Commercial lending digital transformation

Commercial lending challenges: The case for change

Manual processes still exist in the lending life cycle despite new technology rollouts
Even today, 30 to 40 percent of lending resources time is spent on noncore, automatable tasks due to disaggregated systems and manual tasks. The high degree of manual efforts is driven by inefficient processes and inaction around improvement opportunities (including digitization). Redundancies across credit analysis, underwriting, loan booking, and portfolio management processes need to be addressed.

Legacy technology has hindered banks' agility to evolve with next-gen solutions
Many banks operate complex and outdated legacy IT systems, putting pressure on costs and often hampering them from leveraging digital technologies to scale for growth. Not being able to harness innovative technology can severely hamper their ability to drive differentiating experiences for clients.

Legacy underwriting and warning systems slow agility with market trends
Traditional banks that rely on manual, paper-intensive underwriting processes prolong the loan approval process. Outdated credit risk models are also making it difficult to assess creditworthiness of clients. Both facts impede a bank’s ability to keep pace with competitive forces in the market, as reflected by the rapid growth of fintech loan portfolios.

Limited insights through data hinders ability to drive front-office performance
Lack of rigorous data analytics to draw insights from loan or payment portfolios can potentially hinder most banks from building a comprehensive understanding of clients. In fact, only 37 percent of clients believe that banks understand their needs and preferences adequately. Limited access to data leads to poor loan performance management and makes it difficult to identify areas with subpar operational efficiency.

Fintechs’ ascent in recent years requires banks to define a go-ahead strategy
Fintechs are working hard to affect banking through digitization with the promise of better client experience and faster decisions at a lower cost. Commercial lending is no exception to this disruption. By using data and technology, fintechs are challenging the traditional business model of commercial lending with differentiated offerings and services.

Clients are more willing than ever to change banks for innovative experiences
Commercial clients are increasingly expecting a level of service similar to that which they receive as retail customers; clients are often willing to switch if their expectations are better met elsewhere. Banks need to keep pace and adopt means to originate, decide, and close loans faster while offering a frictionless client experience.