Finance Everywhere, Member Exclusive

Embedded Briefing: MX and Boss Insights collaborate to enhance digital SMB lending

  • For lenders, the partnership serves to enable better and faster decision making based on applicant firms' data — collected via integration with data sources like Shopify, and QuickBooks.
  • For SMBs, the partnership seeks to bridge the financial data gap between them, their financial institutions, and their financial applications.

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Embedded Briefing: MX and Boss Insights collaborate to enhance digital SMB lending

MX and Boss Insights collaborate to enhance digital SMB lending

Utah-based MX, an open banking service provider, and Toronto-based Boss Insights, a business data aggregator, have partnered to provide lenders with SMB data to accelerate SMB lending processes. 

In this partnership, Boss Insights brings small business data across multiple categories — banking, accounting, commerce, and payroll — collected through its integration with over 1,000 data sources, including Shopify, Stripe, Gusto, and Quickbooks. MX, through its APIs, connects financial service providers to this data reserve, enabling them to understand SMB applicants and their financial standing.

Lenders often struggle with access to reliable data to make speedy and secure SMB lending decisions. Boss Insights uses its data together with AI to accelerate the lending process for SMBs. The firm claims its technology connects lenders and businesses for 5x faster loan decisioning and servicing, funding, and cost savings. Through this partnership, Boss Insights gains access to financial accounts on the MX financial data platform, thus attaining the financial data of 200 million consumers that MX’s clients serve. This will aid Boss’ Smart Capital product suite, which provides automated screening, due diligence, and portfolio management, helping lenders with real-time insights to lower risk and boost revenue opportunities. 

Powered by the MX Data Engine, MXdata for SMBs implement machine learning technology built to identify, cleanse, and categorize business transaction data. By standardizing business transaction data, the firm argues that financial brands can track and measure performance gaps, develop a better understanding of their business consumers’ profiles, and drive more accurate funding and payment decisions.

“By partnering with MX and leveraging MXapi and MXdata solutions, Boss Insights is now able to provide access to enhanced banking data, strengthening the breadth of its data offering,” David Whitcomb, the vp of product at MX told Tearsheet. “This empowers its clients (i.e., fintechs and financial institutions) to make even faster, more accurate funding and payment decisions for SMBs. The partnership manifests in the offerings and digital financial experiences that fintechs and financial institutions deliver to their SMB clients.”

For SMBs, the partnership seeks to bridge the financial data gap between them, their financial institutions, and their financial applications. It does so by providing SMB owners a ‘360-degree view’ of their financial health through a single application programming interface, with data from multiple services that they may use — like Amazon, Xero, and Block. 

Today, as SMBs seek to recover following the covid recession, they’re hungry for funding. Providers, on the other hand, though approving more loans since the downturn, are still not up to their pre-pandemic levels. Small business loan approval percentages at big banks increased from 14.2% in November 2021 to 14.3% in December 2021 — though still roughly half the approval percentage they had pre-pandemic. Additionally, small banks’ approvals also rose from 19.9% to 20.1% between the two months — however, they generally approved over 50% of their loan requests pre-pandemic. This indicates that loan approval percentages for banks and most non-bank lenders are slowly but steadily increasing, as SMB owners look to reinvest in their businesses.

A 2021 survey found that 33% of SMB borrowers feel discouraged about loan approval due to their low credit scores. In this environment, a partnership of this sort appears to not only be the need of the hour, but also a lucrative offering for MX and Boss Insights. It provides lenders with more robust data points — like a particular firm’s accounting or transactional data — that span beyond traditional points to speed up loan application processing times while helping lenders better judge whether a company should get a loan.

It is also important to note the limitations of traditional data points, and how they serve to uphold biases against historically underserved communities. Online lending has the power to change this. The Electronic Transaction Association (ETA) issued a white paper that argues that online digital offerings have proven their ability to expand access to credit and offered affordable alternatives to traditional loans for minority-owned small businesses seeking to grow.

In 2022, MX will continue building its open financial data ecosystem, by forging partnerships with organizations such as Boss Insights.

In addition to this collaboration, MX and Boss Insights have been forming other key partnerships, too. Earlier this month, MX teamed up with omnichannel payments platform Qolo Partners to help fintechs and neobanks scale their businesses. In March, MX became the first company to access tokenized consumer data via AllData Connect from Fiserv, enabling secure consumer financial data access and sharing. That same month, MX announced that it had forged a new data access partnership with the University of Wisconsin Credit Union.

Chart of the day

‘Embedded finance is booming’, ‘open banking is the future’ — these statements are hardly news anymore. As financial institutions and fintechs bring services to the top of consumers’ palms, and non–financial companies begin offering financial products, there is an entire fintech infrastructure landscape running behind the scenes. The landscape is made up of core infrastructure providers that power distributors to launch products, and then run them.

This fintech infrastructure landscape is big, growing, and intertwined. To understand and navigate it, the landscape can be divided into 9 categories of providers (by services provided): 

  1. Lending
  2. Identity, fraud, and risk
  3. Banking
  4. Crypto enablement
  5. Insurance
  6. Data aggregation and normalization
  7. Payments
  8. Brokerage
  9. Income verification, and payroll. 

For example, launching a lending product requires bank partnerships, lending partners, servicing capabilities, and underwriting expertise. Kanmon and Lithic are two firms that enable their customers to provide instant growth capital to their end-users. Such firms typically take care of one or more of the underwriting, funding, and servicing. Similarly, in banking, BaaS providers like Unit or Treasury Prime allow the creation of simple products like checking and savings, while also having the capability to power more sophisticated features like interest rate segmentation, joint accounts, and high yield savings.

A newly bustling area in this regard is cryptocurrency. 31% of 18-29 year-olds already own cryptocurrency, and firms want to cater to that growing group. Crypto enablement providers enable firms to offer seamless crypto compatibility to their end-user, whether for transactions or investments. Paxos and Fireblocks are examples of two firms active in the space.

Here’s a chart that maps out key players among the aforementioned 9 categories. It provides a simple and easy-to-navigate visual representation of the industry.

enabling fintech infrastructure

Source: Medha Agarwal

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