In the two weeks it took for the $349 billion Paycheck Protection Program to run out of money, lenders and other financial-services institutions learned a lot about their ability to execute.
Many simply weren’t prepared to process in near-real time the mountain of documents they received – and the data onslaught continues with the infusion of $310 billion in new funding. And the PPP is just the first wave of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
An analysis of the data management requirements for successful execution of the PPP uncovers a host of data-related challenges, spanning storage and accessibility, security and governance, compliance, scale, and customer experience. While each new stimulus program will bring its own challenges, the underlying data management requirements — ingesting, processing, validating and communicating — remain consistent.
Lenders will continue to see a high volume of applications, each with payroll documents, employee count reports and ancillary programs, such as Customer Identification Program (CIP) and agent fee documentation. Manual entry of applications and supporting documents is both costly and time-consuming, underscoring the potential benefits of controlled data ingestion in near-real time. The ability to extract data from .pdfs and other non-standard files, parse these files into standard fields and store each entity in a data catalog can alleviate time and quality concerns.
Once applications, forms and supporting documentation have been cataloged, the information must then be validated and risk assessments completed. The ability to quickly compare a given customer application with their history, or a new customer with their CIP data is critical. Likewise, automating workflows to assess risk profiles and verify that applications are compliant allows lenders to have confidence in applications that are sent on to the SBA for loan origination.
The SBA makes loan decisions directly based on the information provided by the lender, so data quality is a primary concern. In addition, the SBA’s E-Tran system has experienced challenges handling the influx of applications. Lenders that can optimize their PPP data pipeline using a gated process that checks for data quality, compliance, and known success factors may be able to minimize the impact of any SBA data issues.
As applications are processed, customers need to know about their application status, especially given the financial urgency for so many small businesses. Lenders should consider offering an automated way to communicate where an application sits in the journey, the number of days pending and any likely barriers to approval. This ability to communicate in near-real time builds customer confidence and loyalty, ensuring the lender remains a trusted partner.
The ability to process PPP applications is just the tip of the data operations iceberg, and there are very serious challenges below the surface including:
Data security. PPP applications require the customer to submit a large amount of Personally Identifiable Information (PII), which then passes through AWS, the lender’s systems and the SBA at a minimum. Without proper masking and tokenization, the risk to customer data security is high.
Secondary markets. Approved loans will likely be purchased by other banks interested in forming derivatives composed of bundled loans. Lenders interested in taking advantage of these opportunities will benefit from having easily accessible, well-controlled data management.
Agent fees. In many cases, customers will enlist an agent to apply on their behalf. The fee structure, billing and required records for PPP applications that involve an agent are complicated and need to be auditable.
The CARES Act and its PPP program highlight the need for financial-services companies to modernize their data management capabilities so that they are equipped to excel not only with sudden data onslaughts but also for their customers’ day-to-day needs. The coronavirus has changed the way we bank for the foreseeable future, and to be successful, financial institutions need robust data operations to thrive in this new normal.
Susan Cook is CEO of Zaloni, a data management solutions company based in North Carolina’s Research Triangle area.
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