Lenders are moving beyond static financial statements to real-time transaction data, enabling faster decisions and more current assessments of SME performance and funding needs, according to David Reynders, CTO at Merchant Capital.
The rise of digitally active SMEs is driving a shift in how lenders evaluate risk and funding readiness. Traditional models built on historical financials are being supplemented by approaches that incorporate real-time transaction data, providing a more current view of business performance.
In this Q&A, CIO South Africa speaks with David Reynders about how this transition is affecting decision speed, risk assessment, and how CIOs approach financial systems integration to support funding readiness.
Q: How is real-time transaction data changing the way lenders assess SME risk in South Africa today?
A: Real-time transaction data provides an up-to-date view of a business and allows lenders to assess performance based on recent activity. This includes whether payments failed, what was sold and what was ordered the previous day. It also enables faster assessments, as systems only need the latest data to update previously shared information. This supports more current decision-making and gives lenders additional context.
Q: What are the biggest limitations of traditional funding models when applied to modern, digitally active SMEs?
A: There are two key limitations, both related to time. The first is information recency. Lenders often request audited financials that may be six to 12 months old, while management accounts can lag by six to eight weeks. This limits visibility into current performance and funding requirements. The second is time to analyse. Large volumes of data are typically submitted and assessed at once. Real-time data enables incremental updates and ongoing analysis, which can speed up decision-making.
Q: How should CIOs think about integrating financial data systems to better support funding readiness?
A: Integrating production systems and banking data with accounting platforms consolidates business information more efficiently. This supports a clearer view for decision makers and lenders when assessing funding requirements.
Q: What risks should businesses consider when relying on data-driven funding decisions?
A: Data may not provide a complete picture. Systems can be outdated or incomplete, and important context may be missed if decisions rely only on system data. In practice, this is often addressed by incorporating additional input from SME owners to provide context alongside system-generated data.
