As bankers you must be familiar with the dilemma of having to choose between customer experience and credit risk management. Often times, the customer requests leave you with no choice but to sway away from the organizational policies. These are the times when you have to take tough decisions – ones that could make or break the deal for the bank.
The general tendency has been to give credit risk precedence over customer experience. And there is a background to it. The global financial meltdown of the last decade came along as a huge reality check for banks and financial lending organizations across the world. It brought with itself sweeping changes that transformed retail and commercial lending operations.
The focus on business growth clearly got side lined, while a wave of scepticism seeped in. This scepticism was characterized by the prioritization of risk management and compliance over customer experience and operational responsiveness. Processes became rigid and strenuous as internal business policies got defensively aligned with the tight external market conditions. Banks made their customers go through long approval cycles and complex documentation, without giving them any clarity on the application status.
While it did reduce the overall risk exposure of banks, the dissatisfaction amongst the retail and corporate customers was evident. They started looking at alternate sources of funding with Venture Capitalists and Angel Investors coming into prominence, as they seemed to be a much more viable source of capital.
As banks waited patiently in their ranks for the world economy to recover, most customer centric initiatives were put on the back burner and an air of sheer conservatism gripped the entire financial market.
The Resurgence of Credit
Recently, however there are clear signs of revival as the international markets have consolidated and diversified. In a sign of increased confidence, large, small and foreign-related banks in the United States increased commercial and industrial loans at double-digit rates last year. Banks have opened up their lending operations and have begun exploring the latent demand for credit.
However, the after effects of the crisis are still there and are defining the way banks operate. The regulatory oversight has intensified significantly, and managing new and evolving requirements is a challenge – particularly from the perspective of accurate reporting requirements of Dodd Frank and CECL. Aggressive competition from the emerging non-banking lenders is becoming a threat. Risk management is becoming a holistic process across lending institutions, requiring more standardized processes and better understanding of exceptions.
While on one hand there is an opportunity to attain a distinct competitive edge through superior customer experience, there is also the lurking danger of falling through the same old trap of being too aggressive and complacent.
Banks must realign their strategies and try to find the right balance between risk management and customer experience across business drivers such as revenue, customer centricity, efficiency, costs, compliance and maintenance.
Time to Find the Right Balance
The key to finding this balance is through a unified operational framework that provides end-to-end visibility across various processes involved in the lending lifecycle. Business Process Management (BPM) platform finds synergies between growth initiatives and compliance needs, providing the bank with levers to implement a future ready solution.
A BPM based integrated platform supports the entire credit lifecycle as well as facilitates new delivery channels without compromising on the key aspects of risk management. This stands to improve the efficiency and performance of all lending business units, ultimately increasing customer satisfaction across the credit lifecycle.
Banks need to realize the requirement for this much needed structural change to restore optimal levels of credit flow in the market. And BPM is a contemporary technology to see them through.
From a macro perspective, this is a rare opportunity for you to take the ‘First Mover Advantage’ in this evolved marketplace. Think about it!