By: Scott Sanchon, Trade Treasury Payments 

Over the last decade, private credit has grown quite a bit, with the market currently valued between $1.7 and $2 trillion and still growing.

Despite its complexity, private credit is a source that can generate significant returns for banks and is increasingly used as the rising demand for smarter and scalable infrastructure has become the new normal. Since private credit has traditionally funded private companies and private equity buyers, it has, unsurprisingly, attracted a large number of lenders. 

At Finastra’s Lending Day in March, Deepesh Patel, Editor in Chief at Trade Treasury Payments (TTP), sat down with Andrew Bateman, Executive Vice President of Lending, and Barry Rodrigues, Executive Vice President of Payments, to uncover a shared roadmap of the technology that processes $7 trillion in payments every single day.

The complexity behind the scene

Generally, banks that have implemented private credit services rely on third-party administrators. These third-party services tend to use labour-intensive client teams while providing internal, bespoke systems designed specifically for banks. This market nuance often results in inefficiency because almost every private credit loan is unique by nature, making it a challenge to manage.

This is where Finastra hopes that LoanIQ, its private credit management platform, will make its mark. Banks that originally adopted LoanIQ for syndicated and agency lending are now expanding its use to bilateral books, SME portfolios, and private credit. 

Although the pressure from rising interest rates is impacting the industry, Bateman believes that there is as an opportunity for Finastra to expand its ecosystem across different areas.

“We’ll see more and more AUM coming onto the platform,” he said. “Even with higher interest rates, it puts pressure on the banks. The more they’ve got to invest in accelerating the modernisation agenda.” 

The interoperability gap

One of the key challenges facing most technology systems at the moment is making sure that any one system is able to talk to any other one. “We’ve got customers that might have a hundred different platform integrations into a solution, both internal and third party,” said Bateman.

This degree of interoperability often comes with a couple of aspects. One is the complex ecosystem. Every time a core system like LoanIQ gets implemented within current operating systems, banks have to go back and rebuild connections to all their other tools. It is slow, expensive, and disruptive. Managing the end-to-end testing across all integrations also adds to the burden.

Another layer of this complexity is that many of the ongoing services cannot be shut down while new connections are added. Imagine trying to replace the engine of an aeroplane while it is still flying. That is exactly what modernising the banking system can feel like.

Partnership is another aspect that will help foster the expansion of the core system, and in fast-moving areas such as private credit, working capital, and supply chain finance, the right partner will always get you there faster than trying to build everything in-house by yourself, Bateman said. For its part, Finastra’s focus is now on working with a smaller number of partners where the fit is clear and generating commercial results that speak for themselves.  “The partner ecosystem is just really important for us,” Bateman added. 

Putting AI to work on the banking floor

What about the more futuristic side of digitalisation? For Barry Rodrigues, Finastra’s EVP of Payments, agentic AI has some interesting potential. 

“I’ll give you a real-life example,” Rodrigues said. “Every morning, the wire room operator comes in and has to find out what transaction failed, has to go through every single individual screen to find out where the transaction failed, and has to think about what to do to fix it.” For banks running 300 to 500 of these operators globally, it requires an enormous amount of time and resources on something similar to detective work before the real job even begins.

A solution to this, and one that Finastra has been exploring, is an agentic AI that detects failed transactions, lists them immediately, navigates the operator directly to the point of failure, and provides recommendations on what may have caused it. The company’s early feedback suggests the tool would help save around 30% of wire room operator time. “That’s a meaningful improvement,” Rodrigues said. 

Perhaps the more interesting question is what banks will do with all that time back? 

The freed-up capacity could allow banks to allocate resources to, for example, stablecoin solutions and cross-border payments innovation. Cost saving, in other words, is just the starting point. “It’s more about redeployment of resources,” Rodrigues said, noting that part of the reward will come in what banks choose to build next. 

And with all this extra time on their hands, who knows what kind of solutions they will be able to dream up.