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The Connector Podcast - FinanceX #15 - Lending & Mortages Innovation
Finance is being fundamentally rebuilt and re-architected as credit becomes woven into our digital lives rather than something we seek out separately. This shift toward invisible, embedded finance is changing how individuals and businesses access and manage money, with fintechs often leading the charge.
• Invisible lending is embedding finance directly into digital experiences like e-commerce checkouts and business software
• Traditional banks risk becoming less relevant if they don't adapt to new distribution models in digital spaces
• AI is transforming financial processes, completing credit assessments in minutes instead of hours or months
• European and Asian regions approach fintech innovation differently – Europe like chess (methodical, rule-heavy) and Asia like go (fast, agile, experimental)
• Cross-border credit invisibility affects thousands of Europeans who become "credit invisible" when moving between countries
• Only 1% of VC funding in Europe went to women-only founding teams in 2023 despite research showing strong returns
• The future of property finance involves holistic dashboards tracking value, renovation opportunities, and environmental impact
• Revenue-based financing provides SMEs with flexible repayments based on actual income, better matching business reality
• Singapore demonstrates integrated property tech systems connecting smart buildings, resident apps, and digital financing
• The Nordics show successful collaboration between banks and fintechs in creating agile lending ecosystems
As finance becomes more embedded and invisible, the challenge becomes ensuring your financial reality is fully seen and properly understood by AI systems and platforms.
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Koen Vanderhoydonk
koen.vanderhoydonk@jointheconnector.com
#FinTech #RegTech #Scaleup #WealthTech
Welcome to the Deep Dive. We're digging into the fast-changing world of finance today. We've waded through well a ton of articles, research, interviews, all that stuff, and our goal is to pull out the really crucial, maybe surprising and definitely relevant insights about how money's moving borrowing, lending, managing assets.
Speaker 2:It really is a landscape in flux, isn't it? We'll try to connect some dots for you, looking at trends, from, say, how you might get credit in the future to how your biggest investments, like property, are managed. It's all being redefined.
Speaker 1:Yeah, and the amount of information out there is huge. We've looked at things like Finance X Magazine industry reports, so think of this as your shortcut to getting the big picture fast. We'll hit on key themes like invisible lending, the massive role AI is playing and how different parts of the world are tackling things differently. Ok, so let's start there with invisible lending. Akuro talks about this. It's this idea that credit isn't something separate you go looking for anymore. It's just woven into your digital life, like right there at the e-commerce checkout maybe, or even in business software.
Speaker 2:Exactly, and that's fundamentally changing how we access finance. It's gone way beyond the early buy, now pay later stuff. Now you're seeing it in business too, like SMEs financing invoices right inside their ERP systems, their main operational software, or retailers offering flexible payments instantly at the point of sale. And, interestingly, it's often the non-bank players, the fintechs, who are pushing this forward.
Speaker 1:Right like InBank. Financex highlighted them CEO Prit Pondogia specifically. They started after the 2008 crisis, saw a gap and built this automated credit decision system. Approvals in minutes, he says right when you're buying something like financing a car or electronics. Apparently, apple products are good because of residual value, even solar panels, all through partnerships.
Speaker 2:And this really matters for the traditional banks. I mean sure banks have trust, they have capital, they understand risk, but they often don't have the distribution points in these new digital places. So if they don't adapt, and quickly, they risk becoming well less visible, less relevant compared to the agile fintechs. Your Clarness, affirm Stripes Squares.
Speaker 1:So it sounds like this invisible lending needs a totally different approach. It's not just about putting old loans online. It's flexible product, super fast, automated decisions like milliseconds fast, and being built API first so you can plug into other platforms easily. It's embedding your service in someone else's workflow, essentially.
Speaker 2:Akuro lays out some clear strategic options for banks. Things like focusing on the fast-growing embedded markets, retail point of sale, sme invoice financing, partnering up instead of trying to build it all themselves, adopting more of a software company mindset, you know, faster integration and leveraging their strengths. But the key message is urgency. They need to move now or risk losing ground. So, like you said earlier, think about your last online buy If financing was just there seamlessly. That's invisible ending and it's already happening.
Speaker 1:Let's switch gears a bit. Technology, specifically AI, how's that driving things? Covecta points out the old problems with getting loans right Waiting months, sometimes, all that manual document checking, drafting those credit memos in minutes.
Speaker 2:They saw this with Metrobank commercial credit. Tasks that took hours, now done in minutes Big efficiency jump.
Speaker 1:Wow, minutes instead of hours and you mentioned it's different from typical software as a service, saas.
Speaker 2:The business model is different. Saas usually charges per user, per seat. Growth means more users. Agendic AI often charges per task completed, so its value is directly tied to the outcome, the efficiency gain. Scott Wilson from Covicta put it well SAWs incentivized headcount growth. Ai does the inverse. It replaces it.
Speaker 1:Interesting, and AI's impact goes beyond just process automation. Right Dilley Piper talks about credit scoring.
Speaker 2:Exactly. Machine learning models now chew through huge amounts of complex data, not just traditional stuff, but alternative data too, like spending patterns. This means faster risk assessments, often more nuanced, maybe even more accurate at predicting default risk than older methods.
Speaker 1:But that leads to the blank box issue, doesn't it? If an AI denies credit, how do you understand why, especially if the criteria aren't clear?
Speaker 2:That's a major concern and regulators, especially in the EU, are definitely tackling it. There's a layered approach. You've got GDPR, the Data protection regulation, which gives people the right not to be subject only to automated decisions, and it demands a meaningful explanation. Then there's the new AI Act. It labels AI for creditworthiness as high risk. That means strict rules on transparency, data quality, human oversight and, coming in 2026, the Consumer Credit Directive 2 strengthens rights further clear explanations, right to give your view, right to ask for a human review. So, yeah, you might get that decision in minutes, but the crucial part is do you understand it? Can you challenge it? That's what the rules aim for.
Speaker 1:Okay, so let's zoom out. How are different regions handling all this change? Queen's Business School uses this neat analogy Chess versus go Europe is chess.
Speaker 2:Yeah, that's the idea Methodical rule, heavy focused on stability regulation, think MIFID, gdpr. It creates transparency, which is good, but maybe slows down radical innovation sometimes.
Speaker 1:And.
Speaker 2:Asia is go Right, Fast, agile, all about scale, experimentation, higher risk, maybe higher reward. You see lots of fintech sandboxes there places to test new ideas safely. Look at India's UPI payment system, often built with consumer incentives like little scratch cards or cashback. Contrast that with Europe, where GDPR makes monetizing payment data really tricky. So you often see fewer direct consumer perks from similar systems.
Speaker 1:And geopolitical risks play into this too, especially for the EU with its focus on rules.
Speaker 2:Definitely it can slow down cross-border stuff, increase operating costs because of all the checks and balances.
Speaker 1:And speaking of cross-border issues, Mifondo brings up this challenge of mobile Europe. What's that about?
Speaker 2:It's fascinating. Every day, thousands of Europeans move between EU countries for work, family, whatever, but their credit history. It often just stops at the border. They become credit invisible in their new country, even if they had a perfect record back home. Think about a German engineer moving to Belgium suddenly seen as riskier than a local graduate with no history, just because the data doesn't travel.
Speaker 1:That sounds broken like a system failure, not a data problem.
Speaker 2:Pretty much, and that's what Mifundo is trying to fix Building the plumbing. Basically Secure APIs, getting GDPR-compliant consent to link up credit bureau and open banking data across borders, turning weeks of assessment into minutes, reducing risk for lenders, opening doors for borrowers.
Speaker 1:And this credit invisibility isn't just about moving countries, is it? Avound's story touches on this too.
Speaker 2:Yes, very personally. Dr Michelle he, who's an expert in lending analytics, actually couldn't get a simple loan herself in the UK. So her platform, render, uses open banking, accessing real-time transaction data, income patterns, spending habits with consent, of course, it assesses true affordability, not just relying on traditional scores and their results. Significantly lower defaults like 70, 75 percent lower. They helped people like Zara, a part-time tutor, single mom. Traditional banks saw irregular income. Render saw affordability.
Speaker 1:That's powerful. But even with all this tech progress, Rofintech points out a big gap in diversity.
Speaker 2:A huge gap. The stat is stark. Women-only founding teams got just 1% of VC funding in Europe in 2023. 1% and this is despite incredible women leaders already driving innovation people like Anna Maria Georgescu at Smart FinTech and Bowdoin, who founded Starling Bank.
Speaker 1:This was the answer more panels.
Speaker 2:No, I think the point Rofintech makes is it's not about more talking shops. It's about capital and trust for women. The call is for VCs to fundamentally rethink how they find deals to actively back female-led funds and look at the results. Research shows female-led teams often deliver strong returns, sometimes better capital efficiency. It's about building a stronger, fairer system overall. You know whether it's making sure your credit history travels with you or looking beyond traditional metrics to see true financial health, it's all becoming more personal and that means fixing biases and connecting data better.
Speaker 1:Right, so let's look at how the future is being actively crafted now New models, different strategies. Rick Kokelberg talks about dreams, not loans for real estate banking. What's that mean?
Speaker 2:It's shifting the focus. Instead of just a dashboard showing your mortgage balance, imagine a holistic property dashboard, tracking its real-time value, suggesting renovations that could add value, maybe even its ESG score, its environmental and social impact. It turns a liability, the mortgage, into something that feels more like an active investment you manage.
Speaker 1:And this keeps the human touch, even with AI.
Speaker 2:That's the idea of human augmented business. For huge decisions like a mortgage, people still want human contact, but AI can work alongside identifying opportunities, maybe suggesting relevant insurance or home improvement financing, making the relationship deeper and generating better returns through engagement.
Speaker 1:Singapore seems way ahead in integrating this kind of thinking for property tech or prop tech.
Speaker 2:They really are a great example. It's an interconnected system, Smart building management sensors, building systems feeding data, resident apps like Habitat for communication and services, then digital rent collection platforms like CardUp, integrated home finance portals from government housing, HDB and private players like Property Guru Finance, and it's all underpinned by things like MyInfoSingPass APIs for secure, instant identity and data verification.
Speaker 1:And the legal side keeps pace.
Speaker 2:Crucially. Yes, Singapore emphasizes the legal and regulatory rails, things like electronic stamping of documents, IRAC stamping, digital conveyancing portals. It ensures tech makes things faster and safer. That whole integrated property tech stack is a real lesson for other places.
Speaker 1:OK, so speaking of specific markets, what about SME growth? Softloans mentions an invisible engine.
Speaker 2:Yeah, that's about revenue-based financing. The problem for many SMEs is cash flow unpredictability. Traditional loans with fixed monthly repayments can be tough when income fluctuates wildly, so revenue-based financing adjusts repayments can be tough when income fluctuates wildly, so revenue-based financing adjusts repayments based on actual income, often a percentage of daily or weekly sales. It flexes with the business and the results they cite are impressive 90% of merchants come back for more funding.
Speaker 1:Average sales jump 30% Because it fits their reality better.
Speaker 2:Exactly For SMEs often speed, simplicity, transparency they matter more than the absolute lowest interest rate. And effective embedded lending. Here means partnerships Working with payment providers, the sauce tool. Smes already use banks meeting them where they operate.
Speaker 1:Makes sense, and all these threads seem to come together in places like the Nordics. Nordic Fintech Week discussions highlighted this.
Speaker 2:Right, the Nordics have a strong history of banks and fintechs actually collaborating. They've built a pretty integrated, agile lending ecosystem, big focus on embedded finance, plugging those SME gaps. We talked about using data smartly and adapting risk management quickly. So yeah, from specialist lending systems to helping small businesses thrive to empowering individual investors. Lending systems to helping small businesses thrive to empowering individual investors. The future isn't just flashy tech. It's about smart, ethical, collaborative strategies keeping people ultimately at the center.
Speaker 1:Wow, okay, we have definitely covered a lot of ground today A real deep dive from lending becoming almost invisible to AI changing everything, the different ways regions are tackling this and remembering the human side of finance.
Speaker 2:Absolutely. The takeaway really is that finance isn't just evolving, it's being fundamentally rebuilt, re-architected, and for everyone involved banks, fintechs, consumers like you the key seems to be embracing innovation, not just as disruption, but as the new infrastructure, building systems that actually work, that serve real needs and that are built to last.
Speaker 1:So maybe a final thought to leave you with drawing on all this. In a world where finance is becoming more embedded, more invisible to you as the customer, how do you make sure your financial story, your reality, is fully seen and properly understood, whether that's by a traditional bank, a new AI agent or some embedded finance platform? Something to think about. Thanks for joining us on this deep dive. Stay curious, keep digging into these changes.