The finance industry has undergone a significant technological transformation in recent years. However, the complex and opaque market of syndicated loans remained largely unaffected until recently. This is due to the bespoke nature of the contracts, which often span hundreds of pages, making automation challenging. However, the global loan market has doubled in value to over $20 trillion in the last three years, coupled with increasingly stringent compliance regulations. As a result, there has been mounting pressure to digitize the sector, leading to the emergence of new fintech platforms.

1. What are the new platforms for syndicated loans?

In the past, banks used manual processes to share information and form groups to provide loans for investment, expansion, or acquisition. However, the rapid growth of the market has made it impractical to call potential lenders in a single transaction, leading to the emergence of new electronic platforms. These platforms not only allow banks to post information but also automate loan documents and conduct the entire syndication process. They can also be used for portfolio management and loan settlement and provide communication between arrangers, sellers, agents, potential lenders, and buyers. Some platforms even offer algorithms based on previous deals to suggest lenders that may be interested in a particular deal.

2. Why are these platforms new?

Automation allows banks to use their time more efficiently and generate more deals. These platforms are also more secure and rigorously audited, which helps banks meet their compliance needs. They also reduce the time it takes to sell a secondary loan, freeing up the bank’s available capital.

3. What other services do they offer?

Apart from loan automation and document management, these platforms offer a centralized data sharing system, including market analytics such as lender share and price analysis. This helps banks with marketing deals and outstanding bank positions. They also provide a data room consisting of documents and contracts, which can be accessed by selected lenders who sign a confidentiality agreement.

4. Where is the market heading?

The lack of standardization and fragmented markets in Asia, Europe, the Middle East, and Africa have slowed the adoption of technology in loans compared to other markets. However, more platforms targeting niche segments of the loan market are likely to emerge, with some merging into larger entities to scale their business. For example, VC Trade, a German-based vendor with roots in the local promissory note market, recently announced the acquisition of ING Bank’s Loan Optics service.