“how firm a foundation:” · 11/5/2018 · “how firm a foundation:” ... partnered to help...
Post on 22-May-2020
3 Views
Preview:
TRANSCRIPT
“How Firm a Foundation:”The Basis for Building a Growth‐Oriented
Digital Credit Process
2018 RMA Annual Risk Management ConferenceNovember 5, 2018
©2018 Automated Financial Systems, Inc. All Rights Reserved. AFS and all AFS product trademarks Are registered trademarks of Automated Financial Systems, Inc. The content of this document represents confidential and proprietary information of AFS. This information may not be disclosed to any third party, other than the direct addressee and its employees, agents, and representatives. The infringement of this prohibition may violate AFS proprietary and trade secret rights with resulting irreparable damage to AFS. Your cooperation is requested and appreciated. Thank you for your help in this matter. AFS 123 Summit Drive, Exton, Pennsylvania 19341. Telephone (610) 524‐9300 Fax (610) 524‐7977
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 22018Achieving Success through Execution
Agenda
Digital banking – why now?
Digital commercial lending – why not now?
Digital, technology, data and the customer: a common bond?
Five foundations for a successful digital credit transformation
AFS and Greenwich: where are banks in the commercial lending digital evolution?
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 32018Achieving Success through Execution
“Digital Transformation:” What are We Really Talking About?
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 42018Achieving Success through Execution
Evolution of Digital Banking: Why the Excitement Now?
“Digital” technologies and capabilities have long been in banks
Several factors have combined to accelerate digital uptake:
Near total process automation now possible
“Digital natives”
Mushrooming growth of fintechs
Post‐financial crisis banking environment
“Analog” falling farther behind
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 52018Achieving Success through Execution
Is Digital Commercial Lending Imperative? Inevitable?
Commercial/corporate banks have lagged retail segments in uptake of digital
Several factors and circumstances have caused the slow uptake of digital in commercial lending
Multiple potential impacts of digital create opportunities in commercial lending
But doubt, confusion and hesitation remain
Digital must convincingly meet business objectives
Credit Processes Provide Major Digital Opportunities for Banks in Several Functional Areas
6
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 72018Achieving Success through Execution
Gaps Between Banks and Customer Expectations
There is a Clear Link Between Digital Banking and Customer Support, but Banks are Behind
8
Banks that have begun to digitize their credit processes are improving the ease of doing business…
But few banks now offer more than basic online capabilities to their commercial customers…
0% 20% 40% 60% 80% 100%
Change company…Access to real-time data
Mobile access to loan…Automated self-service
Initiate advanceInitiate payment
Basic loan inquiry
0%14%
26%48%48%
62%81%
Sources: Greenwich Associates Market Pulse, AFS Survey
9Greenwich Associates
Customer Satisfaction, Loyalty and Profitability are Most Influenced by Ease of Doing Business with a Provider (in 2017)
10
But Now, Digital Channels Surpass the Banker as the Primary Driver of “Ease of Doing Business” Among Commercial Executives
Bankers remain a critically important element of the equation despite now ranking second to digital channels as the go‐to channel for commercial customers.
Greenwich and AFS are Partnering to Help Banks Understand and Leverage Digital Lending
Need to Meet Heightened Customer Expectations for Ease of Use and Speed of
Decision
Continuous Pressure to Reduce Costs by
Minimizing / Accelerating Process Steps: Sales through
Servicing
Urgency to Improve Accuracy of Data for
Servicing and Portfolio Management
A “New Normal” of Credit Operations is Emerging:
Greenwich Associates and AFS Have Partnered to Help Banks Understand Why, Where and How to Deploy Digitization in
Their Credit Process
Digitization Will Be Critical to MeetingAll Three Challenges… But Where to Begin?
• What do customers expect?• How have other banks deployed digital
solutions, and how do you compare?• What specific benefits should banks
expect by digitizing processes?• What are the risks of not digitizing?
11
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 122018Achieving Success through Execution
#1: Align Digital Strategy with Business Strategic Goals
Growth, customer experience, efficiency
Line of business leads, technology follows
Incremental results in pursuit of longer‐term goals prove value, create capital and confidence
“That’s what it’s all about”
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 132018Achieving Success through Execution
Shiny Object Syndrome and Other Distractions
Adhere to business strategy
Don’t be distracted by “shiny objects”
Think outside the traditional box – peas or carrots may not be the only or best options
Make digital the solution to a problem, not a solution in search of a problem
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 142018Achieving Success through Execution
#2: Know What Your Customers Want, Need and Actually Use
“Customer‐centric” finally becoming real
No longer “selling products,” but now “fulfilling customer needs”
What will differentiate from competitors?
In a commoditized environment, “information about money is more important than money itself”
Involve customers in pre‐ and post‐implementation research
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 152018Achieving Success through Execution
A Comprehensive Approach to the Customer ExperienceBusiness Performance through the Entire Credit Lifecycle
The customer experience is an end‐to‐end journey, not a series of touchpoints
Data should be captured and integrated to enable analysis of turnarounds, transitions, delays and consequences
Convenience, channel handoff, responsiveness and status notifications are all part of the journey
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 162018Achieving Success through Execution
#3: Digital Needs to Fit into the Technology Architecture
The “digital ecosystem”
Commercial lending in many respects is the centerpiece of commercial/corporate banking ecosystem
All participants in the ecosystem need to connect and integrate seamlessly for the customer
Remove complexity
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 172018Achieving Success through Execution
Prepare for Future Moving Targets
Plan for the future, especially with growth objectives
Moving targets – “nice to have” today becomes “must have” tomorrow
Current fixes may generate future problems
Look out for the “Butterfly Effect”
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 18April 26, 2018Achieving Success through Execution
The Digital Corporate Banking EcosystemThe Customer Experience is Central, but will Demand Integration and Data Integrity
Digital transformation must be focused on the customer experience
This will require an integrated ecosystem of applications and delivery channels
Its ultimate growth and success will depend critically on a firm foundation of data integrity
Data integrity draws from straight‐through processing, automated controls and “one version of the truth”
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 192018Achieving Success through Execution
#4: Develop Efficient Processes and Operations
Evaluate the entire credit process—digital can address chronic problems
Aim for double or triple value: Efficiency ratio Turnaround times RM productivity Straight‐through processing
Disruption is necessary and normal
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 202018Achieving Success through Execution
Inefficiency, Delay and Leakage in the Credit Process
A poorly performing credit process has serious impacts
Unnecessary and inefficient expense Loss of business and customer retention risk Decreased loan yields Lost revenue opportunities Increased compliance cost Unreliable regulatory reports Increased capital requirements and limitations Failed stress tests on qualitative grounds Adverse press/reputational risk
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 212018Achieving Success through Execution
Measure What Matters in Credit Delivery
Source: AFS/McKinsey CDM Survey 2012
Median days per step, total = 11 banks
Sum
Top quartile 4 2 2 4 1
Bottom quartile 7 5 7 17 4
Median
All banks
Day 1 to writeup
Writeup to initial decision
Initial decision to final
decisionFinal decision to closing Closing to
booking
5 3 6 13 2 29
Duration (in days) of credit delivery activities
13
40
The capability to maintain and track process‐related data can affect not only customer satisfaction, but also revenue opportunity, if the “right” data is kept. For example, numerical volumes of “work packages” in the credit pipeline can be translated instead to dollar volumes and measured as lost revenue resulting from process delays.
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 222018Achieving Success through Execution
#5: Deliver Without Compromising Risk Management
“The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk.”
— Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk, 1998
Risk can be understood, measured, to some extent predicted, and thereby protected against
Rules‐based risk management (preventive)
Strategic risk management (reductive/mitigative)
The strategic value of data
“Data integrity must be built in, not inspected in.”
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 232018Achieving Success through Execution
Data Integrity in the Credit Process
Data Integrity Data integrity in the credit process is what ensures data quality in reporting
“Integrity” refers to the collective nexus of capabilities, safeguards, policies and controls that form the backbone of the credit process and ensure higher quality output
Its framework of protection and higher standards is what delivers a near guarantee of data quality
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 242018Achieving Success through Execution
The Critical Role of Data Integrity: “One Version of the Truth”
An integrated straight‐through processing loop ensures that data maintains integrity from first point of entry to data warehouse for use in analytics, management reporting and regulatory compliance
Through online and mobile digital channels, customers have direct access to receive notifications, access loan data, and initiate self‐directed transactions
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 252018Achieving Success through Execution
The credit delivery model of the future will be digital, in a cloud‐based “virtual bank.” Lenders, customers, administrators, risk managers and all other participants in the CDM can theoretically be anywhere in the world, accessing, monitoring and analyzing credit information from any device, at any time of day; and it will always be up to date and consistent across any channel, governed by an integrated network of policies, procedures and exception controls.
Enabling the Digital Commercial Lending Model
©2018 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 262018Achieving Success through Execution
For Further Information
Chris McDonnellManaging DirectorGreenwich Associates917.331.0379chris.mcdonnell@greenwich.com
Lee KidderDirectorAFS484.875.1537lkidder@afsvision.com
top related