We’ve recently lived through another Amazon Prime “Day”- now actually a series of days- which serves as a reminder of Americans’ obsession with bargains, e-commerce and immediate gratification. CNN Business weighed in on the downside to “America’s addiction to free, absurdly fast shipping,” pointing to its environmental consequences. Cost notwithstanding, the credo that “the customer is always right” certainly applies here.
These “anytime, anywhere” expectations for real-time fulfillment apply to a wide array of services, including banking. If it takes “too long” for a financial institution to deliver, clients will likely turn elsewhere. The alternative may not even be a traditional competitor willing to go the extra yard- consider the “Push button, get mortgage” campaign.
A new ARGO white paper explores the opportunity to meet customer expectations by automating the credit underwriting and analysis process. Although it’s unrealistic to think that human expertise will ever be fully removed from this key function, there is ample room to improve on current day models for the benefit of all involved.
Push Button, Start Routing
To an outsider, the decision of whether to extend credit to an applicant can seem deceptively simple. Those familiar with the financial services industry appreciate, however, that a loan request kicks off a myriad of sub-processes. There’s the review of personal information provided such as income, assets, employment, and existing obligations, as well as separately sourced credit bureau and other publicly available data. Collateral must be assessed for adequacy, pricing established, and compliance with relevant regulations confirmed.
Many of these tasks are conducted in parallel in order to enable an acceptable turnaround, but the various moving parts must also be coordinated. Requests must be properly assigned based on factors such as geography and complexity, with an eye toward load balancing- bear in mind that applications arrive via multiple channels (the branch, online portal, call center, third party partners), often in different forms. Someone must also monitor the quality of the analysis, request additional information where necessary, and ensure delivery of a yes/no decision within an appropriate time frame.
It’s no wonder than even a savvy marketer like Quicken Loans has backed off a bit from its earlier bold promises. Instead of implying an instantaneous decision as its TV commercials did previously, Rocket Mortgage now indicates that a decision can often be returned within minutes. That’s still an aggressive goal, and a marked improvement over longstanding industry norms. It’s also a challenge banks and credit unions need to embrace.
Leave it to the Experts
With so many moving parts, the notion of triage certainly comes to mind. The good news is that the credit underwriting process includes many routine exercises ripe for automation. Doing so will allow trained underwriting professionals to focus their attention on value-added analyses where their expertise can truly make a difference, and to reach the moment of truth more quickly.
ARGO’s white paper describes in greater detail how such enhancements can be implemented, including the ongoing refinement of decision models. We haven’t even touched upon how automation can remove inconsistency and unintentional bias from routines and serve to document process transparency- we’ll save those topics for a future post.
In the 1980s, long teller lines would have been a meme- if memes had existed back then. Automation, in the form of ATMs and online/mobile banking, removed that pain point. Automation is now poised to solve the next banking bottleneck. If the incumbents don’t take the reins, tech-savvy upstarts stand ready to claim their turf.
For more information, download our white paper, "Automated Credit Underwriting Analysis and Processing."