“We are in a complex historical phase, probably the worst since the post-war period for the real economy, certainly the most fulminant. Digital is decisive today, both entrepreneurs and banks are realizing it. But we must not overlook the physical channel, which is still fundamental at a time when assessing creditworthiness is a more delicate activity than usual”. Commenting with FIRSTonline on the evolution of the banking business in times of Covid is Raffaele Zingone, Head of Central Affairs Department of Banca Ifis, specialty finance active in the non-performing loan market (acquisition and servicing) and in credit services and products for companies (factoring, lending, leasing, structured finance). An institution which has made digitization and innovation its daily bread for some time and which today aspires to assume an increasingly central role in the productive world, in particular SMEs: "It is a matter of no longer being simple lenders but partners, to support the supply chains and the economic recovery".
Dr. Zingone, what is the scenario and why is digital so important?
“It's a particular moment, the issue of digital is very delicate. We started with the vertical initiatives of Fintech startups, but now a light has come on and the first digital banking initiatives for SMEs are now on the market. Digitizing does not only mean offering vertical and transactional processes such as an online current account, which is now a commodity. It is a question of grafting technology into all parts of the process, including the correct assessment of creditworthiness, a skill that will be decisive in the coming months. The financial statements that we receive from the business world will be an important litmus test of the state of health of the economy and we don't expect comforting numbers, on the contrary, especially when the credit moratoriums lose their effects. Our hope, especially now that there is a seasoned banker in government, is that support for the real economy will not be stopped abruptly, that there will be a soft landing”.
But will numbers and algorithms alone be enough to read the market?
“I doubt that in this context the analysis of Big Data will be decisive in giving credit to a company without a guarantee from the State: an even greater ability to prospectively evaluate the strategic capabilities of entrepreneurs and companies will be needed. Like Banca Ifis, we have given ourselves the obligation to apply our lending expertise to digital: leave the most operational activities to technology and robotics, which we are implementing, to improve customer response times, while reducing costs, and concentrating people on analysis and verification activities with the highest added value”.
The human factor therefore remains central.
“We need the right alchemy between technology and the human factor. Assessing creditworthiness is not trivial, especially in this period. Entrepreneurs are business captains with great market and product skills, but (and this is especially true for small businesses) sometimes they are not in a position to be able to build accurate strategic business plans. And yet, in a country like Italy, it is the SMEs that support the productive fabric and the supply chains. We are talking about strategic suppliers, with very high skills: even if these players are small, they have a central role in the supply chain, to which they bring quality".
So what is the right recipe at this stage?
“The right recipe is difficult to find but I can identify three fundamental ingredients: planning, realism and the right alchemy between technology and the human aspect. Planning is important because we have to prepare for the possible worst case, when the moratoriums on mortgages will expire (June 30, 2021, ed). Then it will take realism to evaluate, together with the scenario in which we find ourselves, the economic and financial parameters of a company: today it is obvious to expect 2020 financial statements with sharply decreasing revenues and margins, with exceptions for market niches. Finally, on technology we have the tools to digitize all processes, even using robotics in low value-added credit processes. This is the perfect moment to turn and optimize human energies and experience in the analysis and interpretation of such a complex situation”.
You have always been involved in factoring, i.e. the assignment of trade receivables. Today, however, you focus more and more on supply chain management and on the figure of the "assigned debtor". Can you explain to us how?
“The assigned debtor has always been the central figure for Banca Ifis. It is mostly the head of the supply chain who, with his collaboration, allows us to financially support his suppliers. We asked ourselves: how can we make his life easier? The answer was: making us more flexible, leaner, faster, eliminating paper and digitizing processes. But could we still add something? Yes, for example by returning this customer with valuable assessments, albeit of a financial and non-industrial nature, on his supply chain. Adapting credit support to time to market. By becoming an all-round financial partner and no longer just a factor”.
Another novelty that you have recently launched is digital lending.
“Yes, it is a medium-long term loan with a guarantee from the Central Guarantee Fund (the subsidy from the Ministry of Economic Development for SMEs, also financed with European resources, ed). The tool already in the portfolio is now completely digital in its entire process, including the collection of information which then goes to compose the request dossier and submit an application for obtaining the guarantee: to date around 60% of this report is composed automatically , also for the anti-money laundering part, thanks to our partners, above all info providers. We are in the market testing phase but a few days after its launch, Banca Ifis has already received around 100 online lending requests".
With Covid, what has become the typical need of your client companies?
“The Government has facilitated access to medium-long term financing and this has triggered a race for these funds. To understand to what extent this intervention was also incisive in the timing of its renewals, we have to wait for the expiry of the moratoriums: that will be the decisive moment, a sort of litmus test. For our part, I can say that customers' demand for speed has accelerated. Speed was already in our DNA but now I have noticed that the propensity for digital is increasing exponentially, even on the part of older generation entrepreneurs".
