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Bank Lending Challenges: Aligning People, Process, & Technology

In today’s hypercompetitive market, banks must become skilled at how to
create services quicker, cheaper, and better and improve profit margins in the
face of escalating competition and other economic realities. Increasing business
process efficiency and effectiveness are critical success factors to improve
margins and allow more flexibility in financial product and service pricing.

Sustaining an elevated level of service in customer, agent, and broker interactions
is one of the most effectual ways for banks to distinguish themselves and
increase profitability in a highly aggressive and crowded market. According to
the Economist, “banking executives are discovering that the winning differentiator
is no longer the product or the price, but the level of engagement – the degree to
which a company succeeds in creating an intimate long-term relationship with the
customer and external stakeholder.”

Banks are always talking about searching for the silver bullet that will somehow
transform their bank lending activities into a well-oiled cost-effective machine!
However, without discovering the silver bullet most banking executives will agree
that a successful year over year profitable lending activity will always
contain exceptional and skilled governance supporting with well-organized
and high performing people, processes, and technology.

Real Life Experiences

Have you been a participant in a real life drama with a bank in attempted
to negotiate a business loan? If so, the following should be familiar scenarios
and bring back some frustrating thoughts as you recall your own experiences.

  • The effort to complete the loan forms during the process of negotiating
    a commercial loan is often a waste of time or very frustrating as bank
    representatives will typically ask the same questions in the initial
    meetings and follow-up phone calls.
  • Banks have a lengthy list of forms that require input from the
    borrower, the borrowers’ attorney or outside agents (appraisers,
    inspectors, etc); these documents habitually are misplaced or are the wrong
    version which requires significant duplication of effort.
  •  Identification of the authorized borrower’s representatives
    during the loan negotiation process can be subject to weak security and
    controls that generally increase compliance and legal complications for
    borrower.
  • Banks cannot locate your completed documents after submission
    due to error prone processes and routing activities.
  • Banks do not know if the documents that you mailed or sent
    by courier have arrived at the Bank and therefore delay the loan processing
    activities.
  • Compliance and transparency of the process is inconsistent particularly
    with keeping pace with the correct version that reflects new
    compliance language.

The experiences highlighted above are difficulties that are assumed by many
to be part of the game and accepted as a way of doing business! However,
that was yesterday in a different economic climate. Today, new technology
and processes enable banks to become better at the process of managing
customer expectations. In addition, collaboration tools can empower
bank staff to work in an efficient and timely fashion with their clients which
results in significant gains in improving the customer experience.

The Productivity Factor

For the last decade, a key goal of banking institutions within their lending
areas has been to rely less on manual-centric paperwork by automating
lending transactions and communications. Thus the stacks and files
of paper that clutter lending offices and bog down employee productivity are
evidence of the fact that many banks are far from achieving their goal and
improving the overall productivity of these activities. So why have banks not
improved their business practices in dealing with their lending activities?
Some key causes may include bank management’s:

  • Failure to appreciate the strategic and mission critical nature of content
    management as applied to bank lending in ensuing that customer
    loans are handled in the most effective and efficient manner supported by
    state-of-the-art technology and time-tested best business practices.
  • Employment of legacy document and content management systems
    lacking:
  1. Critical functional and technical capabilities
  2. Cross-division and external integration for exchange of
    vital documents and information
  3. Automated process work flows
  4. Non-supportable outdated versions of vendor content
    management solutions.
  • Absence of enthusiasm to aggressively challenge current failing loan
    policies and processing activities and identify enrichments to customer
    customer and stakeholder ‘touch points’ and the overall banking experience.

The Lending Activity Triangle

What are the critical components for consideration when undertaking
bank lending improvement? Our experience is that best-in-class
banking institutions place focus on the lending activity triangle elements
namely, people, process, and technology people.

The focus on each of these is both individually and combined as
outlined below:

People: The people focus of the triangle is always the most complicated
as training typically takes a back seat to populating the production line with
live bodies to move loan packages through the paper mill. A successful bank
lending activity will generally have difficulties if the people component is not
fully prepared with appropriate training and empowered for prime time
immersion into the process as productive employees. Considerations for
evaluating the people element include matching skills and experiences with
the current employee universe, training requirements, and approach to
continual monitoring employee performance.

Process: What should be the first consideration for enhancing bank lending?
Improvement typically starts with identification of the current process
weaknesses followed by a top-to-bottom redesign of the associated activities and
flows. Key decision points include considerations for bank policies controlling
cross organizational borders, roles and responsibilities, governance and
risk and control.

Technology: A successful process design typically entails pairing the redesigned
process with the most appropriate enabling and supporting technology to meet the
joint objectives of improved productivity and customer touch point effectiveness.
Key considerations include design of an innovative technology architecture that
provides functionality richness, user flexibility, performance, and support
and cost effectiveness.

In actual fact, no major software implementation is really about the technology.
It’s about aligning people, processes, and technology to implement a  solution
that meets business needs. The result is the ability to capitalize on the full
potential of a business technology investment.

Changing a bank’s approach to improving overall performance by embracing
a holistic approach to people, processes and technology has the potential to
mitigate risks, inject better-than-anticipated improvements into your
organization, and lead to a successful deployment of a content solution
that solves critical business problems.

The bottom line is that banking institutions need to constantly challenge the norm
so as to identify and enable necessary changes on an ongoing  basis if they are to
maintain or attain competitiveness in their targeted lending areas.

In conclusion we will leave all with a topical W. Edwards Deming quote:

“A system is a network of interdependent components that work together to
try to accomplish the aim of the system. A system must have an aim.
Without the aim, there is no system.”

Authored by:

Brian Blair, President of Malvern National
Services LLC (http://www.malvernnational.com) and,

Kevin M. O’Sullivan,
President of The Knowledge Compass, Inc. (http://www.knowledgecompass.com )

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