To the Swiftest Go the Spoils: Case Studies in Retail Loan Origination

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14 November 2007
Bart Narter and Jacob Jegher


New York, NY, USA November 14, 2007

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, , 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.

Members of Celent's Retail Banking research service can download the report electronically by clicking on the icon to the left. Non-members should contact for more information.

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Insight details

Corporate Banking, Retail Banking
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Banking, >>Retail & Business Banking
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Asia-Pacific, EMEA, LATAM, North America