Factors contributing to the downfall of the financial industry have been discussed ad nauseam and I suspect will continue to be debated well into the future. While I agree, identifying the root cause is necessary to ensure history does not repeat itself; financial institutions must begin the recovery process by getting back to business and back to basics. At a time when expense management, client acquisition, and retention and risk management are crucial to not only success, but mere survival in the market, it is ironic that many institutions are shying away from IT investments and reverting back to a more manual and ultimately, more costly and risky methodology.

Throughout the industry, there has been a resounding call to get back to the fundamentals of banking. However, this does not imply reverting back to manual processes, nor does it preclude banks from investing in innovation. What it means, or should mean, is that questionable lending and risky investments must stop and banks need to enable better predictive capabilities to reduce risk through utilizing new, more sophisticated technology. In today's financial market, having the right tools in place to adapt rapidly to changing market conditions, as well as empower every bank employee to provide the best, most personalized service possible (all at lower costs) is essential. Process automation allows banks to do just that - reduce costs while providing better service to their core clientele.

One could argue that technology was the villain that caused many institutions to make more bad lending decisions than they would have using a manual process, and there is some truth in that statement. However, the foundation of bad decisions is bad policy, not bad technology. Technology is more accurately described as a vehicle that enables the institutions' strategic plan.

Think of technology as an accelerator. By itself, an accelerator is neither good nor bad. It simply serves to speed up the current condition of the object to which it is being applied. An automated system cannot (and should not) adjust itself. The system can create a report, but it takes human reasoning to interpret the data from the system, to spot patterns and check that decisioning criteria is striking the right balance between approval and risk.


Tom Johnson is vp of product development at Zoot Enterprises.


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