Credit risk is a critical factor that influences the pricing and yields of financial assets in every lending transaction. For any financial institution, whether they are mortgage lenders, loan providers, or investment firms, it is vital to understand and manage this risk.

Automating this process and effectively evaluating companies with limited data pose some of the most pressing challenges for the business sector.

For Entando and Modefinance, a TeamSystem company, the FinTech partnership meets these challenges head on. Leveraging advanced modeling techniques, robust risk management platforms, and integrated sets of qualitative and quantitative data, the partners plan to establish an end-to-end automated process that enables more informed and secure decision making protocols, providing accurate and precise answers to clients.

When Modefinance joined Entando's Independent Software Vendor (ISV) program, the expertise of the two companies combined to deliver composable applications that propelled and automated financial risk controls for companies. Modefinance, a TechFin and Credit Rating Agency, offers valuable support for processes related to the regulated world of financial risk management, from customer onboarding, to loan disbursement, financial ratings, and ESG assessments.

The collaboration leverages Tigran, Modefinance's API-first technology, a modular and customizable platform designed to automate and accelerate credit risk management processes, and enhance its efficiency every step of the way. Certified as a Credit Rating Agency (CRA) and an External Credit Assessment Institution (ECAI) since 2015, Modefinance's patented cloud platform implements credit policies and proprietary models, offering real-time integration of proprietary and third-party information on counterparties, including alternative data and sentiment analysis.

Entando and Modefinance created the latest success story when they introduced a "composable business" application for Garanzia Etica, a regulated financial intermediary overseen by the Bank of Italy. Composable because the innovative solution is adaptable at various business levels, able to leverage technology to deliver comprehensive and integrable services that meet the diverse and ever-changing needs of stakeholders.

Integrating Entando 7 with Modefinances' Tigran platform, the solution transformed the process of providing credit to small and mid-sized enterprises, or SMEs. It streamlined customer onboarding, ensuring compliance with regulatory frameworks and conducting proactive risk analysis of applicants. Initially targeting unsecured financing products, the scope of the solution was expanded to include the granting of guarantees.

Faster Approval Process

• An automatic procedure was created for managing regular approvals and rejections as part of daily business practices.
• The processing time spent on risk analysis has been reduced, resulting in more efficient and effective use of staff time.
• The number of applications that can be evaluated is expected to rise significantly, up to approximately 67 percent.
• Data is collected in real time, standardized and categorized instantly, speeding up the application process further.
• The application approval process is 100 percent digital, capable of eliminating paper-based routines that are often prone to errors.

Consistent Data Analysis

• Integration of alternative and third-party data into the automated process means credit decisions are more objective, traceable, and transparent.
• The consistent, standardized, and repeatable process further removes subjectivity that can lead to a 33 percent reduction in disputes.

Accurate and Lower Risk

• The new approval process will reduce the costs associated with acquiring and managing cases.
• A monitoring system for companies and enterprises are built into the process.
• Nowcasting procedures have been developed, providing real-time data and assessments.

Early detection of warning signs have been implemented for high-risk businesses to mitigate exposure.

The assessment of portfolio risk has improved with continuous access to real-time data.

Credit risk evaluations have achieved an elevated level of reliability and trustworthiness because the methodologies have been certified by the rating agency Modefinance.

THE RESULTS

The integration project between Entando and Tigran focused on reducing the time required to complete a single risk analysis from about 40 minutes down to 2 minutes-- this means the process is 20 times faster than before.

To put it into perspective, 100 monthly evaluations required almost two full weeks to complete previously, about 67 hours. With the new application, it will take less than 5 hours to finish the same 100 evaluations.

"In the era of open finance and Embedded Finance systems, building a collaborative ecosystem to support credit provision with value for all stakeholders in the supply chain is more than a mission. The concreteness of projects of this nature, once again demonstrates our commitment, both as a TechFin and as a Credit Rating Agency, to collaboration, with the ultimate goal of supporting businesses and financial institutions in their digitalization of financial risk, using the most advanced evaluation methodologies, including for the ESG world. The agreement with Entando aligns perfectly with this direction, allowing us to offer AI technologies that are quickly accessible and easily integrable to an even broader market, in the form of both APIs and risk management platforms." Mattia Ciprian, CEO of Modefinance.

"Given the heterogeneity of the services and supported partners/clients, there was a need for a system that could ensure rapid adaptability and optimize operational processes to reduce time to market in support of our specific product/service go-to-market strategies. The ongoing evolutions in the business landscape also necessitated an innovative approach that could be supported by digital means. Therefore, we had to innovate within a regulated environment, using tools that would enable us to build a "digital" contract with our partners and companies.", Marcello Tiddia, General Director of Garanzia Etica.

“This initiative is in line with the expertise model with which we want to build the Entando ecosystem, an open-source platform capable of enhancing existing digital platforms by enabling the creation of composable solutions. These solutions not only simplify access to complex functional areas, but also allows companies to easily compose and adapt these applications to their processes without necessarily losing their competitive value.",  Emanuele Cerroni, Entando Partner and Alliance Manager.

Modefinance, a company with the TeamSystem group and a rating agency (CRA and ECAI), specializes in developing Artificial Intelligence solutions for credit risk assessments. Founded in 2009 by Mattia Ciprian and Valentino Pediroda, it is headquartered in Trieste, within the technological-scientific hub of Area Science Park in Padriciano.By employing modular, customizable, and continuously evolving technological processes and solutions, Modefinance can offer their clients, including banks, financial institutions, and businesses, tools to digitalize and automate credit risk assessment processes. This means traditional processes can be optimized readily without sectoral or size limitations.

Garanzia Etica, a financial intermediary overseen by the Bank of Italy has been promoting business development and supporting companies in accessing credit and fostering growth for 50 years. Operating nationwide, they have undergone a remarkable evolution to strike the right balance between their traditional role as a "guarantor" and the new role as a dynamic advisory firm. Garanzia Etica specializes in financial consultancy, providing expertise in regional and national economic development initiatives and direct financing solutions to meet the unique investment and working capital needs of clients. They provide a wide range of services to enterprises, including banks, leasing companies, and financial intermediaries, with turnkey solutions and management of third party activities, all of which can be customized.

Entando enables and supports organizations in developing cloud-native and composable applications on Kubernetes, allowing them to organize their projects based on specific business functionalities called packaged business capabilities. These capabilities can be developed, implemented, and updated separately and reused across different solutions. The resulting application architecture accelerates release times, reduces development costs, simplifies maintenance, and optimizes the applications evolution.