When people discuss the automation of banking services, the conversation typically turns to high-profile initiatives like artificial intelligence and chatbots. There are greater opportunities available, however, in improving back office blocking and tackling through technology upgrades.
While such advancements may lack the promotional sizzle of voice-response apps or virtual reality interfaces, corporate customers enjoying faster loan decisions and fewer redundant data requests will receive plenty of direct benefit- boosting the financial institution’s bottom line as well as its net promoter score.
The challenge lies in integrating the disparate systems strewn across most banks’ operations. These are the sort of time-consuming, unglamorous projects that tend to get deferred during the budgeting process. We’ve muddled along with our existing systems for this long, surely they’ll hold up for another year- or so the logic goes. At some point, however, it’s important to evaluate the costs continually incurred- on both the top and bottom lines- by not integrating systems.
Alleviating the Pain Before AND After Closing
It’s easy to overlook the number of disparate systems in co-existence across the typical bank enterprise, with limited formal connections at best. These provide mission critical support to the front lines (loan origination, document generation, CRM) as well as the back office (underwriting, collateral management, financial spread). Because these applications rarely “talk to each other,” however, the potential for duplicate effort and manual re-work is immense.
It’s no secret that commercial credit requires significant diligence both before and after extending a loan. Despite the heady promises of machine learning, it’s also clear that we’re many years away from automating the expertise that goes into commercial lending decisions. Consider, however, the effort that goes into gathering data in multiple parts of the process- data that’s often stored in multiple places, refreshed multiple times, and worse yet, must be reconciled across systems. Potential savings from streamlining are substantial even before factoring in the cost of compliance- and the greater cost of non-compliance, if supporting documentation is found to be out of sync.
Integration can fuel a virtuous cycle- quicker and more effective underwriting leads to faster decisions and closings, enabling loan officers to target and close more high-potential loans. Automating routine tasks- monitoring compliance with loan covenants, for instance- frees professionals to hone in on value-added analysis, flagging issues earlier and improving portfolio quality. Along with the internal benefits, customer experience is always key to selling an initiative. Faster closing times and reduced frustration thanks to fewer requests for info that was already submitted or should be readily available punches that ticket.
Act While the Good Times Are Still Rolling
If such integrations were easy, however, every FI would have already done them. The legacy status of most core accounting systems and many point solutions can make integration a daunting task, one that competes for IT resources with initiatives that often carry greater strategic cachet. There are two key points to consider on this front- one is to select a solution provider with a proven track record of addressing your critical pain points and successfully implementing with the relevant existing systems.
More importantly, after working through the headaches of the Financial Crisis, banks are currently enjoying the upside of a strong economy and the solid loan performance that comes with it. An eventual downturn is inevitable- what better time is there to prepare for the storm, while funding should be more readily available and capabilities can be built for when they will be even more critical?
Of course there are many more aspects to this topic- among them process flow, process risk, pipeline management and regulatory hurdles - than can be covered in a brief article. We hope you’ll consider this the beginning of a conversation.
For more information, download our Commercial Lending business case.