Commercial banking, particularly commercial lending, will face 3 disruptive forces in the next eighteen months. First, macroeconomic conditions (inflation and recession) may take their toll on certain sectors. This could have a disproportional impact on your loan portfolio, and your risk profile, if you have heavy concentrations in those areas. Second, there are strong and well-funded competitors (national banks, FinTechs) who are targeting some of your most profitable customers. Third, borrower expectations have changed, and they are looking for a bank with which it’s easy to do business.
Manual commercial loan processing puts financial institutions at a competitive disadvantage.
Here’s why:
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- It’s inefficient for both the customer and your bank.
- It does not meet borrowers’ new expectations based on digitization in retail banking. And, the Payment Protection Program showed commercial banking customers that commercial banking software can be highly effective in processing loan applications.
- “At its onset, participating banks and credit unions were able to distribute 14 years worth of federally backed loans in just 14 days to small businesses…”1
- An existing BankPoint customer was able to grow their portfolio by 30% through PPP and was able to outperform their peers. “I don’t think we would have been able to execute close to that level if we didn’t have BankPoint.” – Director of Credit Administration, $1.5B Texas bank.
- It makes it more difficult to monitor loans and perfect liens, affecting banking compliance and risk management.
What you can do to prepare for disruption: Automate complex manual processes with banking systems software.
Modern banking systems software can overlay your core banking system and aggregate data from other key systems – such as your Customer Relationship Management system – giving your bankers timely access to critical customer data. The right bank software can also add workflows to provide efficiency and consistency, dashboards to monitor your loan pipeline and portfolio, and facilitate loan review and reporting.
Why your bank software matters
Automated banking systems software enhances bank performance, customer experience, and employee satisfaction. That’s because commercial banking software:
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- Reduces loan onboarding time – from weeks or months to days or hours.
- Better meets the changing expectations of commercial customers.
- “95% of commercial clients who bank digitally in their consumer lives expect their financial institutions (FIs) to deliver digital services for their businesses as well.”2
- Enables bankers to focus on relationship building and customer support vs. managing paperwork.
- Gives regulators better access to loan monitoring data; helps FIs stay on top of liens.
Other advantages of commercial banking software include consistent and repeatable processes that save time and money, easy access to data from other bank systems, which simplifies reporting, and the ability to automatically capture audit logs and approval history, which facilitates staying on top of banking compliance.
“From the end-to-end digitization of the credit process to the creation of clear segmentation rules, maximizing the efficiency of the SME (small-to-medium enterprise)-lending process can help banks generate more opportunities and to close more loans. Now, more than ever, banks must reimagine the SME customer experience. The most frequently noted pain point for SME borrowers across the globe is uncertainty and delayed time to funding. Automated lending can significantly streamline processes. By redesigning and digitizing a significant portion of the customer journey, banks can substantially enhance the SME experience.”3
Strategic investments in technology today can help your financial institution navigate volatility and uncertainty.
Selecting a knowledgeable partner who knows banking compliance and can help you execute quickly is important. If you liked this article, consider: Evaluating commercial loan automation vendors? Start with these 3 steps..
Sources:
1. The Pandemic Changed Commercial Lending Almost Overnight. What the Future Holds. Barron’s’
2. Ready for the Imminent Disruption of Commercial Banking, AiteNovarica
3. How banks can reimagine lending to small and medium-size enterprises, McKinsey & Company
