While it's no secret that lenders are looking for better ways to simplify, streamline and continuously improve the loans, credit and financing processes within their organizations, it's not always clear to them what changes will have the greatest impact.

A few months ago I helped conduct a survey of North American retail banking executives to examine current trends in optimizing loan processing. We found that most executives are not satisfied with their current environment and see loan complexity as the major factor driving the need to improve performance.

A simple plan then to apply technology to remove complexity should be the answer. However, just as in the movie “A Simple Plan”* we can all appreciate that nothing is really ever that simple. There is solid evidence though that Case Management can make a significant impact.

In this installment of my ACM article series, I share what our recent survey uncovered about the current state of the lending environment, as well as highlights of trends and best practices for operational improvement from my “Mending Lending” webinar with Rod Nelsestuen (@rodnelsestuen) of CEB TowerGroup, including insights as to how Case Management can help lenders.

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Why is Lending so Complicated?

Properly managing the customer experience for loans and other transactions is becoming increasingly complex, in large part because of multi-channel integration challenges. Mobility and online channels are an opportunity that bankers and customers alike are talking about, and a problem that institutions know they need to solve in order to optimize customer experience. The social and mobile aspects are converging very quickly and the industry needs to catch up with what is happening in retail and personal consumer use.

And, while banks have always had customer trust as a priority, the social challenges of widespread viral threats to their reputation are new. Never before have banks been in the situation where customers could for example with one single tweet create a reputational nightmare or with a YouTube video criticize a financial institution and what it did or did not do for them. The stakes for customer experience are climbing higher.

At the same time, regulatory change is accelerating and impacting on-boarding, new account opening, origination and account management. For basic loan transactions many of the regulatory hurdles are well known and automation has helped to simplify the process. But difficulty increases with more complex customers, products and relationships, as does the amount of time that’s involved.

For example, there are a larger number of players or actors in the process specifically around certain kinds of expertise when you get into commercial or corporate lending where you need industry and compliance knowledge that goes well beyond a simple scoring. In addition, specifics are still to be revealed in legislation such as Dodd-Frank and other regulations, leaving institutions with significant risk if they cannot find a way to quickly respond.

While consumer protection rules seem to be on time, that’s both good news and bad news. But the problem there is we don’t exactly know what all those rules will be over the long term because the Consumer Financial Protection Bureau has a huge mandate and has broad-ranging and deep powers to determine what it is that they’re going to require going forward.

Another significant driver of complexity is the existing IT architecture and application portfolio. The financial services industry has a huge number of older, legacy systems that have been augmented over time with different technologies on top. There is a host of middleware that’s been put in place to try and make things behave more simplified at least on the user’s end. Yet complexity continues to exist both for the users and behind the scenes, and that can cause problems and drive up costs.

What the Survey Said …

Earlier this year, we invited selected executives in North America to participate in a survey we conducted on trends in optimizing loan processing working with Gatepoint Research. If you’d like to see the survey findings summary you can download a copy here.

We decided to do the survey because as we were talking with lending institutions, many seemed to be struggling to deal with cost and cycle time issues in their environments. We wanted to understand and share a snapshot about the current state of the lending environment, as well as highlights of trends and best practices for operational improvement. With my focus on case management and business process improvement, it is not surprising to me that our survey revealed the ability for continuous improvement as the top priority for loan processing.

The top five executive priorities in rank order are:

5. Improve management visibility into the process

4. Remove paper from the process

3. Reduce the cost of processing a loan

2. Reduce loan process cycle time

1. Optimize and continuously improve processes across the business

In fact, in my opinion all of these priority improvements require an approach and technology like dynamic case management that can continually adapt to changing customer and regulatory demands. Perhaps most significant though, with the industry’s focus on customer acquisition and new business growth, is the ability of Case Management-based lending solutions to help us fight two arch enemies of a good customer experience:

  1. length of time it takes to provide a service
  2. customer perceived complexity with which they have to deal

Studies have shown again and again that the simpler you make it for somebody to do business with you, the more loyalty you’ll build with them, the more wallet share you’ll get and the better growth you’ll have from an organic perspective as an institution.

Next month in part two of this three part series on lending processes I’ll discuss how case management can help lenders prepare for the future.

* The movie “A Simple Plan” is a dark comedy about three friends who find millions of dollars in lost cash and devise a simple plan to keep the money if no-one claims it. Of course, nothing turns out simple.

Editor's Note: To read more of Deb Miller's Adaptive Case Management articles:

-- How Adaptive Case Management Builds Business Agility