Financial Lending - Learning from Industrialisation!

Banks are under intense regulatory pressure to improve their services and mitigate financial risk while providing more lending to businesses and consumers that’s critical for a return to growth in many major economies globally. Upcoming measures linked to the European Mortgage Credit Directive and the UK Mortgage Market Review due in April 2014 will put an even stronger focus on customer protection and improving transparency and accountability in financial lending. 

Organisations that were used to be able to implement change slowly and over years, now need to be able to keep up with regulation, but also to not let innovation get swamped by just trying to remain compliant. But how can lenders deliver more flexible, more competitively designed products and services, while at the same time ensuring compliance with new regulations and keeping down IT costs? 

To be able to achieve the needed agility, the financial services industry needs to reinvent itself by taking a look at what the manufacturing industry has known for ever. Manufacturers have learnt long time ago that having under-utilised resources sitting in a warehouse is expensive and destructive at just about every stage of the process, from production to consumer purchase and use.  

What delivers much more value is the ‘Just in Time’ approach to delivering financial services that centers around producing goods just in time to meet demand. This will enable financial organisations to use their resources, including systems and people, just as they need them and when they need them. 

To be able to achieve that, financial institutions need effective systems that are able to support flexible deployment of people and resources. This will enable lending providers to divert valuable resources where they are needed most, at the right time, eliminating the need for unnecessary hiring, firing and retraining of staff that current operational models display. Moreover, this will lower the percentage of fixed costs and mitigate business risk by reducing the dependencies between the business model and external market factors.  

To achieve real transformation, financial institutions need consistent IT processes that span the full financial lending lifecycle – from marketing and sales, to loan management, fraud and claims processing, and customer service.  By connecting all operational siloes of the business, financial institutions will be able to unify lending processes, whilst improving efficiency and the ability to adapt to changing regulatory and market conditions. 

Such a centralised approach will allow financial organisations to reuse common standards, rules and processes across multiple lines of business such as mortgage, commercial and retail lending, foreclosure recovery and brokerage on-boarding. Moreover, by combining process standardisation with intent-driven rules, users will be able to comfortably shift between roles, moving from onboarding to servicing, or collections and resulting in faster resolution of customer enquiries. 

Ultimately the ‘just in time’ approach will provide financial organisations with the needed agility required to meet and exceed regulatory requirements without sacrificing on innovation and incurring intolerable costs. This will result in achieving business transformation that empowers the business to quickly adapt to market changes and regulatory requirements, whilst fostering innovation to maintain a competitive edge.