All in One Lending Systems
To keep up with changing customer needs, banks are quickly adopting technologies such as mobile, social media, data analytics and the cloud. While all of these technologies play a key role in modernizing banks and ensuring relevancy, it’s not enough to adopt and implement emerging trends, since such efforts always lead back to the question of whether a bank’s underlying systems and platforms are powerful enough to support these efforts.
The single most controllable aspect of a bank’s operational success is its ability to efficiently manage back-office processes in a way that is cost-effective and delivers true optimization and differentiation. Since back-office Information Technology (IT) systems drive process automation and workflow efficiency, it is no wonder that banks are assessing their core platforms and vital sub platforms such as lending systems. In fact, many banks are making great strides in business performance by consolidating multiple lending systems and moving to a universal lending platform that can process any type of loan, be it personal, mortgage, consumer or credit cards. Such an effort, though daunting, ensures a sustainable long-term technology strategy.
Utilizing multiple systems to support only some products and channels will limit a bank’s ability to serve the customer. Unifying the bank’s lending activity under one universal loan origination system umbrella produces a single customer view by painting a far more accurate and holistic picture of the borrower. Rather than tapping into multiple systems to understand a customer’s product portfolio or financial profile, all of this information is housed in one centralized location. As a result, loan officers can more easily identify opportunities to cross sell and up sell.
Managing multiple lending systems is also expensive and no longer practical for a bank with loan products that span across consumer, commercial, business, mortgage and high net worth customers. If a bank is planning to expand its footprint to a new channel or needs to add a new product to its current offering, it is far more expensive to update specialized lending systems that are designed to only support one type of offering, such as trying to add a personal loan product to a system designed around the mortgage process. In addition, if your mortgage-specific lending system wasn’t designed for that type of flexibility, it is more difficult to predict the time and money required to configure that system. Since a universal lending system will standardize the process across the board for all products and rule sets and is likely designed for the utmost flexibility, it greatly reduces costly IT challenges.
While some banks are reluctant to abandon the multisystem sinkhole, it is only a matter of time before they feel the financial pinch that occurs when investment dollars get lost on supporting multiple systems with different architecture and different languages. Added to the cost of managing, updating and maintaining separate systems, many banks are also required to hire IT staff with vastly divergent technology skill sets.
They also face the paradoxical challenge of a dwindling resource pool. Since legacy platforms are typically deployed in-house and built on outdated architecture, banks may find themselves on a long quest for that rare and coveted master of dated code who, by the way, will surely expect to be well compensated for their expertise.
This exact scenario occurred at the turn of the millennium when Common Business-Oriented Language (COBOL), the most widely used business code, began to decline and programmers who carried specialized knowledge of the legacy code began to retire. Reluctance to change systems paired with limited knowledge transfer left many institutions in the precarious position of bringing on highly paid consultants to keep their business applications running on COBOL. For banking institutions dealing with loan volume declines and tightening margins, paying top dollar to fill the programming gap may not be the financially sound decision. In addition, banks that fail to find a system guru may end up with an unsupported system, or will create system risk by taking a trial-and-error approach to tweaking the system.
The investment a bank makes in its systems often serves to either enable or thwart employee success. When using multiple systems, the bank likely goes through far more effort to train and develop new staff. Alternatively, using a universal lending system offers employees a career trajectory. By training your staff on a common, workflow enabled and role-based enterprise solution, employees gain familiarity with the behavior, look and feel of a system.
This comfort level makes cross-departmental advancement easier for the employee and the bank; a consumer loan officer may soon find themselves producing auto loans and later moving into a mortgage loan officer role. Since the employee is familiar with the system they can start their new role from a position of strength and confidently move into a new position. Rather than focusing on technology training, the employee can focus on learning position duties, which ultimately speeds knowledge transfer and employee ramp-up time for the bank. Not to mention, a common end user experience mitigates much of the training expenses for the bank.
The ability to measure risk and performance is incredibly beneficial in today’s volatile market, but gaining these insights is far more difficult if data is extracted from various systems. Reporting and analytics is much more challenging when fields are mismatched or uniquely formatted. Universal lending systems offer greater reporting and analytics tools that minimize manual data re-keying. When all the data is centralized, organized, and easy to view, the bank can more accurately measure performance of its loan products and people. For instance, a bank may be able to maximize loans made to the borrower; understand rate or pricing trends; or create more segmented or product-focused marketing campaigns by identifying common borrower characteristics such as credit, pay histories and income.
Finally, managing and mitigating risk is always at the top of every bank’s list. Regulatory activity is at an all-time high and costly to banks, especially when multiple systems are involved. Since enforcing compliance changes is expensive in any system and the risk for error is much higher when multiple systems are involved, banks will benefit from making changes in only one universal system.