Streamlining digital lending – the customer journey

Digital lending – the new normal for financial institutions.

Ensure effective user engagement while leveraging AI-based lending model throughout the client’s lifecycle, from client acquisition to client success, and origination to servicing up to repayment.

Join leaders from Sopra Banking Software and Newgen in this engaging discussion on the significance of streamlining digital lending lifecycle for financial institutions and the technologies that play a crucial role in it.

Konstantin Lambrinov: Hello everybody, and a very warm welcome to the session Streamlining Digital Lending: The Customer Journey. My name is Konstantin. I’m with the product marketing of Sopra banking, and today I’m going to be the host of this session.

So, what is this session about? First, we have a lot to talk about. Second, basically everything is in the title, but let me break this up for you a little bit. Obviously, we are going to talk a lot about the digital in lending. And then it says the customer journey, and the customer journey in lending has his stations, right? So we are going to have a look on the full lending life cycle and go across this customer journey, and maybe a very important highlight of today’s session, we are going to deep dive on one of those pillars, which is loan origination. Here we have lots of exciting things happening at SPS, and this is why today we want to announce to you our new partnership with Newgen on loan origination.

With that being said, let me please introduce my speakers and guests, starting with Rajiv Nair. Hello Rajiv. Rajiv, you’ve been in the industry for a very long time. You are a director of sales at Newgen for UK and for Europe, and you’ve seen lots of huge deals in lending. So you’re going to share this experience with us today; thank you for that.

Rajiv Nair: Thank you for having me.

Konstantin Lambrinov: Then, we had Varun Ghai. Hello Varun.

Varun Ghai: Hello.

Konstantin Lambrinov: Varun is heading consulting in pre-sales for UK and Europe at Newgen, and he is the digital guy, if I may say. So, he is taking care of lots of key accounts in UK and Europe, so this is his perspective on today’s talk.

Varun Ghai: Hello,

Konstantin Lambrinov: Welcome.

Varun Ghai: Thank you.

Konstantin Lambrinov: Then we have Pierre-Yves Le Roux, and he is a deep expert in lending. He has lots of experience, a very international experience, which I like a lot. If it’s up to the Newgen partnership, he is the one who worked really hard in the last time to make this possible. Thank you for that. Of course, he is the deputy of our Mr. Lending. And Mr. Lending at SBS is our own Jean-Yves Duchosal, who is obviously heading the product line. And of course, he’s one of the most experienced guys that you can meet in lending. Welcome everybody.

Jean-Yves Duchosal: Thanks.

Pierre-Yves Le Roux: Thank you.

Konstantin Lambrinov: So with that being said, before we go to the lending life cycle and to the Newgen partnership, maybe let’s set up the scene a little bit, right? So in my research for this session, I was finding some fantastic figures about how big this lending market actually is. Basically something more than 20% of all the transaction values that are happening out there are on lending. So maybe to start with, my first question would be, what is your view on this huge lending market? And maybe as you speak, you could introduce a little bit your company in terms of business in it, about solutions we are talking later, but maybe first in terms of business. Rajiv, do you want to take this?

Rajiv Nair: Sure, thank you Konstantin.

Konstantin Lambrinov: Thank you.

Rajiv Nair: It’s quite interesting because over the last couple of years, I still believe a lot of the so-called developed economies, digital lending is still in its infancy. Take two years of lockdown where zero touched lending was adopted or had to be adopted by banks. Keeping all these in mind, I believe this figure of 20% is quite conservative, and it’s going to increase both in terms of value, absolute value and as a percentage of overall lending. Now new products, BNPL for example, two years ago who thought that would be a product, but now it is. Financial inclusion, so I think it’s going to be 40% – 50% the share or the growth of digital lending in the coming three, five years.

Now at Newgen, we believe this, for banks, means when you’re selecting your technology or the technology partner, you have to keep one consideration in mind, and that is competition. In terms of technology, what does that mean? You have to choose a technology platform that is flexible, not a semi-rigid point solution. You have to choose a technology platform that is extensible, because competition is changing daily, as is regulation. You have to choose a technology platform that is robust to withstand macro environment shocks, which seem to be happening on a regular basis now. And this, I believe, is where the combined experience of the Sopra-Newgen partnership plays a key role in helping our clients succeed, because what happens is, combined with Sopra’s core servicing capabilities which are globally proven, you have Newgen’s digital origination platform, which is 70% to 80% ready for any market, with the balance, 20% to 30% just being bank-specific configuration or integration. So yeah, that’s I think, where our value lies.

Konstantin Lambrinov: Thank you very much Rajiv. Gentlemen, who is going to take this on the Sopra side?

Jean-Yves Duchosal: I will start.

Konstantin Lambrinov:   Yes.

Jean-Yves Duchosal: Yeah. As well as for Newgen, lending is fundamental for Sopra Banking Software. The figure that we have there showed that we anticipate the customer needs, and innovate in collaboration with our clients. Beyond that 20%, what is very important is the tendency it shows. Before the COVID crisis we were probably 5% – 6%. In 2030, we will be around 50%. So the tendency show that being able to digitalize the loan value chain is key for us. Pierre-Yves?

Pierre-Yves Le Roux: So fully agree with you two. We live today in a world of high technology, where automation in fact is almost everywhere. No doubt that this technology will continue to spread over our customer organization to make finance better, faster and probably more and more cost optimized. We already integrate in our systems new algorithms with artificial intelligence and data analytics to automate and optimize already the lending processes. With the arrival of inclusive finance, open finance and embedded finance, as you said Rajiv, access to lending through intuitive customer digital journey will become easier for the greatest number of people. More and more loans will be originated using digital capabilities. And so for us, also 20%, it’s really just the beginning.

Konstantin Lambrinov: Thank you. This is really a very impressive figure, and imagination and image of the future that is coming. So if we stay there but just zoom in a little bit more maybe on the market that we would call for Sopra, our more traditional market, which is obviously Europe, UK, Middle East and Africa, this itself, it’s still a huge market. So my question to you is, how are those micro markets in this market different, or how they are alike? Are there many differences, maybe in terms of regulation, let’s say, or even in types of lending products? What do you think about this?

Pierre-Yves Le Roux: Well, in all lending markets, you find mainly differences between business processes, differences between countries due to local regulations, in countries between financial products, and also business processes by bank trying to differentiate from each other, and differences of data quality by country, and also by banks. So yes, we find mainly differences. But you find also a way to converge at another level. By geographic zone, for example, in Europe, guidelines from banking authorities exist to harmonize regulations between countries. If I take an example, the mortgage, European Directive was published, and I think will be changed in the coming year.Same in Africa, with the CDO and CEMAC zone. You have also a way to converge all these regulations.

By market, we find also similarities between business process. As an example, for the personal loan, which is quite simple, many similarities exist in the market. We can take also as another example, the business lending, where when you do working capital, when you ask for working capital or for liquidity, it’s almost the same process too. So you can also find the same level of data quality through the partnership we can have with our data provider. Service bureau, open banking, digital identity makes all the data converging to the same point.

To make the link with the slide we have in background, the SME market is a good example of markets where we find convergence, and where we can bring automations through our lending systems. Using generic process for SME and connecting with the right data provider or FinTech partners, we can find out various ways to assist our clients to build automatic acquisition channels.

Konstantin Lambrinov: Okay. So from what I understand from this, there are many differences, but also if we put this on a very high level, let’s say, maybe like a top five list or something, there are many similar challenges that are faced for the industry. Everyone wants to cut cost, everyone wants to be faster, and cheaper in regulation. Everyone wants to break through with digital innovation, and all this stuff. So my question to you is, how do we tackle the challenges that they have?

Jean-Yves Duchosal: I will try to keep it simple. First, answering the pain points of our client, of our customers is the way of working of Sopra Banking Software. That’s our DNA. For example, do you want to address TCO cost reduction? We promote managed services, capabilities, replacement of specific development with the software, we build a strategic partnership agreement to mount a new offer like the exciting one that we are talking about today with Newgen. Do you want to speed up digital transformation? In this case, we will work based on our set of APIs or componentized architecture to help to transform the information system of our customers. Do you want to differentiate from the competition? Then in this case, we will put highlights on onboarding, origination, customer journey, mobile app-first, and so on, and so on. So I can take lots of example to illustrate. But to summarize, our software is really the first instance of all to be the answer for our clients. Varun, can you also add?

Varun Ghai: Yeah, sure. Thank you. So what we have also been seeing from our customers globally is the speed of change, or the agility with the way the market is changing. The dynamics are changing, there are so many new digital new banks, so there’s a lot of competition going around. And because of that, through innovation, banks are struggling to keep up the pace and change their offering, services, products internally.

The other thing what we have seen the banks have been asking is, with today’s connected world or collaborative world, integration with multiple systems, both internally and even external, there are a lot of FinTech solution providers, like digital signing on the documents, et cetera. So banks want an experience which could leverage integrating with all those multiple platform. Thirdly, what we have seen is banks want to serve their customers better, so they want to know them better. To know them better, they want how we can extract intelligence from all the information content we have. So you’re using AI in a better way, right? So knowing their customers in more detail, and personalizing the services for them. And with all that in mind, keeping the cost low is important, and plus making sure we are compliant 100%. Like in cloud integration, compliance becomes a big struggle. How do they keep up and meet all that?

Konstantin Lambrinov: Yeah, this is not an easy one, right? It’s quite comprehensive.

Varun Ghai: Yes.

Konstantin Lambrinov: Thank you. So maybe to close up this introduction round, I got one more question that I need to ask because it’s everywhere. Basically, analysts are saying that there are billions going to happen in the next years, and it’s all over the Summit too. And of course, I’m talking about cloud and software, say service, or let’s say SaaS. So basically my question to you is, what is the impact of that on the lending industry? Do the operation and subscription models for software change too in lending?

Pierre-Yves Le Roux: Sure, sure. Cloud-based solution are at the heart of the digital transformation today. All this week, we talk a lot about cloud topics in the different sessions we have. And be sure that lending is also fully concerned by the cloud transformation, and we really need to be there. Even if we notice multiple speed of implementation on the go to cloud, some major financial institution promote their private cloud as others looks to managed services, but that’s a reality. No choice, we need to be there. And as well as they ask for more and more for subscription models.

Konstantin Lambrinov: Different opinions? All being said? Very good.

Jean-Yves Duchosal: Yeah, it’s okay. Yep.

Konstantin Lambrinov: Thank you. Thank you Jean-Yves. All good. So yeah, perfect. Basically this is a nice roundup for the first round, and now let’s start going to the heart of our session. And my question is basically, maybe one more time on the Sopra side, in terms of the full lending life cycle, how is the market positioning of Sopra Banking Software here and what do we understand by saying the full lending life cycle?

Pierre-Yves Le Roux: Yes. Okay, so I will take the points. In terms of market positioning in lending, our lending solution covers absolutely all market segments, from retail lending, for individuals with personal and mortgage loan as an example, to business lending for single organization, SME for example, or even corporate lending for multinational structure with really complex and syndicated loans. In terms of market footprint, we are mainly located in Europe, including UK, and we have also a large market share in Africa. We cover almost all great techniques, from single loan passing through variables rate contracts, credit lines with limits, financial lease, fundings, collaterals. So yes, we cover a lot of market techniques and credit techniques. Maybe Jean-Yves, you can give some view about our solutions.

Jean-Yves Duchosal: Yeah, I can. On the solution, our approach is to be able to provide an answer as well for end-to-end solution as part of the value chain. Our strategy is to be able to reply on origination servicing and/or collection with our set of software components that we published. In parallel, of course we cover the key points relating to customers and risks, linked to credits and which is fundamental in our different countries, like collateral repository, IFRS 9 provisioning and reporting, trade finance sometimes, et cetera, et cetera. Our loan lending offering is really there to allow us to address every kind of transformation program of our clients.

Konstantin Lambrinov: This is really interesting. So let’s stay a bit there and go deeper. Then because we have digital in the title of our session obviously, how is the evolving digitization changing the full lending life cycle?

Jean-Yves Duchosal: Well, the picture there show that formally centered on bank branch, the credit is now mixed and integrated with a set of non-banking services, of course. And the consumer, who may be an individual or a professional, first seeks to respond to a moment of life rather than to obtain a credit even if it is… his goal behind. Some years ago during an event, an analyst said that lending is boring, shopping is fun. So I retained this, and since I’ve made this sentence mine and I keep it in mind when we work on our run map on our software. And of course, the digital is the key element of this transformation of the lending industry, especially on origination and per sales topic.

Konstantin Lambrinov: Okay, very good. So, you gave me a key word, because the first time someone said loan origination. So before looking deeper into the solution, I have a few questions, because obviously finding the right partner is not so easy. So my question is talking loan origination on the Sopra side, what are we looking for? How does a solution has to be? Is there some principles that are important to us, and which are these principles?

Pierre-Yves Le Roux: Yes, yes. In fact, for SBS, an ideal loan origination system should be based on five pillars, and should follow five principles. The first pillar is to be omni-channel, to give access from different distribution channels, so self-services, branch, broker, calls, et cetera. It should be also collaborative, as we already said, to enable the interaction of internal and external users. The bank advisor, for example, should be able to contact the customer using chats, using video conference, et cetera. The system should be also catalog based. What does it mean? It means that you should be able to configure the pricing conditions of sales, and the underwriting and acceptations of rules, and it should be configurable by the user themself. Very important.

It should be also integrated to centralize all of the exchanges; requests, consultation notes and documents used by the bank advisor and the customers. It should be also business oriented, and this is one of the most important points. So the workflow should be based on business rules, and milestones, credit oriented. Regarding the principle, in fact, you should have a system which is agile. What does it mean? It means that you should be able to make gradual implementation of the system, focus on user pain points, with a low-code capability if it’s possible, to be really, really flexible. Scalability, you should be able to enrich all the processes, and that should be also done by the user themself. Competitivity, to accelerate the go-to market, for sure. Open digital services of partners and open API capabilities. And finally compliance with banking authorities regarding the regulations, like GDPR for example.

Konstantin Lambrinov: Thank you. Again, these are not light choices, right? There are lots of things to think about. So me, I’m obviously not the deepest lending expert. I’m more of the classic processing core banking side of things, but there are some things that I immediately think about that are handy for lending, even though there are more generic capabilities that we are really good at at Sopra. And there I’m thinking maybe on something like open banking, right? When you get open banking, obviously we can gain lots of value out of open banking. You can pre-populate data in the process. But then on the backend side of things, you can also use that to see if there’s some existing loans, or how are the spendings of someone or something like that. So this is an obvious use case in my world.

And then another technology comes into my mind that we are doing some nice progress, and this is the real obvious one. Basically, when you say artificial intelligence, and when you say machine learning, many people in the industry are automatically thinking credit decisioning, right? So those are things that I know that we are good at in Sopra, and that we are really, really advancing at. But when it’s back down to loan origination, what kind of a functional architecture do we need or have now?

Pierre-Yves Le Roux: Our loan origination, functional architecture in fact is really now to tackle all changes required by the market. As we already saw, our loan origination components can be run across channels, devices, applications, and core systems using case collaborative workflow to guide, in fact, the bank advisor and the customers orchestrating all elements together, SBS software and external partner systems, all along the loan origination process. In fact, to benefit from innovative financial services and automation with a strong document management, managing electronic architecture, electronic signature, and with the communication module to notify and share with internal and external third party.

So by embedding Newgen origination engine in our SBS platform, we have now a loan origination system that connects all the dots together easily and with a great flexibility for more automation, and also to maximize contract conversion rate of our customers. Jean-Yves, maybe you want to add something in this topic?

Jean-Yves Duchosal: Yeah, of course. Just to be clear, at this stage that Newgen and Sopra Banking Software share knowledge and wield a strong partnership dedicated to origination, and today’s session could be seen as the starting point of a future long story that we will drive together. Rajiv, maybe you can also…

Rajiv Nair: Yeah, thank you Jean-Yves. And basically, to summarize my respected colleagues, I think for customers, the most important takeaway from this partnership is that you get a comprehensive end-to-end digital lending platform, the core, or the foundation of which are Sopra systems complemented by Newgen’s digital origination system, which is deployed at hundreds of banks globally. And supplemented by transactional versions of Newgen’s document management and customer communication modules. So as a customer, this partnership for you translates into three benefits. The first, of course, is a vastly reduced total cost of ownership. The second is a single modular digital lending platform, and the third is a variety of models to suit your operational needs and budget. Thank you.

Konstantin Lambrinov: Very strong messaging, Rajiv. Thank you very much. So gentlemen, we had enough talk and enough slides. So maybe what about showing what we have? Maybe Varun, can you take us on a journey on the solution?

Varun Ghai: Sure, why not? Thank you Konstantin.

So what you would see as the digital journey of, first on the customer and where the customer can self-service themself, they could provide all the information, their personal details, any national ID, their contact address details, also their financials, et cetera. Like Johnny said that shopping is great, and people enjoy it. So empower the client so that they can control their information themselves. They provide, they control what product or services on the digital channel they want to choose from the bank. So they provide all the details related to their income, their past, their liabilities, et cetera, over there. Now this helps, at the background, to do a lot of analysis, background checks, KYC, et cetera, automatically over the platform, the system can give Approval in Principal, an offer, using which customer can confidently shop around, search the right property they want to go ahead with, they can select, we can integrate and fetch the property details. They could choose how much they want to borrow over the platform. They could themselves control over the simulator, what’s the tenure, what’s the interest rate, et cetera, or the product they want to choose.

Once they like the different offers simulated by the system, and I’m happy I can create my AIP, or Approval in Principal, which help me as a customer to proceed in my buying journey of my property. So I could preview all the information. Being a client, I have control on all the information. And if I select, I can just submit it over there. And if I wish to, I can even schedule a meeting. It could be an online through, like Zoom or Skype, something like that, or it could be an in-person branch meeting depending upon what model the bank provides.

Once this information is submitted, all the content, the document, everything the customer has provided, which you see on the next screen, the information is seamlessly carried to the back office system where the bank side or the underwriters, the processor at the branch or the middle office, back office are working. So there’s a dashboard, easy dashboard where they see all the cases which they are receiving across channels, whether it’s through mobile, portal, broker, et cetera. As a processor, my role is to verify if required from… the compliances, I can verify all the information. If there is anything missing, straight away from here, I could trigger out a request back to the customer. So customer can log in onto the portal and fill in the missing information, or additional information, or any other missing document straight away. So there is no gaps. It’s tightly integrated, the process, and the portal or the mobile lab, they are tightly integrated so that there is no gaps in the overall journey.

Once I have processed all the information, I have seen all the personal details, the collateral provided, et cetera, are in place are… ask for the bank policy, and I feel confident I can proceed with this, I can authorize this particular application and proceed it to the underwriter for further steps. Now, system generates the complete audit trail, the different people who are approving as part of the whole life cycle. So you have control into who’s doing what over the applications. Once done, I could add my remarks over there, and I could submit this application which goes to the next user. So each user has their own profile, own personas, and their own dashboards where I see my cases.

Now we are at the underwriting stage where the underwriter is doing a further deep analysis from KYCs, from the credit scoring and the risk scoring, et cetera, being performed on the customer. Here we could integrate with various industry data aggregators to provide the external scoring information. And as a bank, I could top up with our own internal scoring information basis which we can auto-qualify the client.

Then the case can move to different levels for approval. So depending upon the value or the type of the product, so if it’s, let’s say more than €2 million or €3 million, you want two level of approvals, less than that, you want one level of approval. So as a bank, the system can route the request to multiple levels. And on the click of a button, I can generate a digital document, a PDF, which can go digitally to the customer for electronic signing directly. Once they receive the email, the customer can see the offer and if they’re happy, they can sign and accept the offer. The moment the offer is accepted, the request seamlessly comes back and I can accept it for further loan booking into the system.

It goes to the next user for issuing the loan and the post-approval and the disbursement activities, et cetera, over there, where I can verify all the information, document, the digitally signed contract, all of the information are there in place. So once I’m happy, on the click of a button, all the information goes to the loan servicing or the loan management system where the loan is automatically created from here. So it’s a seamless journey from the digital end to the back office end, end-to-end integrated over a single platform without any manual activities, without any leakages, et cetera, controlling all the information within the bank, and improving banks to process the loans faster, even straight through over a single platform.

Konstantin Lambrinov: Wow. Thank you Varun for this very impressive demonstration of this mighty system. And of course, congratulations to all of us for this partnership. The system is looking great. Well, this is very good. Now being advanced in time, because our session has an end, I still insist to go through the full lending life cycle. So maybe just cover quickly the other two stations that we have on that customer journey. So my next question is going straight, what is the impact of digitization on the loan servicing?

Jean-Yves Duchosal: That’s a long story on servicing and collection. We drove and we drive our roadmap to focus on… to be able to open our software, in fact. It start with capabilities to provide APIs with loan information, disbursement, collection, being able to apply any event on the contract. Of course, it continues with the capacity to answer to SaaS models today, including cloud we discussed. And today, we also continue to enrich functionalities with our customers who use the cloud. For example, we develop and we are working on self-care capabilities, which is the post sales side on what we have seen on the origination one. And we will see an illustration of process capabilities. This of course needs to be put in front of local regulation, contract characteristics and so on. And lots of thing influence what you can do on post-sales for servicing and collection. But it also shows our financial institution can provide additional capabilities to their customers.

So that’s a mobile demo that can start. So the following use cases is showing someone buying an article using BNPL features, followed by a modification of his active loans on his banking application. The case starts on e-commerce website, in which I choose a TV. Once I select the model, I can pay the full price, or make it BNPL, which allows me to split the price by several months. So to pay a small amount of the price each month without any additional fees, I can adjust the duration. I can choose the payment method by bank card or by open banking. So I have to select, of course, my bank at the end, and select the account. The authentication method is specific to each bank. I have to grant access by using a mobile and choose the bank account which will be used to pay every month.

Once the payment method is selected, I have an overview of the contract. The signature is digital, and we use our partner next on this. And I sign and confirm my identity by using my phone number and the one-time password received by SMS. Now during the same day, but later, I could log on my banking application, and I can find a list of my contract and see that the new one is also there, the BNPL. So I can check the amortization schedule and see what I still have to pay, which are two installment of several months. In total, it makes €1,706 for the next due date, and as I have an active loan, an ongoing one.

Luckily my bank offers me the possibility to manage my loans, so I can adjust the monthly reimbursement amount using the contractual modulation option of my mortgages. So the initial amount is €1,539 and I want to keep the initial reimbursement amount. So I set the reimbursement amount to €1,373 for the next two months, and the simulation is showing me the result, which increased the duration of my mortgage for one additional month of course. I signed fill with my phone number, and I can see that the modulation is activated on my contract, as the new amount automatically accepted is now €1,500, which is the total of my mortgage on my BNPL, so I can see the detail of the loans.

Konstantin Lambrinov: Very cool. This is really a nice use case.

Jean-Yves Duchosal: This is an example, of course, we can work on the customer journey, and this also.

Konstantin Lambrinov: This is just something that we have there to make clear what is possible, right? So yeah, digitization in the lending servicing, all the way. And then to complete the full lending life cycle, of course, my last question on debt collection, do we have something interesting to mention there? Of course we have.

Jean-Yves Duchosal: Yeah. Sure, to finish, we need to also to talk about collection, because when you have a loan, you need to reimburse the loan, and sometime it’s not easy. But we are also working on digitalization within the collection industry itself. And we are working specifically on predictive and soft collection. So with this, the bank and all the consumer, we enrich digital collection, and it is a way to keep some ethics in lending, but that’s fundamental for us to not also being able to do everything, but keeping this under control, depending countries, depending regulation as well.

Konstantin Lambrinov: Yeah, very good. So I think we got tons of information in this session. Exciting, thank you very much, gentlemen.

Jean-Yves Duchosal: Thanks to you.

Konstantin Lambrinov: My head is full, and I am taking away lots of stuff to think about. But if I might pick something up that sticks to me right now, is that maybe three things, that we are serving basically all the distribution channels with our solutions at SBS, that we cover the full lending life cycle, and we are having deep vertical solutions on each pillar of it. And of course, the news of today, which the partnership that we just have with Newgen, we really reinforced our capabilities in terms of the digital loan origination. With that being said, I hope that everyone enjoyed the session. Thank you very much for listening and watching us, and Happy Summit.