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Many banks operate complex and outdated legacy IT systems, putting pressure on costs and often hampering them from leveraging digital technologies to scale for growth.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 Outdated credit risk models are also making it difficult to assess creditworthiness of clients.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.

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Digitally enabled accelerated lending (DEAL)

Deloitte and Genpact have teamed to bring DEAL to market as a digitally enabled managed service offering for wholesale and commercial lending that can help banks accelerate their transformation, overcome potential execution barriers, and stay ahead of future market shifts.

DEAL offers operating capabilities to support the day-to-day execution of the lending process and overlays activities onto the bank’s existing lending process, from client outreach through loan servicing and portfolio management. These capabilities under DEAL are augmented with digital and analytical tools that improve operational efficiency.

DEAL manages key operational activities of the loan origination and servicing process, allowing bank executives to focus on client experience, decisioning, and other market-making activities.

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When to consider DEAL

Wholesale and commercial banking has experienced minimal change in its approach to lending, which presents a strong opportunity to reimagine how work is done and how value is delivered to clients. DEAL can be the right answer for those tackling increasing market pressure or managing transformation roadblocks.

Managing emerging challenges and capture opportunities:
With increasing market pressures that are inhibiting long-term growth and profits, banks are looking for more streamlined investment options with lower costs and quicker pathways to digitization. DEAL can help banks grow and protect their wholesale and commercial lending business by providing a service that is the digital enablement of the loan process, supported by operating capabilities.

Addressing large-scale transformation barriers:
Many banks have begun their transformation journey, and along this path, several barriers to execution have emerged:

• Prolonged timelines and the pressure to deliver results often forces transformation engagements to their “minimum expression."
• The complexity of execution results in smaller-scale improvement over radical, and at times much-needed, transformation.
• Previous transformations often cause fatigue, limiting appetite to take on additional scope.
• And finally, the difficulty to secure funding can often dampen the enthusiasm to execute.

DEAL, a managed service, can help push through the transformation agenda, lower investment needs, and allow for quicker realization of benefits that can fund related projects. Banks must effectively address the emerging challenges and opportunities related to technology, starting with improving the client and employee experience.

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