The commercial banker’s guide to driving digital led growth

Unlocking growth through smarter lending

For a commercial bank looking to drive top line growth, one of the core drivers remains how well the loans are being managed. The good news is - in this era of digital transformation, there are ample levers available for banks to radically change the old ways of loan management. However the not so good news, is that there are umpteen operational and technological challenges that come in the way of realizing that objective. Let's do a deep dive into what it takes for a bank to get a loan disbursed - the 'whys' and 'hows' of it, the impact on bank's growth and borrower's experience.

Where does the struggle lie?

It all starts with the relationship manager being able to generate an opportunity with an entity looking to borrow working capital. The lead qualifies further as part of the front-end process and eventually you've a quotation that goes back to the applicant. That's where the opportunity stage comes to a halt. For the borrowers to come to this stage of the lending cycle, they have to scale through 6-7 sub-processes that the bank must manage at the backend to be able to get into application stage. Next, the applicant fills in the details, submits the documents, agrees with the pricing, and pays the fees. By the time the bank and the applicant reach the end of this process, they have gone through 25-30 odd steps. So what are the core issues that the stakeholders (both the bank and the customer) in this journey are grappling with?

• Long turnaround times (TAT)- 72 hours at a bare minimum. Unacceptable in today’s competitive environment.
• Regulatory compliance related issues - the penalties can be heavy. Again, unacceptable given the margin pressures.
• Information leakages at the back of manual intervention. Another way to increase TAT and bring in inefficiencies.
• Too many stakeholders (humans and systems, both).

Bank’s nightmare

And, what does all the above lead to for the bank?

• Poor efficiency and productivity of the front-end sales team - spending time on activities that otherwise should be automated
• High customer attrition - well, the competition is tough and there are several banks who have thought through and made the user experience smoother. Why would the customer wait for us unless there’s a drastic interest arbitrage we offer which will anyways hit your margins so let’s not think of it.

No points for guessing why a lot of banks are keen to make this process nimble to be able drive nonlinear growth.

There’s a way out

So what does it take to solve this problem? We would recommend you look at the below listed simple ways to start your exploratory journey with-

• Faster movement of actionable data between various systems and processes
• Smarter and robust way to deal with regulatory and compliance policies
• Embrace digital to reduce manual intervention and drive efficiencies

And, how can you make it happen?

• Leverage technology to achieve real time integration across various systems across the user journey
• Drive platform modernization programs to infuse the latest digital backed solutions
• Re-imagine existing ways of developing loan cycles - leverage design thinking

What will it all lead to?

We’ve seen banks being able to accomplish the below listed by following the core principles of digital disruption-

• Reduce the lending cycle times from hours to minutes. Yes, that's the scale we're talking about
• Multi million worth of savings at the back of operational and technology revamp
• Greater loan volumes – as high as 20% growth

What will the lender of the future look like?

The stakes are enormous – we all agree to that. There's a huge market opportunity for banks in today's times to drive loan backed growth. There could never be a better time thanks to digital technologies, analytics and design thinking. For any bank that is preparing itself and its customers for the future, it must investigate two broad result areas-

• Top notch customer experience - bring down the TAT from days to minutes
• Efficient systems and processes to drive sales productivity - think of not more than five steps

If strategized and implemented well, this approach has the potential to unlock aggressive growth path for several banks and lending institutions. In the long run, those that embrace these changes will grow the fastest. The decision is yours.