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Thursday, July 25, 2024
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How alternative finance is closing the SME funding gap in the EU by helping businesses grow 

Interview with Mantvydas Štareika, CEO of CapitalBox 

Mantvydas Štareika is the CEO of CapitalBox, a leading fintech lender for small- and medium-sized enterprises (SMEs) throughout Europe. Headquartered in Finland, the pure fintech company has offices in Sweden, Denmark, the Netherlands, and Lithuania. CapitalBox’s financing solutions are flexible and accessible, and provided by mixing lending tools to make financing both secure and responsible. In this interview, Mantvydas chats about his journey to CapitalBox CEO, how SME lending is being upended by fintech, and where the industry is heading. 

What is CapitalBox, and where do you fit into it? 

Essentially we provide SMEs with loans that meet them exactly where they are in their financing journey, and with the amount of capital they require to not just stay afloat but grow. We’re able to dispense loans within a matter of hours, accept more diverse criteria as collateral, and provide more personalised attention to our clients. SMEs are often overlooked by traditional banking institutions because of the element of risk involved. These banks are often weary of giving SMEs the capital they need, and that’s led to an enormous SME funding gap in Europe. That gap amounts to roughly 400 billion euro in the E.U. alone. To say there’s a market for alt lending to serve this is putting it lightly, and that’s exactly what CapitalBox is doing.  

What was your professional journey prior to CapitalBox? 

It was an interesting one, to be sure. My educational background happens to be in law. I entered fintech in 2007 when I joined Coface, eventually working my way up to CEO. Coface provides credit insurance to businesses, and it was a crash course in credit lending and crisis management via the recession and banking crisis of the late 2000s and early 2010s. As CEO I focused on consolidating and relaunching entire divisions to optimise the company from top to bottom. I integrated AI and data information systems. I later joined SME Bank as a board member and as CEO, and that was my springboard into CapitalBox in January 2023. 

So you’re a little past the one year mark. What have you accomplished in that time? How has the company changed during your tenure thus far? 

 Hitting the one year mark is a crucial milestone for any executive. You’ve had time to try out certain things and let ideas percolate, but it’s still, relatively speaking, early days. I’m very proud of the expansion efforts I’ve spearheaded in the last year, including launching a new branch in Denmark with a team of Danish market experts. We’ve done some recruiting and expanded our C-suite. On top of that, we’ve also introduced collateral loans ranging from €500,000 to €3,000,000. Finding a way to offer collateral lending was a major priority from the moment I arrived, and to see it implemented and chugging along at the one-year mark is a big accomplishment for me personally and for the company at large. 

Tell us more about this emphasis on collateral lending, and where that fits into the underfunding gap you described. 

Everything we do, as far as I see it, is about addressing this underfunding gap, including collateral lending. Closing that gap is the overarching goal. SMEs make up 99 percent of European companies, so no matter how you slice it, SMEs are indispensable to the European economy. The natural next question is, of course, why is the backbone of the European economy underfunded 400 billion euros? Our initial approach with CapitalBox focused on digital sales and small loans for working capital. We’ve since realized the need to offer larger investment loans securely, which led us straight to the introduction of collateral lending. Collateral lending creates the security necessary for us to scale and offer more to businesses. As I mentioned before, there’s a bit of risk aversion when it comes to traditional banks lending to SMEs. Even when these institutions do dispense loans, it is often at lower amounts. SMEs tend not to have an overwhelming amount of collateral assets compared to, say, a major corporation. The loan amounts that collateral lending makes possible are the loan amounts necessary for growth. By expanding the criteria around collateral lending and actually dispensing these loans, we’re addressing the lending gap in a real way. 

CapitalBox is characterised as a pure fintech lender. Where does this approach fit into your specific application and lending process? 

Being a pure fintech company, we’re faster, more efficient, and more accurate than we could be if we weren’t. The funny thing is that initially we positioned ourselves as a lender rather than as a tech company. That has started to shift, particularly since we acquired Omniveta in March. This acquisition reflects our ongoing expansion into invoice financing in a tech-savvy, SME-friendly way. More broadly, we have an API-based model, and we’ve embraced AI and machine learning. Loan applications are reviewed by a sophisticated AI-powered system first, and in most cases can be approved and thus dispensed in a matter of minutes. SMEs have shorter financial runways and need cash fast, so speed is crucial. With all our loans, we use machine learning to evaluate account metrics beyond a simple credit score and include criteria such as social reach. We also offer revenue-based financing for ecommerce businesses that requires sophisticated technology. Essentially a business collects the loan every day, and the exposure jumps up and down based on its turnover. By doing so we address the incredibly specific and mutable needs of a given company, and that happens through being a pure fintech company ourselves.  

How do you balance the AI integration with customers feeling supported by real people on your side? 

That’s a question we’re always asking ourselves. We don’t want to be a faceless machine to our SMEs. Everyone wants and likes our fully digital onboarding and experience, but that doesn’t mean we’re off the hook with human interactions. WIth more complicated loans, particularly collateral loans, we’re very deliberate with interacting directly with applicants. And at every step of the process we make it very easy for applicants to say, ‘Let me talk with a real person,’ no matter how simple or complex the loan. 

Where do you see the digital finance industry heading in the near future? 

Personalisation is already essential and only getting more important. We’re moving from an era of personalisation being focused on needs to personalisation being focused on preferences, thus creating a more satisfying customer experience. Fraud detection is getting better thanks to AI, which I find promising. Open banking, which is the process that allows customers to share their financial data with third-party providers, is increasingly in popularity, which is driving development of new services in the sector. A high tide raises all boats. It bodes well for the entire sector. 

Chris Crespo
Chris Crespohttp://nordicfintechmagazine.com
Chris is a Founding Partner and Chief Editor at Nordic Fintech Magazine, where he simplifies complex financial ideas into easy-to-understand content. With nearly 20 years of experience in management consulting and financial services, including leadership roles with some of Europe's largest banks, he offers profound industry insights. Previously serving as the Chief Futurist at the largest bank in the Nordics, Chris has sharp views on the Future of Financial Services, Money, Disruption, and Ethical AI in Finance. He is also a guest lecturer at Stanford University, Singularity University and Copenhagen Business School, where he frequently discusses the future of Money, Finance, and Entrepreneurship in Financial Services. As a Behavioral Economist, Chris is passionate about studying how human behavior and decision-making relate to risk. He also delves into the connections between psychology, leadership, and technology within financial services.
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