European online lender October has shared key insights from its Netherlands CEO Luuc Mannaerts.
Luuc, who earned his Masters in Business Economics, with a specialization in Finance and Strategy, reveals that when he was around 40 years of age, he went to INSEAD where he completed the Advanced Management Program. Luuc says that he recommends everyone should do that around the middle of your career because it helps you become “sharp again.”
Luuc also shared that he’s worked in banking for around 2 decades. At first, he was focused on the M&A space and worked with large firms, (most of which had been listed on a stock exchange, as well as with private equity).
After that, he moved to the commercial banking sector, working closely with large firms that had a turnover of €50 – €500 million. In his last role before October, Luuc served as the CEO at ABN Amro Commercial Finance (working closely with many SMEs).
In this role, he recalls working with a lot with data. He reveals that they developed an environment where they’d use data to “objectively assess whether we could finance a company – the beauty of data is that it is not only objective, you can also explain to a client how you use it” and that actually “brought me to October,” Luuc revealed.
“The big picture is that we have had 3 large banks in the Netherlands for 25 years. They have around 80-90% of the market. That was impacted [considerably] by … 9/11 that triggered the need for the banks to safeguard us from terrorist organizations, sparking huge additional tasks, and hence cost, we call KYC and compliance. And that still continues.”
He noted that this led to a lot of cost cutting for various banking operations. And if you are a small firm, it’s “much more difficult” to work with a banker, Luuc explained.
He pointed out that at times, a bank can be somewhat like “a black-box for an SME client.” And that can be frustrating because financing for a company is “like the most important raw material for running your business,” and that’s “the environment we’re in.”
“In the Netherlands, we have a digital mindset. When I started October in 2018, SME companies were quite used to digital. What they really liked about us, is that you can approach us digitally but we do give companies a call. We combine the tech with the human touch. This digital mindset already led to two unicorns in the payment service environment (Adyen and Mollie). And I’m sure we will soon have another unicorn.”
While commenting on how these challenges might differ from other countries where October does business, Luuc said:
“Over the last 25 years, if you were an SME, and you needed financing, you would turn around and go to your bank. Over the last 10 years that has become more difficult. And that’s a gap October fills in.”
“We only have three banks in the Netherlands and now we have had two crisis: a financial crisis and the Covid-19 crisis. Dutch entrepreneurs realize that they need bank and non-bank financing next to their bank. … And the difference in NL is that the Dutch government is actively promoting this. This is also the interest of the Dutch economy to have a more diverse landscape.”
Luuc further revealed that at the start of the Covid-19 outbreak, the government in the Netherlands realized that there’d be so many firms requiring financing. That’s why they opened up their guarantee scheme “fairly quickly to non-bank financiers,” Luuc noted while adding that they’re the first non-bank “to get the license to provide guaranteed financing,” and they’re “actively using that.”
He also mentioned that in the Netherlands, they have “limited access” to financial statements. In Southern Europe, we – as October – can “automatically determine how much we can lend to a company based on a public register with financial statements of all companies,” he revealed while noting that in the Netherlands they don’t have a register in which “all financial reports of SMEs are registered and accessible in a structured and digital manner.”
He further explained that accountants can play a key role in this, as they have all the financial reporting in a “structured manner in their possession.”
“We are working hard to get access to that with a tool called SBR Nexus (SBR stands for Standard Business Reporting) where accountants jointly with clients could unlock their reports directly into our tech. That could really be a game changer in the Netherlands.”
While sharing what their target/goal this year is in their country and what they’re focusing on, Luuc revealed:
“[We plan] to double the number of clients we help compared to last year combining tech and the human touch. [We also aim] to simplify our products even more so that clients and financial advisors can easily request a loan through our app and that we could very quickly give them an answer which is correct in 95% of the cases. [Additionally, we intend] to develop our reputation through a partnership with a bank and/or an accounting organisation (or both) to service SME companies even better and faster.”
While commenting on some of the good projects, Luuc noted:
“We were opened one month in the Netherlands, when a client called Adaptive services came to us. It was the week before Xmas. He was to take over the company before the end of the year. So we managed to raise the funds during Xmas. Before we went to the Xmas week-end we put the project on our platform and the Tuesday afterwards it was funded. That was the 28th and he had the money in time.”
Another project that Luuc mentioned is a software company that is “expanding internationally as well.” He added that all the schools in the Netherlands, primary and secondary schools, “know the software.” He says that it’s “beautiful to see how it is changing the life of students and their communication with teachers, helping them to be independent.”
He also noted that these are “beautiful projects that show how digitalization can help our society and improve the lives of many.”