Here is a wakeup call for banks. Customer loyalty, the card that banks were banking on for so long, is now decidedly elusive! Longstanding banking customers are increasingly opting for alternate lenders. Factors responsible for this include an inadvertent delay in loan approval, unfriendly loan packages, loan pricing and ineffective communication. And all of these factors can be traced to a gap in technology. Now, this is where the alternate lenders are scoring. Unburdened with legacy systems, new age lenders are riding the wave of digital disruption and they are addressing the needs of business customers with quick and easy loans.
Piggybacking on outdated legacy systems- The banker’s bane
A majority of banks in the US, especially Community Banks, are still using technology that dates decades back. What banks have today are stacks of servers, outdated file formats that are non-synchronizable, hard-coded applications, manila folders holding critical information and stacks of paper documents-all dispersed. Considering that the average life of loans is 7years and the existing crumbling IT infrastructure of banks, the probability of tracing original loan application papers can be quite a daunting task.
In order to keep up with expanding business needs, banks keep investing in point solutions and packaged applications. These solutions though solves the problem at hand, invariably adds to the ballooning up of cost and operational complexity. With time, banks have created layers of applications on top of core banking system which has made the entire system architecture slow and unstable with a minimal flow of information from one application to another.
Banks in the US are already spending upwards of $60bn on IT every year, but the problem seems to be going nowhere. Most of these spends are on maintenance of the outdated legacy systems. And, with the recent spurt in mergers and acquisitions, greater IT conflicts have emerged. Overhauling core system might act as a placebo, but it doesn’t really address the present needs of the customers who are flocking to alternative lenders with easy and quick loans.
Brace the Achilles heel with Platform Integration-Need for a Configurable, Unified Platform for Commercial Lending
Commercial Loans contribute significantly to bank’s profits. Yet, banks dither from upgrading their Commercial Lending infrastructure due to their existing investments in the present IT system. However, banks can still achieve an inflection point here, even with their legacy technology. The crux lies in integrating the core system with the disparate point and external applications.
Banks looking to streamline their Commercial Lending business while leveraging their core system needs to look out for Commercial Loan Origination Solutions (CLOS). Here’s why:
- CLOS forms the integrating process orchestration layer that seamlessly integrates with legacy and external systems
- It serves as a single application window to cater to multiple LOBs (C&I, CRE, SBA, Leasing)
- Automates end-to-end Commercial Lending lifecycle from origination to disbursement and servicing, making processes paperless in an automated workflow environment with minimal manual intervention
- Captures loan requests from multiple channels
- Efficient credit scoring and underwriting of loans due to seamless integration with Third Party credit bureau sites
- Makes quicker lending decisions by automating and centralizing business rules
- Takes care of compliance, scaling needs and effective tracking and analysis of processes
Imagine your loan officers taking less than 20% of the usual time to review loans. What you get are happy customers! With CLOS its Time to say YES on Time!