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Improving commercial lending through process and technology

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The commercial lending business has witnessed exceptional growth over recent years. That said, financial institutions are struggling to keep pace with growth as they are burdened with numerous challenges, such as high operating costs, unproductive IT systems, emerging competition, and changing customer behavior. Financial institutions need to reimagine their operating models through holistic transformation and combine lean practices with digital technologies to reduce costs and reposition the business for growth.

Combining process and technology the lean digital way to transform commercial lending

According to a report by the Federal Reserve Bank of St. Louis (FRED), commercial lending is growing at the highest rate since 2009 (10%)1. In addition, The Wall Street Journal states that “US banks are lending to businesses at such a rapid clip that those loans are on pace to overtake residential mortgages for the first time since the 1980s2.”

However, banks are struggling to grow efficiently, as they are saddled with regulatory scrutiny, higher operating costs, unproductive legacy IT systems, emerging competition from non-banking firms, and changing customer behavior.

The critical challenges:

  • Increasing cost and complexity of implementing regulatory compliance and widening exposure to risk: New regulations stemming from the Dodd-Frank Act and Basel III are adding to the complexity of the process. Moreover, disjointed loan-underwriting systems, incomplete customer data, and the complexities around data acquisition expose the bank to higher risks.
  • Banks aren’t fully prepared to embrace digital technologies: The complexity of legacy technology and processes is stopping firms from leveraging digital technology and processes at scale, particularly in the middle and back office.
  • Changing customer behavior: Consumers have become more cautious, and have access to a wider range of financing options, than before. Lenders are under pressure to automate processes andtransform the customer experience using digital channels.
  • Emerging new age competitors: The digital-native lenders leverage technology to run businesses at unprecedented levels of efficiency and offer improved customer interface. The best digital retail lending institutions often run operations at lower costs than their traditional competitors, in some instances achieving up to 70% lower cost of origination, 60% lower costs on the front end, and 80% lower costs for middle- and back-office functions3.

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What do banks need to do?

In today’s aggressively competitive and volatile environment commercial lenders face a clear imperative: they must transform or risk falling behind. Dynamic business and technology forces are driving the need to operate at optimum levels, implement a high-performance culture, and be future-ready.

Streamline processes
A successful transformation requires a solid foundation of effective and efficient processes. Streamlining lending process from origination to maturation helps enable a successful transformation and makes it easier to implement cutting edge technology to increase automation.

The first step in optimizing operations is to review existing processesand identify and eliminate inefficiencies.

For example, a mid-tier US commercial bank identified significant upstream inefficiencies, which were leading to high rates of rework downstream.

Banks are realizing the need to integrate data with key business processes to ensure that everyday decisions are based on data-driven insights.

Issues included:

  • Limited metrics used to monitor the flow of information
  • Insufficient training and workload management for staff
  • Underutilization of existing system functionality
  • Data integrity issues throughout the process causing a drag on sales volume

In response, the bank carried out a detailed process mapping from origination to loan servicing and developed process maps that worked with existing and new technology solutions. A base line and benchmarking exercise identified 80+ metrics and 100+ process-optimization ideas, which enabled greater efficiency and a $5 million impact on the business.

Leverage technology
Lenders spend substantial time and effort in selecting the best technology, but a lack of understanding of business requirements at the outset leads to failures. Aligning technology with business priorities is imperative for lenders to drive a digitally enabled transformation. This will lead to enhanced customer experience, more efficient growth, improved productivity, and better risk management. Experience dictates that the execution of process improvement and process automation as part of an overall solution yields better results than when done separately.

A base line and benchmarking exercise identified 80+ metrics and 100+ process-optimization ideas.

When a top US bank’s commercial lending division saw that sluggish loan management processes and inefficient credit decisions were hurting growth, it focused on fixing both the legacy systems and processes together. The bank conducted a thorough analysis of the end-to- end processes. With a primary focus on customer satisfaction and audit compliance capabilities, the bank analyzed its disparate systems, security and data compliance processes, business process workflows, manual hand-offs, paper-driven dependencies, and efficiency leakage points. A root cause analysis enabled the bank to chart out the impact of each problem on compliance adherence, customer service, and, ultimately, customer satisfaction.

By fixing the broken processes as well as integrating straight-through, end-to-end loan processing using a cloud-based commercial loan origination platform, the bank transformed its lead generation, credit analysis, credit decision, exposure management, pricing configuration, document management, and advanced reporting functions, and reduced turnaround time by 88%.

Tap into additional data
Banks are realizing the need to integrate data with key business processes to ensure that everyday decisions are based on data-driven insights.

For a US-based financier struggling with a manual and decentralized lending process this meant focusing on a process mapping and an activity-level cycle time study to baseline the current performance. The process mapping and data analysis revealed that: (i) ineffective team structuring led to multiple hand-offs and high wait times between teams; (ii) fragmented systems and non-standardized processes led to repetitive checks and manual handovers; and (iii) a reporting structure to track performance was missing.

The financier standardized processes to reduce process variation, merged the teams to remove layers and avoid repetitive work, and implemented technology solutions, such as customer/partner portals, to enhance existing systems. As a result, productivity improved by 10% while end-to-end process cycle time decreased by 30%, ultimately leading to better customer experience and greater market share.


Financial institutions face daunting challenges as costs continue to rise, regulatory burdens continue to grow, and the volatile business environment continues to strain business volumes and profits. Banks seeking to take advantage of the growing demand for commercial lending must transform their lending process by leveraging technology and data and harnessing digital to generate real impact.

For more information, contact, banking.solutions@genpact.com and visit, genpact.com/what-we-do/industries/banking-financial-services

  1. “2014 - commercial and industrial Loans, all commercial banks,” FRED.
  2. http://www.wsj.com/articles/profits-at-u-s-banks-rise-in-1st-quarter-1432737016
  3. genpact.com/docs/default-source/resource-/putting-digital-to-work-the-lean-digital-way

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