Ideally, these steps will take place before the purchase, enabling the financial institution to select the vendor that best meets its needs more easily. It will also be able to enlist the vendor’s help in leveraging the technology. One advantage of working with a third party that has worked with thousands of financial institutions is that the vendor has experiences to draw on and can suggest best practices.
Examine the current situation
One of the most important steps that will help a financial institution leverage its technology investment is to examine the current situation with clear eyes, says LeCorgne, who is co-leading a Nov. 19 webinar on how institutions can effectively implement loan origination systems. “I call this internal discovery and project pathing,” he says. It involves mapping out the current lending or credit process from start to finish. Examining all key loan segments and sizes and interviewing each department representative who is involved in the current process will shed light on opportunities to modify existing methods. “The customer experience and points of interaction should also be mapped to ensure enhancements improve the borrower experience,” LeCorgne says.
The goal is identify how many labor hours it takes the financial institution, from handshake to handshake, to deliver on a loan. It should also identify the multitude of steps involved, the pain points, and the areas where some processes may be repeated or overlapping. One example of this is data entry. How many times is borrower data entered into the system by different staff? Knowing this information helps identify opportunities to reduce errors, inefficiencies, and bottlenecks.
Plan and adopt necessary workflow changes
Once the financial institution has “looked under the hood” closely, the next step in making sure it leverages the technology investment is planning and adopting necessary changes in the workflow. These changes might address the current pain points. Others might provide opportunities for increased revenue, profitability, or more staff time for relational (rather than administrative) interactions with customers.
LeCorgne says mapping the new workflows and process changes helps in clarifying exactly how they will benefit the financial institution’s team members and customers. Mapping them also is helpful because it outlines any new roles and responsibilities for various team members.
New technology + old processes can stymie transformation
A recent study by consulting firm McKinsey on digital transformations at financial institutions noted, “While most banks are digitizing parts of their businesses and operations, many are dissatisfied with progress, especially in credit.”
Efforts to digitize can be sidetracked or lose momentum, the report said. “Incremental changes are sometimes substituted for planned end-to-end transformations.” The firm noted that financial institutions that successfully leveraged technology for a digital transformation of their credit processes shared several common steps in their implementations. These included:
- They determined the current state, measuring lead and approval times and identifying pain points. “Know what you’re solving for,” the report said.
- They established priorities for workflow changes based on material gains, ease of eliminating pain points, and overall complexity in execution.
- They used the goal (in one case, it was a goal of reaching at least a conditional decision on at least 80% of corporate lending applications within two days) to motivate the progress.
Financial institutions, LeCorgne says, have the opportunity to dramatically improve the speed and efficiency of every aspect of the lending process: application, credit analysis, onboarding, review, and renewals. “Implementing technology into an established lending process really provides one of the most significant opportunities for earnings pickups the industry has seen in years,” he adds.
However, layering new technology onto old processes will not generate the types of efficiencies or revenue enhancements the software “engine” is designed to provide. “The change requires a willingness to plan and to examine your current processes.”
One thing is certain, LeCorgne says. Whether a financial institution chooses to transform the entire life of the loan or a piece of it, meaningful changes and payoffs are achievable when the institution leverages digital technology.