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Now more than ever, banks need to focus on customer affordability.
Latest industry data shows that demand for SME funding is strong. In fact demand is up 11% year-on-year, and loan values are at levels not seen since before the pandemic. Worryingly, however, loan delinquency rates are also persistently high.
Research also suggests banks are ramping up their lending activity in line with market changes, but so too are alternative funding providers and digital challengers. As of 2024, challenger banks account for 60% of annual gross bank lending to SMEs.
The question is, how can banks make smart lending decisions that responsibly empower businesses in the current challenging landscape, whilst maintaining their market share risk appetite.
The answer is by expanding their commercial data sets.
In this blog we explore the power of CAIS and CATO for banks seeking to build a clearer picture of SME affordability, and therefore drive smarter lending decision-making.
What is CAIS data?
CAIS stands for Credit Account Information Sharing. It’s a system for financial institutions to share credit account information with credit bureaus. This shared data, includes details about credit commitments, payment performance and account status, thereby helping banks make informed decisions about lending and risk management.
Commercial CAIS is a shared database of around 18 million commercial credit accounts’ credit history that is contributed to by all major financial institutions and credit providers. It is maintained by Experian.
What is CATO data?
Commercial CATO, or Current Account Turnover data, is a dataset that provides banks with a detailed view of a business customers cash flow, including all transactions across its bank accounts. It's used to assist in building a deeper understanding of a business customer’s financial health, assess its ability to repay credit, and ultimately make fair and responsible lending decisions.
It is pulled together from monthly snapshots provided by banks and other credit providers.
So, why do banks still have issues with SME lending decisioning?
Multi-banking is a significant issue, as is the availability of consented data.
Together these create pockets of risk that make building an individual customer picture of financial health difficult and prevent banks from building a total market view for proactive portfolio risk management.
Why is it critical for banks to understand the true financial health of SME customers?
- Reduce risk of defaults and lower total delinquency rates: A complete view of financial health boosts understanding of each SME’s ability to meet its debt obligations, thereby protecting customers from financial distress, as well as reducing the risk of potential losses for the bank.
- Accurate scoring for appropriate loan amounts and terms: With deeper understanding banks can more accurately assess affordability, risk, and liquidity, and therefore set appropriate loan terms, rates, and repayment amounts to improve outcomes for SMEs and sustainable profitability for themselves.
- Enhanced portfolio sustainability: Sound lending decisions based on a total market view of SME lending helps banks build more sustainable and resilient portfolios, reducing risks for both themselves and their customers, especially in times of uncertainty.
- Support for wider economic growth: The UK government’s small business strategy is assessing the ability of the lending sector to overcome the barriers to finance and support that are so vital for economic growth. Banks have a frontline role to play here. With a total market view they can tackle the SME funding gap and contribute to broader economic growth.
- Strengthened customer lifecycle management: A complete view of a business’s financial situation empowers better decisioning at every stage of the lending lifecycle – from acquisition to application, from funding to retention and growth. Thereby improving customer experiences and strengthening competitive advantage.
What decisions does this dataset power?
Together CAIS and CATO help banks build a detailed picture of commercial customer affordability.
This enables banks to assess the risks associated with SME lending, determine appropriate lending limits for each customer, identify potential early warning signals of financial distress, and provide a better lending journey and customer lifecycle experience.
Ultimately leading to a more responsible and effective lending environment for all.
Ready to unleash the power of CAIS and CATO data?
FullCircl ProBanker, built in collaboration with Experian, delivers real time access to restricted commercial credit data for a total market view of customer risk and opportunity across multiple financial institutions. This advanced ready-to-action insight supports smarter lending decisions, stronger customer relationships, and faster time to funding.
FullCircl ProBanker draws on an exceptionally rich dataset, with 148 commercial credit contributors and compete participation from all CMA9 Tier 1 banks. It assists lending providers:
- Access a total market view of a customer’s credit exposure
- Track affordability and liquidity in near real-time
- Strengthen portfolio health by identifying early warning signs of financial distress
- Accelerate time to funding
- Improve customer outcomes through proactive engagement and personalised outreach
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