In everything retailed, banks and financial services organizations have the toughest share of the pie. The vertical is tightly strung when it comes to regulations. Customer attrition is high and the recent financial calamities have done their bit to squeeze profits. As a result, Banks and Financial Institutions are investing heavily in technologies that can bring on customers fast and keep them coming.

A cross-section of a bank’s loan origination or commercial lending process will reveal why adopting technology has become inevitable. For most banks loan origination processes are a fine balancing act, ensuring a fast application process, running credit and risk checks, managing myriad regulatory requirements, and finally topping it up with a quick disbursal. Conventional manual loan processes will take any bank an entire month to close this origination cycle. A time frame banks can no longer afford in today’s competitive market conditions.

Responding to these challenges, banks have begun leveraging homegrown solutions, packaged applications (point solutions), or BPM-based solutions to deliver value propositions to their customers.

BPM v/s Homegrown and Point Solutions

As a best practice, it makes sense to adopt a BPM based solution over a homegrown application or a packaged solution. Homegrown and packaged solutions are good when a bank is looking for quick fix solution to a problem or is trying to ease pain points for a particular stakeholder segment. They might get the job done but unlike a BPM based solution, do very little to streamline the end-to-end process of Loan Origination.

Banks make a beeline for these solutions as they offer a good level of customization. Banks also do not have to worry about managing or maintaining the solution. It is entirely the responsibility of a third party vendor. These applications then are capable of solving a specific problem within a process; for example creating weekly dashboards for the Loan Manager to review process health and performance. Appears myopic here, but most banks only realise the limitation when some other part of the process needs transformation. The whole process of revamping the process or addressing the pain point has to be done from scratch. The cost implication at this juncture becomes enormous.

Where BPM wins?

A BPM based solution when compared to point or homegrown solutions offer not just the benefits of a customized application but also allow development of bespoke solutions to problems as they arise. The BPM based solution for Loan Origination will provide a bank the necessary subjectivity while improving the decision process and through-put times.

As an organization grows, the general tendency is to quickly add processes internally facilitating ease of operations within the enterprise. However, in order to enhance services, productivity and profitability, additions need to be made to customer facing processes as well. A BPM platform empowers the organization to transform both internal and customer facing processes alike.

With a BPM platform, Banks and Lending organizations can enjoy the following benefits

  • Best of both point solution and bespoke
  • Faster time to market
  • Quicker development cycles
  • Highly scalable & configurable (near to zero coding) & ready to use
  • Lowers costs of deployment and future process automation
  • Improves productivity
  • Faster adaptation of change in requirements
  • Smart integration with existing systems

BPM platforms are highly configurable and rules driven engines which opposed to Point solutions provide frugal solutions to customization needs. Tweaks and modification does not require developing a solution from the scratch. The Platform with its process modelling tool can help define better operational flows.

A BPM based solution will combine analytics and activity monitoring to provide an effectual view of an entire process. Business leaders can leverage it to study process health, allocate resources and address problems in real time. A point solution will only be able to do so after extra effort and finances have been put behind such customization.

Leveraging the extra-mile with a BPM

One of Oman’s fastest growing retail banks needed to transform its Loan Origination processes. In recent times, it had witnessed a demand surge in its loan services and its existing manual process was not going to hold. It needed to scale up, but was concerned about cost implications as well. It wanted to drive a transformation that would revamp and automate while returning a healthy RoI on the technology investment made for this change.

The bank had a stringent disbursal policy running several background checks such as

  • Credit worthiness- checking customers credit history
  • Black listing- for customers who might be blacklisted by other financial institutions
  • Duplication- checking for duplication of applications in case a customer already had a loan running with the bank
  • Loan calculator- to decipher the amount for which an applicant is eligible to apply for a loan for

In case of a home-grown or point solution, each of these would be treated as a separate customization. They would be built separately leading and will be extremely rigid. Once put into place they can only be changed when the bank decides to take down a whole process or function and completely remodel it.

In a BPM platform, most of these are created by leveraging a flexible rules engine. Tweaks and major changes can be done over the BPM platform by simply defining and redefining rules. The biggest advantage served here is that the bank never once has to rely on an external vendor and third party to manage such changes. As a result the bank is able to effortlessly and without cost implications bring about process transformation, never once sacrificing the security of sensitive financial information it manages.

The Bank being discussed currently uses a BPM platform for its Loan process. It now enjoys unprecedented process agility, with 80% improvement in cycle-times. SLA adherences in the bank are up by 90%. The bank also enjoys over 50% reduction in operational costs.

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