Credit and lending are the core lines of business in commercial and corporate banking. Even though they are at the center of rapidly evolving digital transformation initiatives, some challenges exist in the commercial lending landscape. Commercial lending facilities are complex and based on the type of customer’s business; banks need to offer different commercial lending products, such as term loans, trade finance, term Loans, Trade Finance, bills, LOC, treasury products to various customer segments such as corporate, SMEs and financial institutions. RM’s need to make quick decisions to offer the right product to their customers based on the customer’s rating and financial analysis. However, the underwriting and commercial lending processes are slow and cumbersome for banks when compared to retail lending. These processes have lead to chronic operational and service problems and been a drag on bank’s staff productivity and customer experience in credit and wholesale lending business for decades.
Customers expect greater transparency in the credit and lending process and services with better digital experience from their banking partners. This is compelling commercial lenders to transform their business landscape from analog to digital. But, having to balance the ongoing use of legacy systems and siloed operations with customer-centricity and higher operational efficiency are creating roadblocks that do not allow commercial banks to undertake an aggressive transformation program. In today’s competitive and volatile environment, commercial lenders face a clear imperative: transform or fall behind and fail.
Banks who want to seize the real opportunity must develop a successful and sustainable digital transformation strategy geared towards improving current processes, leverage new emerging technologies and maintain compliance with industry standards. Finding an optimal balance lies in re-inventing a new operating model: one that blends customer service, risk management, and operational processes with a scalable and agile platform. The credit and lending engine of the digital future must have the design and structural capability to not only drive the front-to-back credit and lending delivery process but also integrate the process within an ever-widening and dynamic ecosystem.
Digital transformation drivers in commercial lending
With digital commercial lending gaining momentum, banks can follow a two-point agenda to succeed in their digital transformation journey: increase operational efficiency, and unlock new sources for revenue and growth by offering new customer experiences. By prioritizing these three drivers, banks can accelerate their digital transformation journey.
- Choose the right platform to support growth
To be able to sustain their business and continue to scale in the future, banks must select a commercial lending platform that is scalable, open, and flexible. This approach will help them drive down the cost of their back-end infrastructure as well as create a more intuitive and flexible workflow throughout the lending process. From the bank’s perspective, the loan origination process is currently broken and needs fixing. RM’s are spending too much time on non-revenue generation activities such as credit analysis or portfolio monitoring and need a platform that can help them become productive. Commercial banks must help RMs be efficient, reallocate their time, and make it more productive – because this is the time to be spent working with customers or prospecting for new clients. With the right platform, RM’s can collaborate with the loan officer and get access to real-time information and using intelligent data and loan simulation can evaluate the profitability of the deal and offer services to their prospective customers that are simple to understand, tailored to their needs, and rapidly delivered.
- Focus on increasing productivity
The lending business possesses one of the greatest potentials for increased efficiency. In the corporate loan area, it requires a large amount of information to process a loan application, but the manual processes and analog data management slow down the process. The data collection across multiple channels and the bank’s legacy systems also increases the risk of erroneous or missing data. For example, credit officers the time to decision and the time to close a commercial loan are too long and uncertain. With a digital commercial lending platform, credit offers can digitize their end-to-end credit journeys, and using underlying technologies such as artificial intelligence, data analytics, and open APIs will enable faster credit loan application processes with more flexibility to submit a digital application process from anywhere at any time. With access to a platform from any time, anywhere customers can gain a better customer experience and get access to their loan information and track the current loan status from their devices without having to approach the customer service desk.
- Invest in technology-driven process value
In a modern and competitive banking environment, banks expect consistent, timely, and reliable data as “one version of the truth” to build better digital customer experiences and data-driven operating model. We are on the brink of a “new world” centered around digitization, automation, and machine intelligence. With new technology-driven processes like artificial intelligence and big data, banks can automate their end-to-end lending journey and help their credit loan officers reduce their time to decision to one week.
Focus on delivery to generate greater value
Digitization in commercial lending is really about the delivery itself – delivering products and services to the customers faster, conveniently, more efficiently and relevantly, more timely and accurately, more richly, and ubiquitously. Banks that adopt digital transformation and invest in smarter operating models, intelligent customer analytics, process transformation, and agile technology can add value, mitigate pressure on margins, and drive growth in the economy by helping their customers expand their businesses to global markets.