately forecasting the SMBs credit worthiness, and the

Marketing premium by accurately recommending PNPs and offering them in an easy to understand format without RM involvement.

👓 SMBs with access to the same PNPs used by large corporates markedly increases their survival rate.