Loan originators find it complex and burdensome to receive Small and Medium Enterprises (SME) accounting data. SMEs find it difficult to access finance partially due to information trust and transparency. Small and young businesses find it strenuous to document their credibility and ability to service debts to the lenders. According to research “Lenders have difficulty defending the cost of building the information needed to justify positive credit decisions”.
Validis is a London-based SaaS Fintech which is revolutionizing financial and accounting data transmission through its cloud-based software offerings. It helps retrieve and detect anomalies in accounting data and also helps in the analysis by creating standardized templates with data obtained directly from API integrations with multiple accounting software solutions.
The company’s target segment was originally accounting companies, but being able to bring all SME data in one standardized format has created a massive opportunity to aim for the p2p lending industry.
History of Validis
Future Route Ltd has been in the business of mechanized software solutions since 2002. Its assets were purchased by Pollen Street Capital and Dan Robert (The Chairman of Experian PLC) and thus Validis came into existence last year. The name “Validis” has been formed from Vali (one who validates) + dis (one who discovers). Thus “Validis” stands for its name – to discover the shortcomings in your financial data and validate the said financial data. Validis has expanded to America by opening an office in Texas and has a total team of more than 35 people.
Importance of Accounting Data
Lending can materialize only when the financial statements of companies are transparent, accurate, reliable, and in standardized form so as to serve as a powerful tool for the Decision Maskers. But it is easier said than done. Automated financial data gathering and analysis for the purpose of risk monitoring is essential for lenders. Accounting firms can save thousands of man hours if they can have a standardized set of data across clients. But due to multiple accounting software solutions, the integration had yet not been successful.
The better quality accounting data so gathered enables originators to offer larger loans at lower rates.
Validis provides a simple solution to all this by acting like a hub-station. It’s a simple & light web java application which arms & empowers finance professionals and chartered accountants associated with the SME, commercial establishments, credit insurance companies, credit rating agencies, with the Transmission Financial Data Software presenting them with clear and accurate financial statements– as per the international parameters of accounting standardizations, as well as the accounting standards approved by the Revenue & Taxation Departments. The company has integrated its software with 16-17 accounting packages which enable it to cover 70% of SMEs.
It enhances the client experience by being painless. The client/borrower does not need to convert any files to a prescribed format, but just have to give permission to access the files and the files are sent in minutes irrespective of accounting platform or client.
History of the Software
This unique software service was initially introduced to a select group of accounting professionals in the United Kingdom in March 2007. Validis current list of clients includes prominent names like Bibby Financial Services, Verus 360, and many more. Deloitte, a leading company in the business of audit, is one of their flagship clients.
Validis automatically gathers the data from its clients especially the Small & Medium Enterprises (SMEs) and the financial institutions lending to the SMEs. The company analyzes the said data as per the Benford’s Law of Accounting so as to detect any manipulations or artificialness or major deviations. This serves as an automatic anti-fraud checker. Reports can be had in the standardized form along with their high-value online analysis, reviews, and interpretations. This software works on the principle of 5 “S”: Security, Simplicity, Sophistication, Speed, and Standardization. Its “Expert System” detects errors and omissions in your financial data and suggests rectifications to the same. Validis does the identification of “4 ‘I’ in your financial data”: Invalid, Inaccurate, Incomplete, and Inconsistent.
Minimization of Risk Factor
Validis have collaboration with “Risk Factor” one of the largest Risk Analyzing Platforms – they are fed with the information they require and the lending decision is automatically suggested by them without even an iota of human prejudice. Risk factor involved in funding gets reduced considerably and thus, the borrowers can have instant funding and lenders also minimize their risk. Risk monitoring can also be done effectively after the funding arrangements through monitoring of fresh financial statements from time to time.
Security of the Data
Validis function in tune with Amazon Web Services (AWS), employing 256-bit military grade encryption to ensure the highest level of security of a client’s financial data. Moreover, the data received by Validis is stored outside the European Economic Area (EEA). Validis can also share with client’s consent the summarized information of their accounting data with its clients for minimizing the risk factors and anti-fraud purposes. The data will remain strictly confidential with Validis unless there is some statutory requirement to disclose the same.
Costs may vary from client to client depending upon the magnitude of volume of services offered. The company typically charges per upload but is moving towards a per client basis. A large traditional bank can be expected to pay 100,000 pounds a year and a small startup can pay even four figures depending upon the volume.
The Company’s London office plans to double the number of its clients within this year. Austin office hopes to achieve more than 100% growth in the US as well. The company is also looking to open an office in Canada. Validis is on a path to creating a unique niche for itself and considering the massive growth of SaaS platforms earlier, it might be a billion dollar blockbuster in the making for its investors.
Author: Heena Dhir and George Popescu