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Commercial lending – Turbo wanted!

In many places, there is still plenty of room for improvement in time-to-yes and time-to-cash in commercial lending. However, many shy away from the IT conversion for the sought-after turbo - too costly, too risky, too lengthy. But that doesn't have to be the case.

(Published on der-bank-blog.de on 05/12/2021) Digitization, who can still hear it as an argument to accelerate projects or an excuse to wait? This is also true for banks and financial institutions in Germany. To be sure, decision-makers are aware that their systems are often too old, too complex and too clumsy. They know that the IT systems do not meet the increased demands of users or the needs of customers – even and especially in corporate banking. Yet despite this awareness of the urgently needed change toward digital, automated and thus faster, more convenient and more efficient processes for all parties involved, there is still a lack of willingness to implement and a lack of speed and focus in the implementation itself, as zeb’s Digital Pulse Check 4.0 study proves.

Banks must draw consequences from the status quo. Instead of burying their heads in the sand, they must adapt their IT landscape and processes to market requirements and become more modern and efficient. Weeks of processing time, as is the norm for (semi-)complex financing, is a decisive factor in the survival of companies and customer relationships, and not just in times of the Corona pandemic. The declared goal must be to make the lending process – like all business processes in the end – more digital, more automated, and thus faster and more demand-oriented. With the right approach and the right software, this can be achieved without having to replace the entire core banking system and start from scratch, as is often feared. At the end of the day, it’s not just the customers who need to be convinced of the innovative strength and future viability, but also the company’s own employees.

Renovate instead of demolish: Building on the old IT foundation

For all the problems that financial institutions have with their core banking system, there are good reasons for them to nevertheless basically stick to it and approach the future in a different way. Having grown over the years and proven to be reliable, the existing IT structure provides a solid foundation for a future-proof bank. Modular SaaS solutions with open system architecture and standardized APIs, which tie in precisely with this foundation, come onto the scene here as a genuine alternative to a general overhaul. They enable seamless integration into existing systems. This can keep resource and IT costs significantly lower than when banks try to make do with time-consuming and cost-intensive large-scale projects and individual developments.

Such cloud-based software solutions bring both the necessary precision and speed to banks’ digitization projects. Together with the specialist departments, they can be used to digitize and automate proven processes within existing systems and along the entire customer lifecycle. To do this, the processes should first be recorded and analyzed, then modernized and finally implemented within the software. Time wasters such as manual processes are eliminated in this approach so that the bank can act more agilely and efficiently in its day-to-day business.

One thing must never be forgotten when it comes to the successful modernization of processes and IT in banks: The digital workplace has often been invoked, but it is still a reality in very few institutions. Only when all existing applications, information, and documents converge centrally in one place and can be controlled from there can clerks maintain an overview, work more efficiently and collaboratively, and process platforms such as Camunda, Flowable, etc. receive a central interface for individual user tasks. For Employee and Customer Experience – and therefore business success – this is essential.

Commercial lending in days instead of weeks and months

It is not without reason that commercial lending is an oft-cited example that particularly illustrates the digitization problem in banks, as well as the solution to it. First, there is the application process itself: Starting with the application, which is far too often still accompanied by customer-unfriendly paperwork, to the still manual application review and processing and the resulting long waiting times for customers until the loan decision and disbursement, to communication with the various parties involved – processes can be optimized at all corners and ends. The application, approval and disbursement process can be significantly accelerated via digital connection to relevant data interfaces such as credit agencies, rating agencies, Know Your Customer providers, etc. – a fact that some FinTechs have long since made a business out of. Corporate loans can then be approved and disbursed within days instead of weeks or months.

However, before manual processes are automated, it is imperative that they are checked to ensure that a poor analog process is not transferred to the digital. Often, there is no documentation at all or only outdated documentation of existing processes. In this case, the processes must be analyzed, reorganized and redesigned if necessary, and then transferred to a standardized modeling language such as BPMN 2.0 (Business Process Model and Notation). This creates generically usable reference processes that lay the foundation for not only digitizing and automating existing processes in a meaningful way, but also keeping the cost of introducing new products low. The time-to-market can be massively reduced by this procedure.

Another problem in commercial lending that financial institutions faced, especially last year: The volume of loan applications is increasing, the comparability of offers is becoming a challenge and the clerks are barely keeping up with the processing. Searching for information across many different, parallel IT systems and applications takes an enormous amount of time, leads to overload and is prone to errors, which in turn increases the probability of poor credit decisions. Digitization and automation are therefore inevitable; digital document management, digital credit assessment and appropriate credit portfolio management form the basis here. The digital workplace brings together all information and documents in one interface and enables efficient, digital exchange with customers throughout the entire process. In this way, staff workload is reduced and the error rate is lowered.

Smooth processes, happy customers, bright future

So in the end, by modernizing and automating their processes, for example in corporate lending, banks are doing both themselves and their customers a favor in equal measure: faster time-to-yes and time-to-cash for the clientele and more volume with less risk. Banks must see digitization – yes, there it is again – as a means of adapting their business to the demands of the market and clientele. Only with fast, agile, and flexible solutions that benefit employees and customers alike will financial institutions position themselves successfully for the future and avoid losing market share to the competition or once again providing neobanks with an opportunity to exploit untapped market potential.

 

The original article and other interesting information can be found here:
https://www.der-bank-blog.de/gewerbliche-kreditvergabe-turbo/firmenkunden/37677853/

Author

Benjamin Hermanns ist CEO und Gründer von fintus, einer Low-Code Banking-Plattform für die deutsche Finanzindustrie. Zuvor hat er bereits acht Jahre lang Unternehmen der Finanzindustrie sprichwörtlich digitalisiert – als General Manager eines namhaften Scan-Dienstleistungsunternehmens.