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Data – The Key to Unlocking Financial Inclusion

16 April 2021

Dr. Mike Goodwin
VP Product Data Strategy and Sage Technical Fellow

Data is a simultaneously the most exploited and the most under-used commodity of the digital age. We hear a lot about how our own data - our digital footprint – is used to serve us a curated view of the world based on personal preferences, likes and shares. Less headline grabbing, but no less interesting is how data can be used to create a more equitable world.

SaaS companies, such as Sage, process large volumes of data for our small and medium sized business customers (SMEs). This data is inherently highly trusted because customers rely on it to pay their employees, manage their business, and make statutory reports to tax authorities. As always, highly relevant, highly trusted data is also highly valuable as an asset in its own right – not just as a basis for business management and control. However, that inherent data value is often not fully realised, either for businesses or, in the case of payroll and HR software, for their employees. In the particular case of access to finance, this can result in SMEs and their employees finding it much harder to get the funding they need.

From an employee perspective, payroll and HR systems often result in a degree of inverse privacy – where the employer has more access to and control over the employee’s data than they do. SaaS payroll and HR providers are in a good position to address that imbalance. One example of this is to make it easier for employees to get access to loans. By building capabilities to allow employees to share their wage data with potential lenders, SaaS companies can streamline the loan application experience for employees compared to existing processes involving paper payslips, while ensuring employees keep full control over who they share their data with. At the same time lenders can have increased confidence in the integrity of the wage data since they are accessing it directly from a trusted source.  In general, SaaS providers can help SMEs provide their employees with access to services like these that would be too complex or expensive for them to access on their own and which help create a more level playing field for cost effectively accessing finance. Employers are winners from this too, because as employees’ expectations around access to their data increase, they will value employers who can meet these expectations.

For companies, the Bank of England has identified an estimated £22 billion funding gap for SMEs. They report that business owners are commonly either foregoing funding, or using personal funds to drive growth, with all the increased risk and stress that creates. The data held in accounting systems provides a uniquely rich insight into the financial health and credit worthiness of businesses including historical performance, current position and likely future performance that is currently being overlooked. Accounting products are the only software category that provide this 360-degree view of financial performance. If this can be unlocked, it can be used by business owners to effectively shop around across traditional lenders and newer alternative lenders, giving them access to more diverse and competitive finance options. In a similar way to employee credit, lenders benefit from having access to rich, accurate data that they can use to make more informed and intelligent decisions on credit. This will help to bridge that £22 billion funding gap by giving SMEs the confidence to reassess their financial options.

SaaS accounting, payroll and HR products have already moved beyond being systems of record that give business owners control and visibility over their business. These examples show how they are also moving beyond analytics and business intelligence that help drive business performance. Increasingly, SaaS providers like Sage are finding ways to enable customers to take advantage of the power of their business data to help their businesses thrive.

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