EXCLUSIVE: “Agents of Change” – Martin McCann, Trade Ledger in ‘The Fintech Magazine’

Demand for trade and working capital credit by SMEs continues to significantly outstrip supply from banks. Trade Ledger’s Martin McCann believes open finance can fix that gap, but agentic AI will fix it fasterIn an interview with The Fintech Magazine in 2022, British entrepreneur Martin McCann urged banks to ‘think about what the next three years will look like’ as a juggernaut of open finance technology promised to demolish their model of SME lending.It’s a model that was widely regarded at the time (including by the International Chamber of Commerce, the Organisation for Economic Co-operation and Development, and the Export-Import Bank of the United States) as being deeply dysfunctional, and still is.

But those financial institutions that didn’t take McCann’s advice might now be regretting it.Speaking today, the Co-founder and CEO of commercial lending-as-a-service platform Trade Ledger, says: “We’re starting to see aspects of profitable credit being stripped away from banks and go to non-bank lenders. In the US, the fastest-growing source of credit for private companies is private funds.



“These funds can choose which sectors of the market that they want to steal from banks – and it’s usually the more profitable ones.”Private lenders might play by their own rules, but in 2023, they funded 86 per cent of leveraged loans in the US, up from 61 per cent in 2019, according to PitchBook LCD. And while they were eating the commercial banks’ lunch at one end of the table, neobanks worldwide were moving from a starter course of solopreneurs to addressing the needs of SMEs at the other.

The shift of credit away from bank lenders is part of a wider dissatisfaction with SME legacy banking services. A 2024 survey from the IBM Institute for Business Value among 1,000 SME owners and managers across different world economies, revealed a deep schism in what bosses looked for in a bank and what bankers thought they wanted across a range of areas. In one, bosses’ top three expectations were for tailored offers, networking and an understanding of their sectors’ needs.

Banks (mis)understood their top three demands as being easy-to-use apps, dedicated managers and local branches, the last two of which, of course, banks have mostly retreated from. McCann hasn’t given up on the incumbent lenders – far from it. But he knows the nature of the beast.

“Banks are run as capital allocation engines that manage risk and return. That’s fundamentally where regulation has driven them,” he says. “So they struggle to be able to understand how to see value the way a business customer wants to see it.

Which is why we need to look at reinvention of the entire supply chain of how business and commercial banking works. The banks can’t do that on their own.”It turns out that three years ago, McCann was planning to double-down on giving banks the tools to prove they can meet some of those customer expectations – and do so within the more cautious risk parameters and regulatory straightjackets than those that confine their rivals.

Trade Ledger was working on a much bigger disruptor than open finance: agentic AI.“I firmly believe that the emergence of agentic AI systems is the single biggest transformation that’s going to happen in our lifetimes – and banks won’t be exempt,” says McCann.In fact, he’s updating his bank survival forecast: “Agentic AI systems are going to have more impact and happen much faster than the Internet.

Banks need to figure out what is the change in their business model that needs to be implemented in three to five years’ time or risk becoming completely irrelevant, displaced.”With Trade Ledger’s first agentic AI, or ‘virtual banker’, due for release later this year via the Microsoft Azure marketplace, McCann is confident that change is going to come.Facing a bigger perilThe trend for SMEs’ working capital requirements to be satisfied by non-banks is of wider concern than the banks whose income might be threatened by it.

Even the European Central Bank has indicated that there might be a systemic risk to financial stability associated with relatively lightly regulated private credit structures taking on a bigger role.“At the dystopian end of the scale, there is no regulation, control or transparency on where capital flows if it moves outside of the banking system,” says McCann. “So, if you look at things like cryptocurrencies, some will be captured within regulatory frameworks and others, potentially, won’t.

If we don’t know where the capital is flowing, then we don’t know what people are doing with it. That’s one of the reasons banking regulation was created in the first place, to make sure there is governance and transparency; that capital is being used appropriately and correctly.“I firmly believe that the emergence of agentic AI systems is the single biggest transformation that’s going to happen in our lifetimes – and banks won’t be exempt”“All that is threatened unless we find a way to flow more capital through business and commercial banks via the regulatory framework, using data and technology.

If business and commercial banks don’t figure out how to address the massive undersupply of trade and working capital credit, somebody else will, and a shadow banking sector will emerge, which, arguably, is worse because it’s not regulated at all,” McCann continues. “My sense, though, is there’s a wind of change happening in trade and working capital.The conversations we’ve been having over the last six months are different.

There’s real intent and real fear. Societal pressures are starting to mount because there’s not enough capital going to drive innovation and to solve problems like climate change, inequality, geopolitical instability. All of these things require resources.

”When asked about their banks’ performance by IBM recently, bankers were candid in their response. Only six per cent gave themselves an A grade; 47 per cent awarded themselves a B or C. Banks must try harder, says McCann – and both he and IBM agree that they can reach ‘outstanding’ through a combination of open finance and by moving from what IBM describes as a +AI approach to AI+, ‘which allows banks to redesign all processes from first principles.

.. helping ensure that human intervention into operations is only required for exceptions and more added-value activities’.

“As SME banking continues to evolve, a pivotal aspect will be the seamless integration of banking services into the diverse industries= that shape the business journeys of each SME,” adds IBM. It has recognised that, in an open finance ecosystem, SME data, be it from merchant terminals or Cloud-based office systems, is more bountiful and more revealing than banks will glean from any corporate. It’s also very connectable.

“Banks are data rich and knowledge poor,” says McCann. “And that’s the key tenet on which value creation is going to change. [But] this is one of the biggest problems that bank executives have, because the regulation around what data they can capture, how they store it, and what they can do with it is minute.

It puts them at a disadvantage against other industries.“That’s where we’re stronger together,” McCann continues. “We work with banks, other technology companies, and data providers, and that ecosystem needs to come up with a solution as to how we can systemically start to change the way that data is managed to provide more value, including to businesses themselves.

An example would be more transparency as to what credit products a business will be eligible for and what products it should be looking at before it even speaks to its bank. For technology partners, it means standardised solutions. And for the banks, it means having prepackaged data sets where the rights and the usage of the data is formulaic and processed ahead of it coming into the bank where it hits that heavy regulatory framework.

”This is the ecosystem in which Trade Ledger’s new virtual bankers get to work.“One of the agentic AI deployment methods that we’ve always been clear on is Microsoft Teams, because most of the banks we deal with use it,” says McCann. “So, rather than having to learn a new interface, banking staff can implement a specific agent who’s an expert in a topic, or look at an agentic workflow, such as ‘I need a treasury solution for this FTSE 1000 company and it needs to have a number of components that meet these requirements’.

“The agentic workflow AI can break that down and say, ‘well, I need a working capital analysis, I need a product matching analysis, I need to understand the credit headroom within the bank, I need to know the credit history. I’ve instructed 12 different agents to do all of these things and I’ll come back and give you the answer to this in a document’.And it will do all that in 90 seconds.

“This is what the virtual bankers are going to look like by the end of 2025 on Trade Ledger.” This article was published in The Fintech Magazine Issue 34, Page 29-30The post EXCLUSIVE: “Agents of Change” – Martin McCann, Trade Ledger in ‘The Fintech Magazine’ appeared first on FF News | Fintech Finance..