Celent examines two financial institutions that have
invested in retail lending automation.
With the mortgage market in great turmoil, consumer
lending is a more important part than ever of a retail bank’s strategy
for growth. The real estate sector (including home equity lines of credit)
of this market had been growing since 2002 at over 11% in the United
States to US$10.1 trillion of outstanding debt as of Q2 2007. This growth
has slowed considerably to a 4% growth rate from Q4 2006 to Q2 2007. Other
consumer debt is at US$2.4 trillion and growing at a rate of 4%. As a
large and growing part of a retail bank, many financial institutions have
thought about how to make the process more efficient.
In a new report, To the Swiftest Go the Spoils:
Case Studies in Retail Loan Origination, Celent explores two financial
institutions’ foray into retail lending automation and provides an
overview of the consumer retail lending market.
“Automation can bring numerous benefits to the
consumer lending process. These benefits encompass both the bank and the
consumer and can contribute directly to the bottom line and the customer
experience,“ says Jacob Jegher,
coauthor of the report and senior analyst. “Winning banks will embrace
automation and loan origination systems in order to make faster and more
consistent decisions, lower costs, increase productivity, automate
processes, reduce errors, and enhance customer service.”
“Bank systems are a quagmire of complexities and
inefficiencies. Lending systems and the associated processes are certainly
no exception. Banks need to invest in identifying inefficient processes to
improve reaction time, customer service, and employee productivity,”
says Bart Narter, coauthor of the
report and senior analyst. “Even with the present volatility in the US
lending market, opportunity still exists. Banks need to focus on
installing systems that will be with them for the long term—systems that
will allow banks to respond to market demand, customer requirements, and
operational requirements.”
The report presents case studies on BECU and Bremer,
both of which have invested in retail lending automation to increase their
ability to capture customers in this market. These two financial
institutions both wanted to rethink the way they originated retail loans
to make the process faster, less costly, and more scalable.
BECU. This Seattle-based credit union is a
prime example of a financial institution that has successfully deployed a
new lending system as part of a larger technology project called Project
DELTA. BECU was positioning itself for growth on both the deposit and
lending side of the house. The bank set out to develop a new system with
the following objectives: faster decisioning; increased efficiency; the
ability to offer risk-based pricing; and new product types. The faster
decisioning enabled BECU to grow the consumer lending part of its business
and empower front line staff to give instant answers to members’
applications much more often. The lower cost enabled BECU to price its
products competitively to win the business.
Bremer. This innovative bank engaged
Information Technology Inc. (Fiserv) and Harland Financial Solutions to
deploy an integrated central loan and deposit origination system. Bremer
set out to develop a system with the following objectives: allow
relationship managers to more effectively interact with customers; support
data requirements for reporting in the areas of risk management, business
development, relationship management, and profitability; allow integration
and expandability; improve efficiencies and remove manual processes; and
enhance auditing capabilities. Bremer has achieved its goal of having a
unified system, and the single user interface provides consistency to end
users. Benefits include the elimination of redundant and inefficient
tasks, automation of compliance requirements, enhanced reporting tools,
improved audit capabilities, simplified support and maintenance, and
improved business intelligence.
This 18-page report contains five figures and two
tables. A table of contents is
available online.
