Five New Year Resolutions for Sensible Lending
January 9th, 2013
We are taking our first steps into 2013, and now it is the best time to re-think our business strategies.
This article considers front-burner issues related to lending, and shows leaders how they can adopt a different approach to new technologies and disciplines and fuel lending growth in the coming year.
1. Maximize the proportion of automated decisions.
Manual data input and application handling is prone to human subjectivity and mistakes, and is not optimal for standard decisions.
Exclude experts from the majority of decisions and focus them on making new and creative decisions. Apply decision automation where it works best and use a more manual approach to capture new opportunities. Standard operational decisions should be formalized and automated.
Automated operational decisions with formalized rules are available for constant analysis and improvement.
This way you can minimize the amount of skipped decisions thus minimizing missed opportunities and revenues.
2. Encourage reasonable risk-taking and prudent growth with custom scorecards.
Predictive models are rapidly becoming an essential part of customer acquisition and loan underwriting. With application scorecards, you can make underwriting decisions more quickly and accurately.
Jennifer Tescher, Center for Financial Services Innovation, stresses the importance of acquiring more customers among the middle class population in the Banking Predictions for 2013: “2013 is the year banks dust off their reputations by embracing the middle class. The mass market isn’t what it used to be. Bankers need to leverage technology to reinvent products, delivery channels and the overall experience to win back the hearts – and wallets – of the average consumer. By focusing on the financial well-being of their customers, banks might just improve their own financial outlook.”
3. Implement sophisticated decisioning logic using visual decision flow editing interface.
To capitalize on changes in lending environment organizations must be able to make complex process changes in a flawless and transparent way. Our experience reveals that agile and efficient lending is impossible without a visual decision flow editing tool.
4. Harness untraditional data to maximize borrower assessment and pre-screening efficiency.
John Dineen, GE Healthcare shares in his recent Forbes interview: “Harnessing big data means gaining the ability to go out and collect data from multiple sources in order to make better decisions.”
About 88 million consumers (35% of the adult population) in the United States have little to no credit history, which makes them unscoreable, says Steve Ely, the CEO of eCredable in Alpharetta, Ga.
To acquire best-bet customers, ensure that your loan origination software has seamless connection with alternative data sources while avoiding dependence on a single data source.
5. Ensure efficient collaboration of everyone involved in the decisioning process
In order to embed analytics into everyday operations you need a lending system that streamlines decision flow. But it is equally important to culturally orient and motivate your team toward using analytics and automated decisioning.
L. T. (Tom) Hall, CEO & Transformational Change Leader at Resurgent Performance, Inc. shares a lot of valuable recommendations on improving an operational culture: establish a cultural framework and corporate ideals by rewarding sound values and behaviors within the team.
Approximately 45 percent of the population have committed to New Year’s resolutions this year, says a recent study by the University of Scranton’s Journal of Clinical Psychology.
Aspects of life that we struggle to improve are very often nothing more than a consequence or certain behavioral patterns. It is wiser and more effective to deal with the behavioral patterns.
This principle is true for risk management as well. Instead of adding minor policy and process improvements, make a serious commitment for 2013 and introduce a new, forward thinking approach to lending.
Author: Anna Zelenskaya | Google+