Commercial loan slump chips away at bankers’ reluctance to automate

Register now

ConnectOne Bank in Englewood Cliffs, N.J., needed to declutter its commercial lending process.

Loan executives at the $5.1 billion-asset bank wanted commercial clients’ information in one place, where anyone within the organization could access it — especially from the road on their mobile phones.

“Every time we ask our clients to fill out a form, make a phone call, respond to an email, whatever, those are all friction points. So the more we can reduce that friction, we’re going to have a better client experience,” CEO Frank Sorrentino said in discussing a systems overhaul that, bank officials say, has shortened approvals to about two to three weeks from an unspecified longer time frame.

Any edge is welcome amid protracted sluggishness in business loan growth. A bank that can deliver a loan decision a little bit faster, or ask a client to input information just once, can get a leg up on the competition. But that is easier said than done at a lot of banks stuck in old habits.

In a report aptly titled “The Productivity Crisis in Commercial Lending,” David O’Connell, a senior analyst at Aite Group, found that at 78% of the banks he surveyed, lenders spent at least 30% of their time on noncore job responsibilities. At 46% of those institutions, lenders spent at least 40% of their time on those noncore functions.

Commercial lenders, in other words, are spending significant portions of their time on things other than structuring loans and getting them approved.

“You have poor systems and poor systems integration, which means that people have to spend too much time finding things out about a prospect or a borrower, and then they spend too much time repeatedly providing the same key identifier data points in different forms,” O’Connell said.

The situation may be making some bankers who would normally be jaded by the constant stream of back-office-product pitches more willing to consider possible alternatives to nettlesome paperwork and redundant tasks.

“The world’s so competitive, you’ve got to deliver in a way that keeps you ahead of your competition and keeps your customers coming back,” said Scott Custer, president of the $3.5 billion-asset Live Oak Bank in Wilmington, N.C., which developed the nCino platform and ultimately spun it off as its own independent company. It is one of several software platforms that automate underwriting chores.

More than 200 financial institutions use nCino, including 11 of the 30 largest in the U.S., an nCino spokeswoman said.

Being asked to reenter the same information over and over can be a source of frustration for clients, and that is another area where banks can improve the commercial lending process.

“In many cases we hear through our surveys that clients are constantly being asked through different parts of the bank, for reasons that aren’t ever all that clear, for the types of information that are being requested,” said Duncan Banfield, managing director at Greenwich Associates.

Several banks contacted for this article declined to comment on the record, but said that they, too, are starting to adopt some of these tools, or at least figuring out which ones might work best for their bank. But others were willing to talk.

The $153.5 billion-asset Citizens Financial Group in Providence, R.I., is one that has invested in several tools aimed at essentially freeing up commercial bankers’ time and cutting down on the paperwork required of them.

Don McCree, head of commercial banking, said that includes cloud-based software that allows bankers to input and access client information remotely and robotics-based software that eliminates the need to type in certain pieces of information over and over.

“We now can key it once and the robotics will automatically read that information and repopulate every other system that needs to be repopulated,” he said. Speaking of its cash management business specifically, he said, “We’ve taken implementation times from in some instances 60 to 90 days for a given client down to three to 10 days.”

Citizens is just now deploying some of those technologies into commercial lending itself, but McCree said its investments to date have contributed to a 20% increase in its commercial loan book over the past three years.

The $1.2 billion-asset Leader Bank in Arlington, Mass. — which like ConnectOne recently adopted nCino — has seen some early positives, said Jay Tuli, head of retail banking and residential lending.

For instance, the platform makes coordination among different parties easier when one banker might be on the road, another working from home and a third working in the main office, Tuli said.

A lot of bankers are reticent and with good reason, Live Oak’s Custer said.

“All bankers are wary of expense ahead of revenue initiatives where you’ve got to put your money out before the returns come in, but you reach points of inflection in any company where you have to do this,” he said.

For reprint and licensing requests for this article, click here.