FIS launches small-business lending tool, first in planned portfolio

FIS is adding a small-business digital lending tool to its arsenal.

SMB Digital Lending, which the Jacksonville, Florida-based core services provider announced on Tuesday, is meant to be the first in a portfolio of digital banking solutions to focus specifically on loans for small and medium-sized businesses. The cloud-native software helps banks automate the way they underwrite and fund small-business loans, and use transaction analytics so banks can prequalify depositors, assess borrower health and target customers for marketing and sales.

FIS and Lendio have created application programming interfaces that connect Lendio's small business loan decision and underwriting software with FIS's cores.  

In the small- and medium-sized business space, "We see there is both a need from borrowers and a desire from banks to do more high-quality lending," said Harry Stahl, a senior director from FIS's capital markets team, in an interview. "We find a lot of the need is at the smaller end."

The announcement cited data from the U.S. Chamber of Commerce and Small Business Administration that 99.9% of businesses in the U.S. are considered small, meaning they have fewer than 500 employees, and that they account for 43.5% of gross domestic product in the U.S. 

On its end, Lendio says the average loan size across the businesses it serves is $40,000 to $50,000. The company typically goes directly to market with financial institutions. Lendio tends to target financial institutions with $5 billion of assets or under, but the company says it is seeing interest from large nationals as well, and that while it assumed larger credit unions and midsize community banks would be its sweet spot, the team has found more appetite than it anticipated at the higher end of the scale. Lendio's technology is meant to remove many of the manual processes that make underwriting costly while using the bank's model to underwrite.

Lendio's focus on small business lending is what drew FIS to the company for this product. 

"This is a fit-for-purpose solution to a problem we were hearing about from the market," said Stahl.

During its Investor Day in May, FIS CEO Stephanie Ferris emphasized the speed at which FIS planned to implement new products for its banking clients.

"We lost our focus on serving our banking clients," she said at the time.