Authored by Virender Jeet, Senior Vice President – Technology, Newgen Software
Filling an online loan application will soon be a thing of the past. Juniper Research predicts that by 2020 Global revenue from Fintech platforms for lending will double to reach $10.5 billion.
By 2022, the implementation of the Fundamental Review of the Trading Book (FRTB) regulation will increase the pressure of collecting more data on banks, as will BASEL III in 2019. These are merely a few examples of the changes the lending market will witness in the coming years. Many more changes will impact lending in the coming decade.
To prevent the competition from eating away your share of the market, you will need to be agile in adapting to market changes and quick in delivering services to customers. The future belongs to those who will be able to master the art of agile shapeshifting in this dynamic market!
You need to weigh long-term goals over short-term objectives, agility over rigidity, and a complete overhaul of business processes over quick-fixes and point solutions. However, most financial institutions (FIs) have decades of legacy and core banking systems in investments across CRM, underwriting, risk management, and other areas. These disjointed processes, in silos, create bottlenecks that delay the delivery of services and prohibit agility.
Unifying Lending Processes for Agility
A fast and agile lending lifecycle cannot be achieved without the unification of processes through robust and seamless integration. However, lending organizations have built their IT systems over decades by building layer upon layer of diverse applications for handling specific functionalities such as loan tracking, loan origination, spreading, rating, etc. to form a patchwork of technology systems that don’t communicate with each other.
This patchwork partly accomplishes the job, forcing banks to invest in additional applications to tackle the job not done. Thus, this sunk cost fallacy has led banks to invest in building a house of cards.
However, a platform-based solution can help banks stay agile even with such obsolete technology. BPM-based solutions can seamlessly integrate with disparate applications, external and legacy systems. This allows banks to leverage their existing IT investment while making them communicate with each other. Thus, accommodating changing market conditions by quickly modifying centralized business rules or credit policies.
Translating Agility into Tangible Value- Optimizing Lending Processes for Speed
According to a report by ABA, “Even a one-day delay or uncertainty in responding to the customer could result in losing business to a more agile and transparent competitor.” Therefore, for agility to truly culminate into tangible value, lenders need to reach customers faster with their product offerings. Let’s analyze the aspects involved herein-
- Straight-Through Processing
Customers expect fast response and contextually correct action. It requires a process mindset, supported by a flexible workflow-driven platform, with the ability to delink business rules from the transactional aspects of the process. Customer data, customer documents and collaterals, lending policies and rules, risk management policies and regulatory compliance aspects need to work in conjunction without forcing rigidity. It is important for business rules to be loosely coupled with the rest of the process and configured independently to facilitate faster changes whenever a policy needs to be revised.
- Building a Responsive Organisation
Lending is a complex and people-intensive process. People in your organization are responsible for decisions that involve a variety of factors. In order to be effective at their job, they need access to the information. They need to use their time to do what they do best, and not on mundane repetitive tasks.
FIs require business rules management-based technology that facilitates straight-through processing of repetitive tasks, resulting in immediate processing. This would help the workforce stay motivated and empowered, enabling a better customer experience.
- Staying Mobile
Mobility provides you with an interface, but for it to be effective, it should be a natural extension of the lending process. A truly mobile interface facilitates the capture of information and documents through a mobile or any other interface, on-the-go reviews, approvals and monitoring.
Mobility should be treated as a productivity enhancer and a key aspect of a great lending process. An omnichannel and cross-channel experience is critical for mobility to be effective. Your relationship managers should be able to expedite the process by capturing customer information and documents on-the-go for a smooth credit origination.
It’s critical to capture documents through mobile, and seamlessly attach them to the credit opportunity, with integrated document management in the backend for a seamless mobile experience. Credit heads should be able to review and approve seamlessly on-the-go.
- Handling Exceptions
Commercial lending processes are prone to emergent and exceptional scenarios. Exception handling is about flexibility and knowledge worker empowerment, ad-hoc routing and flexible processes. The ability to carry corresponding documents & media items, such as photographs, scanned copies, signatures through the process offers a significant advantage. Further, the delivery of timely customer communication throughout the process is imperative to keep the customer informed about the status as well as additional requirements of exceptional situations.
The bottom line is – perception today may not match reality tomorrow. And, slow and steady may not win the race. A process automation platform can help you stay current and competitive while enabling you to leverage your existing legacy IT systems.
