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From every angle, today’s commercial lenders are challenged to add value – to their margins, to their portfolios and, above all, for their customers. So, what’s standing in the way of delivering differentiated services, sealing higher-quality deals and driving profitable growth?
Clearly, there’s the ongoing impact of the global pandemic and its knock-on economic effects. But even before the outbreak of COVID-19, lenders often struggled to manage a growing volume of compliance and administrative tasks and therefore focus on what they do best – customer acquisition, account management and risk control.
Now, deteriorating credit, ever-decreasing margins and uncertain times for many commercial customers make it an even higher priority to ease the operational pressure and make better use of all available resources. And by taking advantage of an established and proven modern delivery model – the managed service – lenders can easily do just that.
Managed services for commercial lending come in all shapes and sizes. They can start with the hosting of an IT environment in the cloud, where the technology provider can also manage and maintain the software.
More advanced services take care of implementation and upgrade activities, such as the testing of an upgrade, too. Then, when you choose to implement a new process or module, the technology provider will make sure it works seamlessly within your specific operational setup.
Ultimately, you could hand over whole business processes to a managed service. In this case, the service provider will put in place a dedicated team to perform functional activities on your firm’s behalf, on a business process as a service (BPaaS) basis.
For commercial lending firms, these activities could include financial spreading, credit write-ups, loan origination, onboarding and servicing processes, syndication creation and management, loan or bond trade settlement, cash settlement and credit monitoring.
And when a provider’s technology covers the entire lending life cycle, a managed service can potentially carry out any of these processes in combination, alongside the existing business function – or perform all of the processes from end to end.
But let’s not get ahead of ourselves. Although lifting and shifting an entire middle- and back-office operation in this way may work well for a startup lender, larger, more established organizations will typically need to take a more gradual, incremental approach.
The best, most flexible kind of managed service will allow you to do just that.
You could start small with a hosted solution for, say, loan servicing. Guided by an expert partner, you could then move steadily toward a more fully outsourced BPaaS model for different areas of your operation. Along the way, hybrid services that combine on-premise and outsourced solutions will ease your journey to adding value.
The more services you take, the fewer nondifferentiating, low-value activities your talented teams will have to manage. That will give them more time to concentrate on what matters most: forward-looking monitoring, working with customers at higher risk of default and reducing nonperforming loans for your business.
With a managed service provider and partner behind you, running and testing your technology, you’ll also find it easier to increase the automation and efficiency of your processes and services. Providers should also be at the forefront of the push to automation and continually making new service options part of their target operating model. And that will help you both outpace continual change and deliver more value for your customers, with less cost to your business.
But critically, you don’t have to do it all in one go and risk disrupting your operations with a wholesale transformation.
So, what’s stopping you from adding value now?