How can financial institutions provide more credit?

modefinance 25 October 2023

Overcoming the difficulty of evaluating loan applications from companies without access to reliable and up-to-date data is the ultimate challenge for credit management and financial service providers worldwide. Thanks to modefinance and Codat's collaboration, this process has been easier by providing a cloud risk management platform that integrates a vast global dataset.

This pan-European partnership combines access to the credit risk management expertise of a rating agency and the AI-based insights of the Tigran Risk Platform with access to accounting, banking, eCommerce, and payments data through Codat's business data APIs. This results in an end-to-end process that allows lenders to make more informed and safer decisions and provide customers with prompt and accurate answers.

The key benefits include:

Faster underwriting

  • An instant process for handling routine or obvious approvals and declines
  • 1900% time reduction in the analysis and management process
  • An 89% increase in the volume of accounts staff can evaluate
  • A completely digital process, free from manual data entry errors and time-consuming, paper-based processes

Consistent policy application

  • Credit decisions that are more objective and transparent, thanks to the integration of public and third-party data
  • A repeatable, uniform process that removes subjectivity, which can lead to 33% fewer disputes

More accurate decisions

  • Decreased costs associated with acquisition and monitoring
  • Better insight into consistently creditworthy companies that can be targeted for future trades
  • Nowcasting procedures, involving real-time data and constantly updated assessments

Risk reduction

  • With the ability to detect red flags upfront, exposure to high-risk companies or trades is significantly reduced.
  • Up-to-date and real-time financial information reflected in credit scores
  • The ability to assess risk on an ongoing basis with access to up-to-date data
  • Early identification of potential risks in portfolios to help minimize losses
  • 100% confidence in modefinance score vs 52% confidence in the public available accounts, adding alternative information (i.e. invoice trading, payments, etc.) for companies without public data.

A quantifiable evolution of analysts’ productivity, in terms of salaries and investments: an average financial services’ GAP of 40k€ may achieve returns up to 800k€.

How a European financial institution that specializes in SME credit leveraged the Tigran Risk Platform

About the client

A specialist lender that helps businesses turn sales orders, pre-invoice/WIP, and invoices into immediate growth capital. This enables businesses to grow, take control, and capitalize on market opportunities to create more value without restrictions.

The Problem

The client needed a technology partner that could help automate processes and analyze large amounts of data. Among various options, modefinance stood out due to its exceptional computational capabilities, status as a Credit Rating Agency, and TechFin capabilities of integrating with third-party information to provide real-time evaluation of companies.

The Process

Modefinance started by identifying the client's requirements, which included evaluating customers' creditworthiness and reducing insolvency risk. The goal was not just to provide a reliable assessment but also to create a tailored, fully digitalized process that would considerably decrease the time-to-approval and improve the operational efficiency.

However, without access to customers' financial statements, evaluating their creditworthiness effectively proved difficult. Modefinance and Codat collaborated to overcome this obstacle by combining their expertise. Modefinance, an official Credit Rating agency, brought its proprietary credit scoring model -MORE-, along with its proprietary and patented "Rating-as-a-Service" platform Tigran. This allows for the design of any counterparty analysis process. Meanwhile, Codat provided a comprehensive, up-to-date view of customers' finances to offer an accurate view of risk.

Both businesses offer API connections. The approach included connecting Tigran to Codat via API. The API connection ensured that the company registry data in Tigran was accurately matched with the applicant's ERP systems. This allowed the retrieval of accounts, validation based on the general ledger date, and reconciliation into the standard format required to run modefinance's MORE score. The collaboration between modefinance and Codat resulted in a seamless user experience on the Tigran platform for the client. 

The Solution

The data provided by Codat, combined with the credit risk management expertise integrated into the Tigran Risk Platform by modefinance, enabled the client to create a proprietary, streamlined and custom risk management process.

Some of the key outcomes include: 

  • Faster decisions made with accurate, up-to-date, and standardized data
  • Over 100k automated analyses enable new business customers to be pre-qualified quickly and at scale
  • Creditworthiness assessed in real-time with monthly updated scores, even for businesses with no publicly available data
  • Significantly reduced manual effort and costs involved in collecting borrower information for covenant monitoring and renewals, thanks to the adoption of Tigran Risk Platform's digitization approach, the authoritative solution developed by modefinance, a European CRA (Credit Rating Agency)
  • Automated risk analyses and management using real-time customer lifecycle intelligence tailored to current internal policies and procedures

To date, the client has deployed over €1 billion in multi-currency funding to European & UK businesses, offers approvals within 24 hours, and typically advanced 88% of the invoice value.

The results

The partnership between modefinance and Codat has significantly reduced the time it takes to analyze a single company from 40 minutes to just 2 minutes. This means that the process is now 20 times faster than before. To put this into perspective, a process that previously took almost two full working weeks (over 67 hours) to complete for 100 reviews per month, can now be done in less than 5 hours in total.

“Our partnership with Codat has been an incredibly rewarding journey so far. We successfully brought together teams from three different working environments and enabled them to communicate effectively. We developed a customized process based on a specific business line and integrated financial information and data into a common guideline. We are thrilled with the results we achieved so far. We are excited to continue this collaboration to see what else we can accomplish together.” Mattia Ciprian, modefinance CEO words.

Codat provides business data APIs for lending and embedded accounting automation. Our specialized infrastructure connects banks and fintechs to all the major accounting, banking, eCommerce and payments platforms their customers use to turn building connected features from their biggest challenge to their greatest differentiator.