Automating data assembling and application segmentation frees staff to focus on complicated risks and new business prospects, enhancing performance and job satisfaction in lending management.
FREMONT, CA: Business banks must focus on digitalized banking to catch up or surpass consumer banks. Managing consumer needs, risk, profitability, technology, and partners is challenging. Digital transformation and tech collaborations are relevant. Banks have been digitizing since the 1990s. Legacy's core systems and processes initially made digital transformation more of a digital transition. Digital customer experiences have transformed consumer banking. Business banking is a decade behind, and lenders must catch up quickly to survive and expand. Consumer banking's revolution has revealed the gap between digitalization and financial digitization.
Digitizing a layer on top of historical systems doesn't work since customer journeys move between digital and manual. A customer may fill out a form online but must print it out for a wet signature and scan or mail it. It's awkward and time-consuming. Tech-enabled, data-driven lending requires technological platforms, APIs, data feeds, cloud hosting, and hyper-connectivity. It allows banks to license this technology instead of acquire and develop, providing tremendous flexibility and innovation. Businesses can partner with purpose-built technology suppliers to offer their consumers the best tools.
Lenders must prioritize the customer experience. Current business loan applications take 30 hours and take 30 to 120 days to draw down. Both borrower and lender have substantial potential costs. Due to the outmoded risk assessment, many profitable businesses don't qualify, especially after the pandemic—the past two years' performance may not indicate a company's future performance. Due to the complex solutions and tedious application process, people who qualify for a credit facility may choose the wrong product. Borrowers enter a few data and consent to access bank accounts and accounting records.
Risk assessments that rely on historical indicators like trading performance have become less valuable. Some businesses have traded throughout, some were put on ice but are now bouncing back, and some continued trading thanks to government-backed loans but won't return to their former glory. Lenders should analyze multiple data sources and their insights, especially near-term and forward-looking indicators like real-time cashflow positions, which reveal companies' current performance. Risk can be assessed more correctly, new products can be based on new collateral types, and new market segments like SMEs can be served.
The borrower can now focus more on loan use than application. Instead of being scattered among emails, files, and spreadsheets, staff has all the necessary documents and information. The platform is highly adaptable so that they can construct workflows and activities on the fly for complex enterprises or financial needs. Bank employees receive easy reminders and notifications on their screens or inboxes throughout the procedure. Lenders can evaluate a business's assets before selling goods that match its demands and eligibility.
