Nucleus’ CEO Chirag Shah: “We are doing ourselves a big injustice by calling ourselves alternative lenders”

The boss of the fintech lending platform has been implementing automation and open banking during the pandemic to help improve loan processes.

So far 2020 has been a rollercoaster ride for fintech lenders owing to the uncertain and looming economic fallout from the global pandemic.  

This new era will soon prompt a ‘separation’ among lending businesses, according to Nucleus Commerical Finance’s CEO Chirag Shah, who says the firm has been able to embrace a number of new innovations during the period but that many other lending firms may struggle. 

Shah, who founded the company in 2011 as an alternative to bank finance, says the Covid-19 response from fintech has proved that alternative lenders (also called non-bank lenders) have moved into the financial mainstream.  

The likes of Nucleus, as well as Funding Circle, Market Finance and many others, have been large conduits for government-backed loans to SMEs including the Coronavirus Business Interruption Lending Scheme (CBILS). 

“COVID-19 is going to prompt a separation between lenders. Only the ones with strong systems, strong tech, controls, strong market outreach, are going to be the ones who step out of the other side and are still the kind of lenders people want to work with,” he said. 

“One of my bugbears has been being called an alternative lender. I think we are doing ourselves a big injustice by calling ourselves alternative and I think CBILS has proven that we are not alternative, we are mainstream. We are now quicker [than banks]. We should be the first point of call.” 

While Shah is optimistic that the pandemic will mean lending volumes actually grow over the longer term, he says the economy’s mood music is set for a new era in the next six months or so. 

“I think the government schemes have been really helpful, but we've already started to see more job losses coming through as the furlough scheme starts unwinding.” 

“A lot of businesses are going to be quite leveraged over this period, but the repayment terms are over six years,” he said.  

“The government is being flexible. That does stretch out the repayment over a long period of time, but still, many of these businesses are quite levered. businesses are going to need additional funds,” he said. 

Open Banking 

Nucleus has recently launched several new technology updates to its lending procedure including using open banking functionality to speed up high demand for its CBILS lending. 

“When we launched CIBLS, we were expecting significant volumes, but the volumes we actually received in the first two days, we're about 10 times our expectations," Shah said. 

“One of the core things we did after that was to make sure that open banking was at the centre of our offering. So, after the first few days, we have been open banking only on CBILS. We are averaging over 150 applications a day. all of them are being processed by open banking,” he added. 

People were not necessarily accepting open banking pre-COVID-19, Shah says, but since the pandemic that has changed. 

He says that is true for the ‘introducer community’: brokers and agents matching borrowers to capital.  

“When they started using it in the first two days and started getting rapid responses...they embraced it because we've already proven to them that all of the components of the tech are working seamlessly."  

"Open banking will only make it stronger, better and quicker for them to get the decisions. And I think that is what really helped. That is what really got them over the line and helped the wider business community accept it” 

Nucleus has also been quickly moving to automated underwriting. 

“Our objective has always been to offer one-click lending,“ Shah said. 

“[Borrowers] should be able to enter the name of their business and via API's built with every third party to gather all the information, we are able to make a decision on the business and offer them the rate then and there. If they accept, they should click and that should be the only click.” 

Nucleus' foray into the world of automated underwriting started in September 2019 and has been running in parallel with its underwriters. But with CBILS, Shah says the firm became “pretty comfortable” and now almost 95 per cent of its deals are being auto underwritten. 

“Our comfort level is increasing with every passing day. We expect the loan size to be going higher and higher as we get more comfortable.”