Why a Loan Management Platform is So Essential in Digital Transformation in the Banking Sector

According to McKinsey, in 2020, 50% of financial companies made digital development one of their top priorities, which is almost 20% more than in 2017-2019. But not everyone has been successful in digital transformation.

In our last article, we mentioned that the lack of a single platform for all processes is an important reason why companies fail in digital transformation. Modern banks that want to transform their business should have loan management software to ensure success. 

In this article, we will explain the role that a unified and scalable platform plays in the digital transformation of banking and why success is unreachable without it. 

A unified and scalable decision platform is the foundation for digital transformation

To succeed in digital transformation, a company must move away from legacy technologies and fully migrate to modern digital tools for customer service, human resources, analytics, and forecasting.

Experts from FICO & American Banker point out 5 digital opportunities that are most important for banks:

1. Using a single scalable platform for making decisions based on analytical data.

2. Personalizing the service based on the needs of customers and the bank’s internal economic and business conditions.

3. Providing business users with the tools to create new strategies, enforce rules, and conduct analytics without the need for IT professionals.

4. Re-using connected decision assets to ensure transparency of customer interactions.

5. Using monitoring tools to simulate situations and predict outcomes before making decisions. 

Combining these digital capabilities is a surefire way to create smarter, faster, and more profitable decisions throughout the customer lifecycle.

Why digital transformation fails without a unified and scalable platform 

The FICO & American Banker 2020 Executive Survey shows that banks with best-in-class transformational capacity now rank themselves low in all 5 categories.

The bottom results can be seen in areas related to service personalization (4%), data usage (5%), and the creation of new strategies (8%).

This trend is especially noticeable when compared to more flexible and progressive FinTech companies. Most banks are far from the level of customer focus that competitors are striving for.

This minimizes the chances of success and hinders customer retention. The right solution in this situation is to implement a unified and scalable platform that works with people, technologies, and processes at the same time.

Scalable decision-making platform as an essential tool for storing data 

Due to the specifics of their activities, financial structures often have complications with storing data and providing access to different departments for making reasonable decisions. 

According to the latest statistics, only 5% of banks use all the data they own to make decisions on a business scale. This is critically small, compared to 31% of FinTech companies.

It is a problem that can be solved with the loan management platform, as the organization of a business data storage system is one of its priority tasks. 

On the platform, data is stored centrally in the cloud, and all the bank’s departments have limited access to it. Exchanges with employees, customers, and partners are provided by electronic document flow and this keeps the process streamlined. 

It ensures transparency in working with analytical data and documents, positively affecting the speed of making management decisions and responding to loan applications.

Loan management platform & Banking Cyber ​​Security

Interpol reports that in 2020, cybercrime intensified attacks against critical infrastructures. There was a 569% increase in malicious registrations and a 788% increase in high-risk activities.

Experts claim that cyberattacks are the most dangerous for banks that focus on improving customer service and lose sight of security problems. This causes serious security implications.

According to a report from IBM, the damage from data leakages could be on average $3.86 million. Lenders are forced to pay about $900,000 to remediate the consequences of malware and restore the system.

It is more profitable to prevent digital fraud in time than to deal with its consequences. 

The introduction of a loan management platform based on AI, ML, Big Data, and blockchain technologies takes data storage to a whole new level:

• Data is stored centrally in the cloud, and all bank departments have delimited access to the storage. Exchanges with employees, customers, and partners are carried out through electronic document flow. 

• The system detects consumer and business fraud in real-time, as well as hacker attacks. Data is protected with two-factor authentication, biometric identification, proxy, VPN, and device verification.

Ensuring and maintaining data security at all levels of the business helps to increase trust on the part of the bank's customers and partners.

Loan management platform and compliance

Compliance is essential for financial institutions. But, unfortunately, it is one of the most challenging and stressful processes in working with data. The bank has no room for error here.

Often the employees are responsible for this process. They have to manually track changes in legislation and check data for compliance with regulations. It entails time-consuming labor and human risk factors. 

If a bank does not have a unified decision platform, it is constantly at risk. Even a minor mistake in working with customer and business data can lead to fines, reputation damage, and loss of customer confidence. 

Adding a loan management platform automates the compliance at all stages of the loan life cycle: from signing a contract to servicing, debt collection, and reporting on portfolios, and more.

Platform and customer experience

Customer experience is vital in the lending industry. Banks that use outdated technology fail to deliver a quality user experience and lose customers.

There are problems connected with a low speed of consideration of applications, paperless processing of documents for issuing loans, fragmentation in multichannel lending, and lack of transparency in credit processes.

Adding or upgrading the company’s loan management platform solves the problems associated with the user experience:

1. Collecting and analyzing data from different channels, storing profiles and interaction histories for a better understanding of the needs of the target audience.

2. Self-service for borrowers by adding a chatbot and online chat to speed up customer interactions.

3. Improved functionality by introducing AI, ML, and RPA to improve the accuracy of credit decision-making.

4. Organizing lending through multiple channels and platforms to attract digital natives and millennials.

5. Personalization of the customer journey based on their credit history and GPS localization to personalize the service.

6. Informing the client about the lending stages and using data only with their consent to gain confidence and meet regulations.

According to the Digital Banking Report, 85% of financial institutions allow customers to apply for loans online. And only 44% of them suggest doing it on mobile devices.

Conclusion

For modern banks, a loan management platform is a key tool to the success of the digital transformation. 

It optimizes and automates vital business processes: data storage, security, compliance, and maintenance. 

As a result, the bank achieves its main goal: customer satisfaction, respect of partners, and recognition in the market.