No credit too complex? Simple loans deserve slick servicing, too

August 20, 2020

Complex credit arrangements need sophisticated servicing solutions. But to really satisfy your customers, you need a system that’s equally adept at handling simpler loans.

Loans today certainly have the potential to be complex, especially when they are meeting the bespoke requirements of corporations at the higher end of the market.

And the more customized, sizeable and highly syndicated the deal , the more difficult and time-consuming it can be for banks to manage, with many organizations falling back on slow, manual, paper-based processes.

So, in terms of speed and efficiency, the loan market as a whole lags far behind the likes of bonds, equities and derivatives. With settlement often taking many days, high levels of automation and straight-through processing remain elusive.

It’s not hard to see why. The most complex, syndicated deals involve multiple currencies, many hundreds of lenders and multi-directional communication, which makes servicing them a major operational challenge.

That’s a challenge the most advanced servicing solutions will rise to. With configurable approvals and workflows, these powerful systems can help you automate the management of the most specialized deal structures, from agricultural loans that offer longer repayment periods to multicurrency syndications with thousands of lender notices to send every quarter.

But what about the simpler loans at the other end of the market spectrum?

Small business lending is the bread and butter of most commercial banks – and has only increased during the global pandemic. But with higher volumes and a separate set of processes to manage, it places different operational demands on lending organizations.

To manage the variations between more or less complex types of credit, from business banking and small business loans to middle market lending and syndicated deals, lenders have tended to amass multiple, specialist technology solutions. That’s great for managing a specific kind of deal, but what happens when customers choose to switch between products?

As it grows, a small business might move from a standard loan to a more structured facility, which will mean migrating the customer between systems. And from one system to another, that customer could have a completely contrasting experience, whether by accessing a different online portal or getting statements or documentation with a different look and feel.

A fragmented landscape of lending technology is therefore bad news for the customer journey. It can also undermine the lender’s relationship with the customer, by failing to deliver a 360-degree view of the various products the business holds. Plus, it increases the costs and risks of running technology, which in turn can stop you from focusing on managing your core business and providing great service.

The answer is to choose a system that can do it all.

While traditionally, technology has developed to tackle different types of loan, a new breed of lending solution has evolved to handle everything on the same platform.

So, alongside the efficient orchestration of complex deals, you can straight-through process thousands of smaller business loans– delivering a unified customer experience, a more standardized lending operation and consistent levels of automation. Further, a single hosted platform can deliver significant cost reductions.

There’s no doubt that the best servicing solutions are highly skilled at managing complex loans. But at the same time, they don’t look down at smaller business deals; they just get on and automate them, fast and in high volumes.

And as your customers will testify, bringing your whole portfolio on board makes lending slicker all around. Simple, right?

Get more insights into loan servicing challenges and how FIS can help.

About the Author
Shanin Clark, ACBS Pipeline and Servicing Product Manager, FIS
Shanin ClarkACBS Pipeline and Servicing Product Manager, FIS

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