The lending market is growing exponentially. In the US, loan origination volumes are estimated to reach $90 billion by 2020 from $25 billion in 2015. And, along with the growing volumes, there has been a steady increase in digital alternate lenders, catering to financial areas not addressed by traditional banks. Alternate lenders such as P2P, B2B, microfinance entities and others, have disrupted lending, offering digital services that traditional lending models struggle to match.
According to a report by ABA, “Cumbersome processes and slow decisions are significant problems for banks when you consider that even a one-day delay or uncertainty in responding to the customer could result in losing the business to a more agile and transparent competitor. Banks may not even realize they have lost this opportunity, as the potential customer may bypass the bank completely and apply directly through a digital lender.”
In such a scenario, it becomes imperative for your bank to invest in a technology that helps overcome operational shortfalls, understand customers’ needs and offer distinguishing services. At the same time, you need the ability to quickly and independently adapt to changing market conditions. To achieve this, you need to go beyond mere automation of business rules. You need a holistic approach and assess a commercial lending technology on below parameters-
- Does the technology automate your lending lifecycle?
- Does it empower your knowledge workers to help prospects/customers?
- Does it help you reach your customers faster and build revenues?
- Does it manage risks and regulations better?
- Does it help you differentiate your products from competitors?
Only after you analyze a technology on such considerations, you can gauge the real ‘digital’ value a commercial lending technology has to offer to your bank. Here are the top 10 considerations to help you select the right technology:
- End-to-end Automation: You need a platform that orchestrates your business processes through workflow automation. You must consider a platform that allows you to design, deploy, execute, track, and administer your lending process. It should ensure this from prospecting, sales, credit analysis, documentation, and disbursement to servicing.
- Digitizing Manual Processes: Manual and paper-based processes are the biggest source of delays and errors. Using electronic documents helps reduce manual errors, overcome regulatory nightmares, as well as reduce the credit lifecycle. To support this, the solution needs to have an in-built enterprise content management (ECM) capability.
- Ensuring Proactive Compliance Management: Transparency is just one side of the compliance coin. Fair business practices are the other. For both, lenders need transparency in their operations and timely control over processes through monitoring. The best way to ensure compliance is to be proactive and make it a part of process management instead of an add-on counter-productive measure.
- Integration with Legacy Systems: Integration is critical for effective automation. For workflow automation and straight-through processing to yield the desired results, seamless integration with all your systems, point solutions, and core banking systems is vital. A platform should be able to integrate using any of SOA, APIs, standard adaptors, and standards.
- Configuration of Credit Policies: Credit Design is becoming involved and sophisticated. The expertise of your credit analysts needs to be translated to larger throughput, and not wasted in mundane repetitive tasks. Automation of repetitive credit scenarios provides you efficiency while configurability offers you flexibility and agility.
- Ensuring Faster Time-to-Market: Buying an off-the-shelf point solution is ineffective due to the rigidity and overly standardized processes. Their inflexibility is a bottleneck in coping with the fast-changing market and compliance needs. Banks need to be able to make changes fast, without having to undergo large TCO of build approach.
- Building Functional Differentiators: Traditional lending point solutions are inflexible. This lack of configurability, across workflows, approval matrices, credit/deviation policies, data models and product definitions, is a bottleneck for lenders. The ability to customize the platform, as if building your own commercial lending process, and being able to do it fast, is the key.
- Unification of Lending Offerings: Disparate point solutions create duplication and redundancies in the system while creating undesirable process gaps. Banks need a unified platform that brings functionalities of all lending processes under one umbrella, enhancing the operational efficiency of business users.
- Empowering Knowledge Workers for Better Decision Making: Commercial lending is a complex and people-intensive process. It is imperative for your knowledge workers to be able to take accurate and informed decisions. For this, they must be provided with the relevant information, on time and in the required form.
- Staying Mobile: Mobility provides you an interface, but for it to be effective, it should be a natural extension of the lending process. Capturing information and documents through mobile or any other interface should be seamless. Reviews and approvals should be possible on-the-go and monitoring dashboards should also be available on mobile.
To conclude, one can safely state that selecting the right lending platform could be a daunting task and enterprises could kickstart their decision-making process by using these pointers as a starting pointing to help you assess and acquire the right technology fit, keeping in mind your current business requirements as well as those in the future.
(The author is Senior Vice President (Sales & Marketing / Products), Newgen Software and the opinions expressed here are personal and do not purport to reflect the opinions or views of the publisher or their team)