Commercial lending forms a big chunk of a bank’s revenue stream. At the same time, letting compliance requirements bog down this source of revenue will be a massive setback for lenders. Additionally, lenders are staring at alternative source of financers like Angel investors taking away a chunk of their revenue pie. Banks need to realize that expectation of their corporate clients have undergone a major change while banks were holed up in getting compliance right.
Today, corporates expect much more than mere disbursement of standard loan types. They are looking for better deals, customized loan offerings, support from bank to understand their needs and of course the obvious – faster movement of application, screening, approval and disbursement. Unfortunately, corporate houses do not receive adequate support from banks when applying for commercial loans.
Carrying the burden of legacy systems
Commercial lenders need to take a step back and identify the chinks. Lending is a complex process, spanning across departments and levels. From Relationship managers to credit approvers, an application goes through processes like Lead Management, Initiation, Underwriting & Credit Analysis, Decisioning & Approvals, Servicing & Restructuring, Monitoring & Reporting, and Collateral Management. Some of the common issues that can be attributed to legacy systems and are identified across lenders include:
- Excessive documentation dependency
- Cascading effect of errors upstream or downstream
- Difficulty in adhering to compliance requirements
- Lack of collaboration across departments
- Islands of information sources without requisite flow of information
- Lack of real time data visibility
The real bottleneck
The truth is commercial lenders today are at technology crossroads. Banks might already be using their core CRM solution or point solutions. However, their existing systems are simply not equipped to handle the demands of today’s corporates seeking commercial lending. Yet, the real bottleneck lies not in the unavailability of technological solutions, but in the bank’s resistance to change coupled with lack of information on transformational technology!
More often than not, banks are settling with a trade-off between technology infrastructure and customer satisfaction. Such a stance is myopic, because even though the existing technological solutions do not require a major overhaul of existing bank IT infrastructure, but are integrated with the existing Banking system. Being at the technology crossroads, banks can either stick to their legacy IT systems and lose business or look at ways to leverage the right technology to mine the opportunity presented by growing demand for corporate loans.
So, what will help?
While technology is an obvious piece in the puzzle – and so are people and processes – lenders need to consider four key aspects while taking steps towards delivering a better lending experience for their customers.
- Be real about Risk – For a bank, risk is inherent in its business model, but it should not be a deterrent in its product innovation or service delivery capability. They should evaluate technology platforms that have complete set of tools at each step of the lending process which can help them assess the risk associated with each application.
- Flexible IT infrastructure – Commercial lending is essentially document and process intensive, with strings of approval requirements at various levels across departments. Moreover, these processes, even after being defined, do not always follow the same frozen workflow. A flexible platform based infrastructure with rules driven workflow processes provides the much needed agility and adaptability.
- Agility – One of the primary evaluation criteria for a technology platform is to see how much agility it can lend to the bank’s core processes and systems. Ability to change in response to market dynamics is directly linked with the underlying capability of the IT infrastructure. The solution should be configurable with the Bank’s existing infrastructure, with focus on quick implementations in waves. It should transcend the boundaries of IT infrastructural transformation and align the lending process with the market dynamics.
- Seamless Collaboration – Collaboration is key for lending processes. Banks should look at solutions that allows them to collaborate across department and levels so that stakeholders have real time access to the right information on time. Moreover a solution with rules driven processes ensures that the flow of documents and information from relation managers to credit approvers takes place logically and as per business policies on a timely basis.
End-to-end lifecycle management of the lending process is now possible with platform based technology solutions. Such solutions unify applications and processes across departments which impact the Lending process, driving business value for stakeholders across the spectrum. Lenders should look at leveraging such technology which integrates with the enterprises core systems and other third party credit systems giving them an undisputed edge for maximizing revenues and engaging customers.
