The Imperative of Corporate Loan Origination Systems
Insights from Béla Vér, CEO at ApPello
As a manager at ApPello, I am privileged to have the opportunity to meet with esteemed banking Corporate Division Directors, CROs, and COOs. With your permission, I would like to share some compelling insights related to software applications that are instrumental in supporting Corporate Lending.
Main drivers of LOS implementation
Time to money
Clearly, the primary motivation behind the implementation project is the bank managers’ desire to accelerate the often lengthy and arduous journey from customer request to loan disbursement. Corporate bankers have frequently expressed concerns about their processes lagging behind those of competitor banks, resulting in worry about potential customer churn. Undoubtedly, with a robust workflow system in place, you gain the ability to precisely measure process durations, enabling you to pinpoint and address bottlenecks effectively.
Forcing the changes according to the Consultants
Recently, I had a conversation with an executive from a prominent bank who, in collaboration with a consulting firm, is in the process of revamping its corporate lending procedures. This overhaul is preciously documented in a comprehensive report detailing revised processes, necessary documentation, evaluation criteria, and more. The executive had a concern about whether the bank’s extensive workforce would genuinely adhere to these new protocols. This is precisely where automation, such as the Corporate Loan Origination Solution, becomes indispensable. It rigorously enforces the established processes, leaving no room for deviations. In my estimation, attempting to introduce such a complex procedure without a system is an insurmountable challenge. A system-less approach would necessitate supervisors monitoring each employee to ensure compliance with the new processes.
Upgrade the bespoke software
Other motivation of implementing LOS product is changes the unfunctional old systems. It’s a familiar narrative for banks to have previously ventured into developing their own Corporate Loan Origination systems, only to encounter project stalls, budget overruns, and unmet functionality expectations. Some clients even argue that their old system serves little purpose beyond email correspondence, despite investing a substantial 10,000 work hours into its development. This critique is undeniably severe!
Rush to the market
Another compelling incentive arises when a bank intends to launch a new product without integrating it into its aging legacy system. The introduction of a new product serves as a showcase for the bank, rendering it more appealing to external partners and investors. These applications promise rapid loan processing, an achievement unattainable through manual methods or with outdated systems.
Too many systems to maintain
Another pivotal factor comes into play when a bank operates separate systems for retail, small business, and corporate lending. In such cases, the objective is to streamline and reduce the number of disparate systems. However, it’s not advised to combine the distinct processes of retail and corporate lending.
Within the ApPello Corporate Lending System, workflows tailored to various business segments, encompassing micro-businesses, small enterprises, and large corporations, are compartmentalized. When improvements to a process are required, there’s no need to conduct universal testing or wait for simultaneous developments across all segments. These enhancements can be executed independently while operating on the same platform.
When a bank possesses an existing system but harbors dissatisfaction with the vendor, the desire for a new system often takes precedence. We often meet bankers whose main motivation for the LOS implantation project is finishing the marriage with an inappropriate vendor.
How Does the Implementation of a Loan Origination System Commence?
First and foremost, it’s prudent for the bank to map out its own processes. The analytical phase typically kicks off with a review of the requirements list. While software vendors are readily available to assist in crafting this documentation, the bank can also accomplish it with allocated resources. Emerging needs are systematically managed. It’s crucial to strike a balance, avoiding excessive granularity in the list, as the bank must adapt to the selected vendor’s software. Overly detailed lists risk forfeiting the advantages inherent in off-the-shelf products, such as seamless upgrades and the incorporation of new features. This document can be prepared ahead of the project’s initiation, saving the bank both time and costs.
At ApPello, several components have been pre-developed, including the Statement Analyzer, Limit Handling, Collateral, and Decision Engine. These modules are designed for user-friendliness and flexibility, having proven their mettle across multiple banks. Furthermore, our flexibility extends to workflow and screen design, and business rules, facilitating alignment with existing processes. Checks within the processes have been designed for easy customization, offering flexibility in rule adaptation within the ApPello system.
It’s imperative to acknowledge the benefits of utilizing components for claims management, monitoring, and pre-built modules. While we can provide various options from this repertoire, deviations from these may necessitate custom development—an option that incurs higher costs, both in the short and long term, compared to utilizing our product.
How Does Such a Project Unfold?
Typically, projects commence with the SME segment before gradually expanding to encompass other sectors. For instance, they may initiate lending to micro-businesses before branching into corporate lending. Caution is warranted when concurrently replacing both processes and software. Key bank personnel, who play pivotal roles in day-to-day operations, should not be overwhelmed with the dual responsibilities of knowledge transfer and process redesign. Instead, the advisable approach entails considering incremental adjustments to existing processes in an agile manner.
Learn more about these problems and systems!
ApPello’s Solution: Corporate Loan Origination System