In a brutally competitive environment, lending decisions are no longer merely about making an approve/decline decision. Rather, lenders must ensure loans can be approved and serviced quickly and accurately to ensure they are profitable.
Being lean, which means performing with fewer capital and human resources, is an absolute requirement. Since most financial institutions are chasing the same book of business, with customers who expect immediate gratification, rapid decision-making can differentiate a lender from the competition.
Inefficient operations cost financial institutions millions of dollars each year. Despite the proliferation of information technology in the marketplace, many lenders are still entrenched in manual processes or fragmented spreadsheet environments replete with the redundant data entry, inaccurate data, and decision-making discrepancies that cause delays for customers.
Traditional enterprise offerings can be very expensive, particularly for small and midsize institutions that cannot spread the costs over a large customer base. Application service provider technology is a viable alternative to an internally hosted enterprise system, because it spreads the costs of the application and staffing among multiple subscribers. The subscriptions are affordable even for small institutions that want to streamline the loan origination and servicing process, automate repeatable business processes, and enable real-time synchronicity.
When implementing the technology, it is imperative that upper managers set clear goals, such as streamlining information flow within one standard platform, rather than multiple systems to accommodate various loan types. Another goal might be to keep underwriting standards on track for maximum portfolio performance and profitability.
For an institution with multiple branches, the goal may be to centralize all the data and processes in one location where all staff members involved in the lending function can touch an application when it's their turn. Another goal may be to maintain a detailed historical record of loan decisions and the reasons for them.
In addition to clear goal-setting, managers must be strong, visible champions of the initiative and ensure buy-in from everyone. Communicate to the entire organization why the new system has been chosen and the expected benefits.
For instance, explain that it will make everyone's work easier, because it will eliminate or reduce manual procedures that waste time, introduce inaccuracies, duplicate efforts, and contribute to delays. Explain that the software uses a "workflow" wrapping that makes it easy to track and monitor the loan origination, analysis, approval, and servicing process so nothing falls through the cracks. Demonstrate how it will make the approval process a "no-brainer" with standard forms, processes, and management reports, along with a step-by-step process and clear rules.
Employees will become more productive and be empowered to make faster decisions so they can delight their customers.
The caveat for institutions that have invested in automated software is that employees generally use only 20%-25% of its capability. It is imperative to have "top-down" management support for implementation and training programs to ensure workers understand all facets of the software they are using on a daily basis. Unless this is done, the product will be underutilized, and ROI will not be realized.
