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Transforming new lending concepts into reality

Arnold Koudijs, Log in to subscribe to the Blog

There is an abundance of excellent ideas for helping customers seeking financing, assisting them with their banking needs, and working towards the right solution quickly. Opportunities for banks are emerging all over, including new channels of distribution and providing highly tailored financing options. Some good successes have already been achieved, for example, by introducing personalized credit within retail offers (captive finance, embedded banking) and by intelligently optimizing trade finance.

For banks, to successfully bring their ideas into reality and become a winner amongst competitors that are also trying to seize the opportunities, new business models and digital agility are needed. Rather than adopting off-the-shelf point-solutions, banks must equip their fast-moving teams with a powerful digital platform if they want to take advantage of their ideas for positive change.

Banking processes are becoming more complex and customer service is suffering

Many banks are still running old business models that have historically served them well. However, over time, banks have added products and services on top of their core business, requiring further sophistication and exception handling. Processes have become quite complex, with segregation of functions and maintaining a huge variety of disconnected systems. Unfortunately, these back-end issues do not go unnoticed by bank customers, who are experiencing long and indeterminate waiting times, heavy documentation requirements, and having to correct errors repeatedly.

In stark contrast, these customers are looking for a simple process and straight answers. They expect a smooth start-to-finish experience from credit request to actual funding. Ideally, this is a digital journey that includes pre-approval, relevant guidance across multiple channels, e-signatures, and document recognition, all brought together seamlessly.

There is quite a paradox here. Customers expect a seamless and relevant journey, yet no two customers are the same. From a bank’s perspective, there is a great deal of complex specialization (including exception handling) needed to be able to deliver that simple and straightforward lending process to every unique customer. Moreover, as financial markets and customer needs are continuously changing, these specializations must be highly adaptable as well. This is where technology is the differentiator. Technology, especially easy-to-change platform technology that is closely linked to the business, is the way forward to successfully deal with this paradox. By running off-the-shelf solutions in customer facing processes like origination, onboarding and servicing, banks will lack flexibility in their workflows and will thus miss out on competitive differentiation.

Off-the-shelf banking solutions lead to disconnected workflows and a lack of agility

It might be tempting to quickly deploy off-the-shelf solutions. These indeed can help improve the customer experience on the short term, but often fail to bring unity across the wider business. Even worse, they can result in data-duplication and entrenchment of business logic (and decisioning), since rules and processes defined in a point-solution cannot be reused elsewhere. This is where a platform for decisioning and workflow automation can really make a positive difference.

With intelligent platform technology, customers interacting with the bank through self-service channels can be provided with the same guided workflows that loan and relationship managers use. This leads to a greater deal of consistency, better collaboration, and improved clarity on the status of a case (like a credit application or loan modification request), including what steps are still needed for completion. By setting up all the underlying credit policies, delegated approval flows, and document requirements in one place, adaptation to specific customer and product segments becomes much simpler. This is how banks can improve the customer experience and facilitate unity across the wider business. And more importantly, banks can quickly transform their new great ideas into a reality and seize the lending opportunities.

Use an intelligent automation platform to streamline and simplify lending processes

Even though there are significant opportunities to improve business processes in the credit and lending industry, there is no easy, straightforward path to define the ideal customer journey and build workflows to support these processes. Fortunately, having an intelligent automation platform in place creates clear steps to success:

  1. Set the focus: Define customer target segments. Customize product, product bundles, and policies. Make clear the unique positioning and return on investment.
  2. Agree on a simple journey: Build a digital customer journey. Define workflows and supporting policies for automated decisioning for simple cases.
  3. Automate data sources: Be creative in bringing in external and internal data for insights to automate credit decisions. Unify data sources to remove analytical silos on cross-selling, credit models, risk ratings, dynamic pricing, fraud and early warning signaling.
  4. Establish the ecosystem: Integrate partner platforms and distribution channels and leverage existing systems that are already in place.
  5. Look for growth and efficiencies: Closely monitor performance against metrics and improve operations. Use the platform to dynamically adapt and expand from the first release.

These steps do not require a total refresh of the IT landscape and the creation of a new end-to-end process. Much can be accomplished by creating differentiation, automating decisioning, and simplifying and orchestrating workflows through a modular approach (leave current systems intact and work with them as is).

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Industry: Financial Services Product Area: Intelligent Automation Topic: Digital Transformation Topic: Workflow Automation

About the Author

As Pega’s Director and Industry Principal for Financial Services, Arnold Koudijs helps some of the world’s most recognizable financial institutions leverage real-time decisioning to manage risk, improve customer engagement, increase revenue, and achieve digital transformation.

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