Outpace new competitors with a cloud-based digital lending system

Case studies

Outpace new competitors with a cloud-based digital lending system

A major bank worked with Deloitte to reinvent its lending system in the cloud

This client case of a large European bank illustrates the next evolution of innovation assimilated in financial services and the achievable wins for both the customer and the bank. The article provides insights on a cloud-based approach and how it can help build increased engineering capabilities that span geography and forge new connections with other industries.

The center of a broad ecosystem of SME services

A large European bank had a long track record of lending to small and medium enterprises (SMEs), but found its competitive position challenged by faster-growing, more technology-centric small entrants. All the while, developments such as strict new capital requirements and a flattening yield curve further eroded the traditional advantages of size. Traditional banking assets, like brand recognition and a large customer base, didn’t provide the speed and ease borrowers were looking for—advantages they were getting from new, smaller banks that used more flexible technology.

The bank had been investing in digital updates to familiar processes. Now it pivoted to aim higher—to position itself at the center of a broad ecosystem of SME services and offer a better customer journey. The first element of this ecosystem would be a renewed commercial lending system that offered the streamlined application process, mobile access, and fast approval decisions that customers wanted.

 

The PDF of this article with more details and insightful results is downloadable on the right.

Cloud-based digital lending system

The bank worked with Deloitte to determine what customer standards its new cloud-based Digital Lending System should satisfy, and to define the characteristics the technology itself would need to meet its mission. For the customer perspective, the teams interviewed more than 3,500 commercial borrowers to learn their priorities and frustrations, and also invited input from employees throughout the organization. To set the bar for the technology, Deloitte and the bank established a “three lens” standard for any undertaking: It had to be desirable, viable, and feasible. Deloitte’s OpenDATA platform, powered by AWS, satisfied those criteria thanks to the cloud’s modular, flexible, and scalable programming environment. This allowed the bank to move from traditional development to an Agile process, and the lending system served its first customer only 13 weeks after the project began. Credit applicants can use a mobile interface to submit necessary documentation, and an artificial intelligence-powered risk engine calculates the customer’s credit forecast in seconds, leading to a loan decision in less than 15 minutes.

The transformation

To allow for speed and allow the project to “fail forward” the way a nimble FinTech entrant can, the team decided to start at the edge of the organization rather than the core. Because this approach proved the business case quickly and showed customer value, two new teams have branched off from the original to make the transformation more comprehensive: one to integrate similar innovations into the core business, and one to focus on further innovations such as application programming interfaces (APIs) that can drive third-party integrations and new lending products. This transformation has demonstrated the potential for this bank and other financial institutions to bring similar OpenDATA-driven innovations to other functions such as lending, mortgages, digital payments, compliance, and transaction monitoring. This cloudbased approach can help build increased engineering capabilities that span geography and forge new connections with other industries.

The wins

  • The bank has embraced a digital mindset that goes beyond reskinning old processes and reimagines business processes from the ground up
  • Employees from across the business, not only technology specialists, participated in advising the system design
  • The new lending system requires low effort from account managers, which can make it easier to scale it for large-scale use
  • Demonstrated that a traditional bank can adapt fintech-style approaches that lead to results more quickly—capturing business case value within a year instead of the traditional 3- to 5-year programs
  • The bank has been able to adopt a new credit risk model, based on payment transaction data from the Digital Lending System, that scores individual clients more accurately than the old one
  • The bank considers the Digital Lending System a model for expansion into other areas, such as consumer lending
     

Jumpstart your transformation journey

It is not always simple to implement emerging technologies in a coordinated way — but the right partner can help you enhance your investments and develop a powerful innovation strategy. Please contact us to discuss these findings and how they apply to your firm and how to jumpstart your transformation journey.

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