How To Manage Credit Risks Using Lending Automation

Written by vitali.arnautov | Published 2018/08/09
Tech Story Tags: fintech | lending-automation | manage-credit-risks | credit-risk | finance-cpo

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In today’s digital environment, customers expect nothing less than excellent customer service. The demands are loftier when it comes to problem-free and timely service rendition. Among the sectors where customer expectations are at the highest are banking and financial services.

These lending institutions are adjusting to the modern setting to win clients over. By using a lending software solution, those lofty demands could be met while simultaneously mitigating credit risks. The season of change in credit management is at hand. And that would benefit both the lender and borrower.

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The need for an improved credit management process

In the current scheme of things, banks and non-traditional lenders are geared to provide the best customer experience to prospective clients. However, they can no longer rely on the manual but antiquated credit risk processes. The challenge is to deliver the quickest turn-around time without deviating from the established credit parameters.

The paper-based procedure delays credit evaluation, loan approval and loan releases. There is so much tediousness from the front-end to the back-end. Time, as well as the cost of processing each loan application, can be lessened if a streamlined credit management process is in place.

Hence, only automation can bring about an immense improvement in their practice of extending loans. The present milieu calls for a dynamic makeover of the entire credit process. Lending firms that remain skeptical about the efficiency of automation would be losing a lot of clients, business opportunities, and more importantly revenue.

The compelling reasons to shift to lending automation

The operational problems present in a paper-based solution will never be eliminated. It’s likely to compound even more in a high-volume scenario. But electing to elevate from an outmoded procedure to a lending software solution will assure lenders of an accurate, problem-free, and risk-averse process.

  1. Improved accuracy in a paper-less setting

Dealing with voluminous data and information has been the perennial cause of delay in loans processing. The flow of data from the front-end requires extensive man-hours. But in a paper-less setting, the lending process from the initiation stage until the approval phase will drastically lessen.

An automated lending system is capable of handling the heavy volume. It can expedite transactions without missing a step. Expect improved accuracy since all relevant data needed for review, analysis, evaluation, and credit decision are captured.

2. First-rate cost-saving tool

When processing time is significantly reduced, the cost of doing business or processing a loan application will automatically drop. Credit and loan officers will then have valuable time to accommodate and process more accounts.

Lending firms can forego of hiring and training of additional personnel as it may no longer be necessary. In totality, operating costs are further reduced. More often, people using the paper-based will tire out and become prone to mistakes. It will unavoidably result in inconsistency. None of that will transpire in an automated lending system.

3. Covers the full cycle of lending operations

A financial services firm that uses a lending software solution is certain to optimize all facets of the lending operation. But the salient feature is always focused on the risk-assessment aspect.

Because all information provided by the borrower is stored in the system, pre-screening is a breeze. When an account passes the preliminary stage, the actual evaluation process is not complicated. Current and historical credit data information can easily be extracted. One of the first, as well as the most reliable solution is Turnkey Lender. This lending software will perform the financial analysis or spreading for the credit reviewer. A client’s risk profile and credit score can be determined without difficulty. Once it reaches the critical juncture, the approving officer can approve or reject the credit proposal with confidence.

4. Centralised record-keeping

The standard practice in many financial institutions is the delineation of sales and credit functions. Usually, each side would maintain separate records of customers. But sales officers are not given access to credit records as a general compliance rule.

With a lending software solution, lenders can centralize records and have a single source of data. Personnel from different departments can gain access. Whether it’s the sales, credit, risk, or audit teams that would request documents or reports, the data is uniform.

However, the lending firm can still limit access to the source by assigning user privileges. From an auditor’s perspective, this set-up redounds to transparency and efficiency.

5. Clients are the ultimate beneficiaries

The best customer experience is what a streamlined credit management process brings to the table. Processing of consumer, commercial or industrial loans need not be a lengthy affair. All it takes is automation in order to meet client expectations and keep them contented.

Customers are not really concerned about what goes on internally. When all loan requirements are submitted or complied with, the countdown begins. Borrowers want the processing of their loan applications to be timely without delay.

The new backbone of any lending business

Traditional lenders seem to have the notion that an automated lending system is overrated. For them, a complex process like credit management is impossible to automate. They fear the lending process will weaken. On the contrary, sticking to the old method poses more risk.

Moreover, a lending firm that process loans at a turtle pace will not merit attention. Times have changed and credit risk processes are turning digital. Every player in the lending space needs a lending software solution.

Automation is essential in this day and age. Lenders can hit volume targets, increase profits while managing delinquencies and mitigating risks. It’s the new backbone of any lending business.


Published by HackerNoon on 2018/08/09