Key Trends in of Credit and Loans Decisions

Paul Thomas is Managing Director of risk decisioning solutions provider Provenir

According to the Bank of England’s Credit Conditions Survey earlier this month, British banks saw a notable rise in demand for personal loans and other unsecured credit in late 2015 which is expected to remain strong in early 2016. The same is true for businesses, with lending growing for the first time since 2009 at the end of last year. This growth means technology has an increasingly vital role. It can speed up the process and minimise the risk or credit decisioning, delivering exceptional customer experiences that are crucial to business growth. Here are the trends we expect to see in 2016:

Automation and digitisation

A reliance on manual, paper-based processes is a major drain on the limited time and budget resources of all businesses, lenders included. Through digitisation and automation financial institutions can help streamline activities, delivering a better customer experience and a more efficient outcome. More automation, less duplication of effort and less reliance on paper, enables lending institutions to speed up information processing, limit opportunities for manual errors, save costs and pave the way for continuing innovation.

Cloud technology

Cloud-based software services will free up institutions from building and maintaining their own supporting IT, bringing them the benefit of scalability, reduced capital investment in hardware and infrastructure and more time for staff to focus on customers rather than IT.

Reducing reliance on complex home-grown IT infrastructures, means scaling up and down to align with demand also becomes simpler. Finance providers can increase capacity at times of high demand and scale back down at low demand instead of having to maintain hardware that is regularly under-utilised.

A cloud-based risk analytics and decisioning solution can also reduce the need for, often significant, capital investment in hardware and infrastructure to get up and running with a solution.

Compliance demands will shine a light on audit trails

Lenders face intense regulatory scrutiny, and must conform to stringent operating standards and process requirements. Heads of risk and compliance have to demonstrate strong risk oversight which identifies and remediates exposures efficiently. Lenders will see that holding and managing their information digitally gives them a more reliable, searchable record of activities; ever-important in a regulated environment.

Flexibility and Vendor Independence

We will see more financial institutions looking for flexible technology that allows them to easily make changes independent of vendors. Customers needs can change quickly therefore financial institutions need the right tools to be able to react rapidly and cost effectively. Hard coded solutions requiring constant vendor support are simply too slow for today’s needs.

Big data and analytics

For financial institutions the sheer volume of data can be daunting. Lenders will increasingly look to get value from the wealth of information they hold on customers, products and repayment models and make use of big data and analytics to attain a previously unavailable granular level of detail to feed business planning. The processing capability to utilise this big data can reside in the cloud and tapping into it can provide a wealth of information at a granular level of detail previously unattainable.

Predicting how customers and competitors’ customers will behave and how that behaviour will change is critical. Using big data should be about changing the way you do business to harness the real value in your data, re-shaping your interaction with the market and increasing the lifetime value of your customers. Therefore, understanding which data is required to achieve these objectives, who needs it and how often are key pieces of the big data puzzle.

Risk analytics & decisioning

Lenders will strive to improve risk decisioning processes with intelligent workflows, automation to reduce the human error factor, and escalation triggers that can be readily updated without recourse to expensive IT updates. The opportunity for the sector is to unlock the potential in data using analytics and shape strategy for business through reliable factual insight rather than intuition. Unlocking the insights in data to better understand customers, competitors and employees represents a significant opportunity to gain competitive advantage. While regulatory pressure is forcing organisations to improve the integrity of the data, financial institutions are seeing improved data quality and the use of analytics as an opportunity to fundamentally change the way decisions are made and to use the data for commercial gain.