Provide a better customer experience through automated underwriting

Is your bank still reaching out to customers and asking for them to send in physical applications or copies of financial information? Does it take your organization longer than 24 hours to decision a loan or line of credit? Are the underwriters at your organization using consistent metrics and risk ratings?

As banking progresses to a more customer-focused industry, your underwriting process should be evolving as well.  Today’s bank customer, whether an individual seeking a single family home loan or a manufacturer with a multi-billion dollar asset size, is looking for an easy and quick way to obtain the capital they applied for.  Too often, most small and mid-sized banks are ill-equipped to underwrite lines of credit within the same week the application was submitted.  This leads to delays in financing, a lack of transparency to the customer, and a credit analyst with a pile of applications to review (hopefully!).

So as the industry shifts to be more customer-centric, why haven’t more small and mid-sized banks adopted an automated underwriting solution?  Until recently, most of what we heard revolved around one theme:  an internal automated solution is too expensive.  The expense of building an internal processing system will take too much time and money with not enough ROI to justify the investment.  Well, we agree!

While it may not be worth the investment for banks to build their own automated underwriting system, they no longer have to.  With new players in the market like nCino, who offer out-of-the-box or customized bank operating systems, any size bank can adapt and stay ahead of the customer focused trend in the industry.  The immediate benefits of a system like this include an elimination of physical documents, automated underwriting, and a greater level of regulatory compliance.

Physical documentation

Can you remember the last time you printed a form, filled it out, and then mailed or faxed it back to the sender?  I can and I am still complaining about how manual and inefficient it was!  By the time I dusted off my printer and found paper to feed it, all I kept thinking was why couldn’t I have done this online?  Not to mention I had to wait for the form to be delivered and then for the organization to respond.  Regardless of the size of your organization, there are software solutions designed to automate processing. For your customers, that means no more manual forms, ID scanning, or searching for old tax statements.  By creating a seamless customer experience, banks can in turn reduce the amount of time to complete the underwriting process and provide the customer with quicker, easier financing.  So you can say goodbye to all of those bulky filing cabinets in the office! But eliminating physical documentation is only the beginning of creating a flawless customer experience.

Automated Underwriting

If you are a small to medium-sized bank, odds are you have a team of credit analysts who review credit applications one at a time and are spending more than a few days reviewing the application.  These credit analysts are also using subjective decisioning criteria that differs from their peers who are reviewing similar credit applications.  Between the time it takes for a credit analyst to review financials and the inconsistent decisioning criteria being used, organizations are slowly realizing the need to automate their underwriting process.  Organizations of all sizes now have the online software solutions available to automate their underwriting process, enhance the customer experience, and perhaps most importantly, reduce decisioning time and processing cost.  Many of our clients are customizing online software solutions to suit their underwriting standards to solve for these challenges and enhance the customer’s experience.

In an industry with increased competition and greater customer-focused investments, the adoption of an automated underwriting system will soon be the status quo.  Using an automated solution is an investment and will require organizations to firmly define their credit requirements and risk matrix.

Lower risk, Greater compliance

As mentioned above, one of the added benefits and direct results of having an automated underwriting system is the elimination of subjective decisioning by the credit analysts.  By automating that decisioning process, the possible discrepancies and regulatory compliance risks will be eliminated. The system will require your organization to establish or enhance credit approval requirements and an appropriate approval matrix.  These requirements will solve for the majority of credit decisions but can still provide the bank the opportunity to review riskier applications.  The concern banks typically have over an automated system is this level of manual override for adhoc exceptions or one-off scenarios that may stray from the otherwise automated decision.  These concerns can be addressed by using the automated underwriting system for the loan preparation and maintaining an approval authority for the final decisioning.  This combination of automation and QA gives the bank the greatest level of regulatory compliance and ensures adherence to ever-evolving regulations.

The goal of underwriting should be to provide the customer with a quick, easy application process while maintaining the bank’s risk tolerance and regulatory compliance for the decision on credit.  If your organization is spending unnecessary time and/or resources to ensure any of these goals are reached, an automated underwriting solution may be the key to operational efficiency and an improved customer experience.