The financial world is being transformed very fast. Innovators are disrupting the status quo and challenging how incumbents are doing business. Anybody would have obviously realised that. Even if you do not spend as much time keeping an eye on what is going on. As some of us do, maybe a bit too much. The pace of disruption is relentless. And as incredible as it may sound, it is not going to slow down any time soon… There are still a number of areas of financial services that need to change. And it will evolve for the better. We asked a few questions to Nick Chandi, Co-Founder and CEO of ForwardAI, on how APIs can transform lending.
Tell us more about ForwardAI. What is your elevator pitch?
We founded ForwardAI to make it easier for banks, credit unions, alternative lenders, and fintechs to get versatile business data, insights, and analysis. With only three steps, our clients can get seamless business information computed into key financial data points from their customers. Our API delivers data securely straight from the source. It also analyses it automatically through our intelligent PreciseMatch technology that validates accounting transactions.
What is your background, and what is the story behind the company?
My first experience with cash flow and its effect on businesses was over 30 years ago. I was setting up and running a small textile factory. But we could not easily collect from our debtors, and the company quickly folded. I was not the first victim of poor cash flow and will certainly not be the last, but it taught me a lot about business.
That’s how I learned my lesson. Years later, I went on to build one of the largest IT consulting businesses in Canada with ForwardAI Co-Founder and CIO Jag Barpagga. We focused on the needs of accounting firms, accountants, and bookkeepers and had a successful exit for that business in 2019.
During that period, we also launched an online accounting platform, SlickPie that had over 40,000 signups. We started SlickPie as a small team, where I would occasionally partake in customer service calls. One call that I attended was from a frustrated customer rushing to send an invoice to her customer. I helped her with the issues revolving around software support, but I also gained some insights during the conversation.
She had an excellent staffing business with well-known clients and received recurring income. However, there was no money for payroll because of large overdue account receivables. A few of her clients were paying 45-60 days late, and it was creating massive cash flow problems for her. She further shared that although she applied for a line of credit with her bank, they would take weeks just to review her application. It was clear she desperately needed access to funds.
Then she said something that has stayed in my mind ever since. She elaborated on how faithful and good her customers are, how they always paid on time, and how they never delayed the payment. This business owner was undoubtedly in a challenging situation and was only looking for an advance of a small amount to meet her payroll obligations. She was expecting to receive a big upcoming payment the following week.
Her situation created a light-bulb moment for me. I quickly realized that there is an opportunity for financial institutions and small business owners to succeed in cohesion. Many small businesses fail to grow due to cash flow problems, regardless if they were profitable in that financial year. Banks and lenders often do not have access to data that sits on siloed systems. As a result, small businesses are less likely to receive funding when they need it. This is the problem ForwardAI is solving. By making it easier for lenders to access the much-needed data, our company is on a journey that we believe will revolutionize how small business lending is done.
Small businesses have been battered in North America and elsewhere… What’s your take on the past year and what comes next for SMBs?
Last year, I personally assisted hundreds of small business owners with compiling financial information for loans. It was heart-wrenching, seeing so many desperate for working capital. At that point, I noticed how difficult and time-consuming it was for lenders to gather information during the client intake process. I’d see clients return to pull new financial statements… All because the lender had been too busy to review their application. And by the time they got to it, the information was out of date. It was, frankly, depressing. As I said before, I have been working with small businesses in the accounting field for over 20 years, and last year was the worst of them all.
The most amazing thing, though, was the innovation I also saw. Small businesses that previously had trouble with technology suddenly jumping to cloud platforms to survive. Industries worldwide had to adapt suddenly. Now that the systems are in place, I hope that businesses retain their flexibility even as the world reopens and continue looking to new technology to thrive.
What are your views on the main challenges that lenders and SMBs are facing when it comes to lending?
I think the biggest challenge most companies face is upgrading legacy systems to absorb new technology. The older a business, the more resistant they are to change. The other issue is siloed information. Previously, companies didn’t like sharing data or talking to each other. But as fraud becomes rampant, it’s becoming more and more important for financial companies to band together and improve the status quo. Open banking, and its growing popularity, is greatly helping with this.
Another thing that might help is standardization. A small part of my company’s core product is a data aggregator and normalizer. This kind of tech wouldn’t even be necessary if every software had the same way of inputting in a client or a transaction. All the accounting system, CRM, bank system, and other software. Because nothing is the same, it makes it difficult for SMBs to share data and makes it difficult for lenders to parse it manually for decisioning.
How are API-driven solutions helping?
The recent willing and practically eager adoption of third-party API solutions by large corporations is happening more rapidly than I would have ever guessed a few years ago. I think lenders of all sizes are beginning to realize they can essentially outsource innovation to fintech companies. They can pick and choose from the products they want for their clients. Open banking and API acceptance has been a considerable part of this process. And it’s one I’m particularly proud to be a part of.
Any plans for the future or product roadmap you want people to know about?
We’re getting ready to launch the first iteration of our PreciseMatch intelligent transaction validation technology later this summer. Our new tech identifies various fraud techniques using machine learning and our proprietary technology, including altered dates, amounts, or labels. By using AI to cross-validate accounting data with banking and credit card data, or cross-reference ingested data from different services, looking for traces of suspicious or fraudulent transactions becomes dead easy instead of a manually-driven pain for staff.
Small businesses need a flexible and straightforward solution to finance their initiatives. Using the PreciseMatch technology, it’s possible to build a new risk scoring model to give instant decisions based on companies’ financial data and statements. With our breakthrough technology, lenders can send offers or issue loans to micro-businesses instantly from $15,000 to $80,000, which could be a game-changer for the industry.
All a lender needs is read-only access to the accounting data and the bank accounts to analyse the eligibility as per their credit box. We focus on specifically tailored indicators and raise a flag when we detect distress signals or fraud. The robustness of our analysis is sufficient to propose an instant offer automatically. This means small-ticket loans will be a new opportunity for lenders to access more small businesses, diversify their portfolios, and participate in financial inclusivity.
In the end, we believe that making lending decisions shouldn’t require manual data import or input. We will continue to improve and make it easier for financial institutions to build tools and services that support their small business clients. Since our first product release in April, we have already more than tripled our supported accounting and ERP software integrations and are now beginning to add support for commerce and payments platforms.