Here is part two of last month’s article "A Simple Plan: Why Lenders Need Adaptive Case Management." In this installment we’ll focus on process improvement with case management to help lenders prepare for the future.

Lending Challenges … Past, Present and Future

Lending has been through some difficult times recently, especially in the mortgage arena where the lending process was broken and a good deal of the effort was on “fixing” or mending the guardrails and compliance aspects. Now there is also focus on dealing with growth.

Automotive leasing and financing is rebounding and in growth mode as is the consumer lending and card industry -- both virtual and physical cards. At the same time, the industry is facing customers that expect almost instant approvals and immediate responses from their banking institution. In the card and auto lending side of things, the penalty for latency is your institution does not get the loan and the customer goes somewhere else.

Costs are growing as well. If you have or know someone who has applied for a home mortgage loan recently, the process is now fairly onerous. While that’s certainly not good news for customer experience, it’s worse news for the cost of doing business and for acquiring these kinds of loans.

Delinquencies are also at historically high levels. All of this combines to create challenges in the cost of doing business in the future, servicing customers and trying to figure out how to manage customer relationships and satisfy customers going forward.

And if you think about the regulatory pressure we’re under today, the magnitude of regulatory change is unprecedented, at least in our times. As my colleague Rod Nelsestuen (@rodnelsestuen), a senior research director of CEB TowerGroup, points out in our recent “Mending Lending” webinar, the banking world is changing and the regulatory pressures are both important to the financial liability of the institution when they’re looking to capital liquidity, leverage ratio, and the like and in their operational component when they’re dealing with customers and reporting to more regulators for more kinds of activities. All to be able to ensure and then to prove what they did was the right thing at the time.

What Does All This Mean for Technology Investment Priorities?

Underlying much of this is the desire to reduce cost and become more efficient. Technology investment choices must be made that can impact across the enterprise and at the same time deliver solutions for specific areas like loan processing.

On the one hand there is compliance and integrating risk and revenue. On the other hand there is the need for enterprise-wide information management and customer-centric decisions as the next best action and improving channel experience. At the center there is a need to redefine and restructure core IT systems and operations, revisiting product bundling and pricing, as well as BPO, outsourcing and cloud as strategic cost management.

Leveraging technology in the drive for productivity is critical as well. This is an area that I focus a good deal on in my work, including looking at how to improve process performance for areas like complex loans, but also across the board for exception handling, for example, with fraud alerts. I see process improvement and its related technologies like case management as foundational to optimizing lending. This raises the question of where the benchmark is today for business process maturity in this industry and how that might impact technology spending priorities.

As CEB TowerGroup work with their Financial Services Operations Council to look at their plans and what they think their level of maturity is in business processes, they found that there is a lot of headroom for process improvement. We share details on this in the Mending Lending webinar.

One statistic that stands out for me is that less than 50 percent of the executives in this group say they have satisfactory process management. Before the market crisis, the results were different. With all that has happened over the last four or five years and with a compelling focus to drive simplicity for both customer and regulatory reasons, people in this industry now think in different ways about how important it is to manage the processes of the business.

In fact, CEB TowerGroup found that 46 percent of this group planned to increase their BPM (business process and case management) technology spend in 2012 into 2013. This is a pretty significant number, and indicative of organizations that are trying to become more efficient and effective.

The simple recipe for success I have seen in practice is applying case management for process improvement. I think that one of the easiest ways to appreciate best practices is through the lens of a case study. So stay tuned for the conclusion of a ”Simple Plan” in next month’s article in my adaptive case management series where we’ll look at an example of how case management can help resolve lending business challenges.

Editor's Note: Deb Miller's three part "A Simple Plan" series started with this article:

-- A Simple Plan: Why Lenders Need Adaptive Case Management