End To End Commercial Lending – Getting Ahead Of The Game
3 April 2014
Despite the clear difference in the way that institutions of all sizes manage their end to end lending processes one fact remains the same, there are many disparate systems in play to manage lending from origination through to maturation.
Whether an origination system may be in use due to the size of an institution or the complexity of loans or if specialty and niche systems are needed and whether technology is ultimately vendor delivered, in-house or even spreadsheet based, whatever the combination, the end result can mean a large 'integration spaghetti' of disparate systems.
Thanks in part to the 2008 Credit Crunch and the resulting trickle down globally, banks are reexamining their entire lending processes from the minute they speak to a potential borrower of funds to the point of loan maturation. Technology strategies therefore are shifting towards an end to end lending system and away from "integration spaghetti" made up of niche systems to handle everything from origination to document creation and covenant tracking to loan servicing.
Proper technology with rules and workflows in place at the origination process can help avoid a repeat of the poor credit decisions of the 2008 crisis. Exposure, risk and the profitability of a loan now demands better overall connectivity with streamlined operations delivered on a modern technology platform. With better visibility and flow of information through to a servicing system that can not only manage loans but also monitor loans that are not performing well can enable banks to get ahead of the game when some servicing assets may not be performing as well as originally intended.
But beyond the obvious lessons learned from 2008 crisis, system consolidation today is simply being driving by two major factors. First,the ability for a platform to function; cost constraints and the risk of having too many systems, too much overhead infrastructure and disparate information as well as the functional ability to manage any type of commercial loan a bank can offer from the most complex, bespoke syndicated to the high volume bilateral. Second,how well the platform integrates; delivering real time information for a flow of data from servicing systems to risk and other operational systems resulting in the real ability to process things across the board and from with the origination process straight through to the loan maturation process.
Shoring up the commercial lending space means that institutions of all sizes are reexamining their entire lending process with the goal to consolidate onto a single end-to-end platform to mitigate risk, lower cost and drive efficiency; three pillars of any bank operating model.