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Achieving Productivity increases in the UK Economy and in the Lending Business

Author: Professor Brian Scott-Quinn.

A big issue for the UK and for the EU is a fall in the rate of productivity growth since the global financial crisis (GFC) back in 2008). The Office of National Statistics says that wage levels in real terms have not risen in 12 years. Others say the period of no real wage growth is much longer but it can be said with certainty that lack of productivity growth is the main cause. And productivity means doing the same amount of work but with less labour input. If a country achieves that, with the same labour force, then the result is economic growth.

But according to our short-lived PM, Liz Truss, there is another answer to the problem of low or non-existent growth. She promised to spur economic growth with tax cuts and deregulation and a budget focussed on £45 bn of unfunded tax cuts — including an income tax reduction for the highest earners. She believed that this was the cure for low growth. Instead it led to a large rise in interest rates which may be good for lenders but not for borrowers. It certainly does not help growth.

In the real world, an economy can grow only if the number of working people increases or if the output of the average person in the economy rises year by year i.e. productivity growth. As the proportion of the working age population has fallen since Covid, the only route to economic growth is therefore productivity growth. This requires more relevant and up-to date education and training, new business models and the application of new techniques in existing industries – and tax cuts don't achieve any of these objectives.

As someone who was a founding director of a "challenger" bank which obtained a banking license in 2017, a key requirement of the software was a reduction, through automation, of the manual input required in banking processes, in order to keep staff numbers down and hence to increase productivity to a much higher level than most other banks, large or small.

When we set up Madiston the design aim for our digital banking and lending platform was also to automate all processes capable of automation – even those that others deemed unnecessary or too difficult to automate. We did that so that our Platform could be operated with the minimum number of people, bringing profitability more quickly to users of our software. Decades of experience across our team both in the production of automating software and in its use in financial companies, has led us to develop a system which enables highly automated back and front offices in the fields of digital banking and lending services. Importantly, our Platform can be easily configured to generate a multitude of fully online digital lending and borrowing solutions tailored to a particular client's needs.

In relation to "improved productivity", the Madiston platform includes, amongst other components, loan quotations through to loan maturity and all in between, lender account portals, a payment processor and the Risk Analysis Decision Engine (RADE), that can handle multiple credit models using Open Banking data.

Open Banking

The Open Banking concept which in the UK is provided by Open Banking Limited is designed to enable innovative apps and services tailored to users' financial data. As well as increasing the value of services to customers, it can also improve productivity. However, many financial institutions still do not offer this facility to customers. It requires a revamp of the software technology and an understanding of third-party connectivity and integration something that many financial institutions are reluctant to undertake. But it is effective in what it set out to achieve. In January 2024, Nat West in a survey found that businesses using open banking reported:

  • spending 150 hours less on operational tasks each year versus non-users
  • saving on payment processing fees versus businesses using other payment systems
  • fewer issues with late payments compared to non-users

The Madiston Platform

We are pleased to say that Madiston can provide a demonstration of the Open Banking payment app operating within the Madiston Platform. The Platform provides an integrated system as shown below which delivers cost savings as well as a better service to customers. It is also highly scalable and operates within the cloud which enables it to grow with its customers. 

It is software like the Madiston Digital Banking and Lending Platform, that will increase productivity in the financial sector. Technology needs to take the strain, so that a smaller workforce can deliver the elusive growth required in the UK economy.

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