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1 Copyright © Open Text Corporation. All rights reserved.
Mending Lending: Trends & Best Practices to Improve Loan Processing
Deb Miller, Director of Industry Marketing @DebsG360
2
Today’s Discussion
Best Practices in Operational
Excellence
Industry Trends in Lending
Executive Survey Says…
3
Complex products & customer relationships
Multiple brands
Margins shrinking
rising risk
Consumer fears escalatingCurrency values fluctuate
Multiple sophisticated channels Social
Legacy systems
Information and paper overloadSilo’ed business structure
Regulatory changes M&A
What’s Impacting the Market?Lenders are facing significant challenges and increasing complexity…
Mobile
4
Loan Processing Performance
Time
Com
plex
ity
Drivers of complexity: Regulation Internal processes Number of players/actors Number of channels Level of integration (a
double-edged sword) Existing IT architecture Existing application
portfolio Number of business
partners
Source: CEB TowerGroup
Checking account
Commercial Client
Corporate Clients
Consumer Loan
Mortgage Loan
Complexity impacts cost, efficiency and cycle times…
5
The Regulatory Fog Continues
Source: DavisPolk; Dodd-Frank Act Rulemaking Progress in Select Categories (March 1, 2012)
ABS Offerings
Credit Rating Agencies
Mortgage Reforms
Banking Regulations
Consumer Protection
Derivatives
0 20 40 60 80 100
2
3
3
4
24
36
12
14
36
44
4
13
3
3
37
4
36
2
Finalized
Missed Deadline: Proposed
Missed Deadline: Not Proposed
Future: Proposed
Future: Not Proposed14
22
43
44
95
63
Category Number of Rules Only 26% of these
281 rules are final
38% of rules missed deadlines
Consumer protection rules are on time
The “best” of mortgage reform is yet to come
Compliance change is a long-term issue; so should FSI strategy, relying on automation for cost efficiency
Dodd-Frank hurdles will unfold throughout the decade…
6
Loan OriginationCosts Remain High and are a Concern…
U.S. Origination Cost Per Loan
2007 2011 2007 2011
Source: Federal Reserve Bank of New York; CEB TowerGroup.Note: Mortgage origination costs per loan are scaled at 10 times that of other costs to fit on graph.
Automobile
2007 2011
$5,11840% increase
MortgageHome Equity
15% increase
7.5% increase
7
Summary: Lending Institutions Face Strong Market Forces
Uneven growth prospects across loan products and country markets
Impact of sovereign/banking crises on lending
Regulatory pressure on revenues and process
Declining consumer employment/income growth
Ongoing legal, delinquency and credit risks
Trust and high customer expectationsSource: CEB TowerGroup.
8
Lending Institutions Are Using Technology to Respond to their Challenges
Click icon to add chartTop 10 Technology Initiatives for Consumer Lending (2012)
Compliance technology to reduce regulatory risks
Integrated credit, collateral, and fraud risk assessment to manage risk and revenue goals
Redefining and restructuring core processing IT and operations
Data management and foundation alignment for business intelligence
Enterprise-wide customer-centric decisioning - “next best action”)
Enterprise content and process management for cost takeout and efficient processing
Customer lifetime profitability measurement and analysis
Optimized product bundling, pricing, and positioning
IT and business process outsourcing for strategic cost management
Channel experience alignment and personalization
Source: CEB TowerGroup.
9
Today’s Discussion
Best Practices in Operational
Excellence
Industry Trends in Lending
Executive Survey Says…
10
Survey Results:Trends in Optimizing Loan Processing
May 2012 Peer SurveyConducted by GatePoint Research
11
It’s taking 45 days
and $3,000 to process
a loan from point of
sale through post-
closing !
Why do a survey?Get a snapshot of the challenges and the responses…
BPM
Optimization of “broken” processes is driving BPM
adoption in Financial Services
12
Loan Operations
14%
Branch Operations
4%
OtherFunctions
31%
Line of Business
27%
Information Technology
24%
Who participated in the survey?
87% of survey responders are VP Level or above
13
Survey Demographics: Institutions
Community Bank43%
Regional Bank31%
Global Bank12%
Credit Union
5%Other
9%
14
Survey Question
Survey Question:How would you describe your current loan processing environment?
Performance
15 OpenText Confidential.
Loan performance environment
8% Excels
45%Adequate
12%Lagging the Competition
33%Smooth & Efficient
16
Initiatives
Survey Question:Do you have a current initiative to improve loan processing workflow?
17
Do you have a current initiative to upgrade or improve the loan processing workflow?
14%
39%
18%
10%
19%
67% Actively involved or expecting a near term
improvement initiative
18
Survey Question:In what lending areas are you most concerned about current performance?
Concerns
19
In what lending areas are you most concerned about current performance? (Check all that apply)
When considering current lending performance, responders worry most about commercial loans.
Student loans
Automotive
Personal lines of credit
Credit cardsMortgage
Small business loans
Commercial loans
5% 19%
22%30%
42%
47%
73%
20
How did the survey responders rank priorities for improving loan processing?
Priorities
21
Priority #5Improve
management visibility into the
process
22
Priority #4Remove paper
from the process
23
Priority #3Reduce the cost of
processing a loan
Loans 5¢
The Loan Processor
24
Priority #2Reduce loan
process cycle time
25
Priority #1Optimize and continuously improve processes across the business
26
Today’s Discussion
Best Practices in Operational
Excellence
Industry Trends in Lending
Executive Survey Says…
27
Leaders are effectively controlling cycle time and costs…
Commercial Mortgage Home Equity
Consumer Loan
Credit Cards
$1,210$1,007 $260 $85 $31
$3,405$1,936 $505 $168 $53
$5,600 $2,865 $750 $250 $75
Loan Origination Cost Benchmark
Low Avg High
Source: CEB TowerGroup and OpenText BPS
Best in class
IndustryAverage
Laggard
28 OpenText Confidential.
Cost of processing a loan > benchmark Cycle times are twice customer expectations Need to manage error rates & improve customer satisfaction
Problem
OpenTextSolution
BPM and Case Management to streamline the process and ensure compliance
Orchestrate and simplify loan processor validation and exception handling
Dashboards for real-time visibility
Case Study: A Major National Bank
29
Improve Customer
Experience
Enable Efficiency and
ComplianceLine of sight to business goals
Focus on Achieving 3 Key Goals
30
Loan Processing Solution
Loan Application
Processor reviews loan
Underwriter reviews loan
Book Loan
Notify Customer
Approved?
Rejected?
Loan Application is scanned and
indexed
Capture Docs
Other Docs
Customer Account Info
Automate Tasks
What is happening in my dept?
Have I balanced the workload?
Where is my loan application?
31
Deliver Productivity Results For Key Personas
Support Staff LoanProcessors
non-value add
value-add
Proactively address issues
with Dashboards
Automate for data quality and process
compliance
Focus on enabling human
judgment
32
Loan Processor Workbench
Integration to back end systems
List of actions to be
completed
Document viewer
Data specific to the
document and the case
Notes
Alerts (e.g. for missing required documents within the package)
33
Thank you.
Learn more about OpenText Business Process Solutions
for Financial Services
www.OpenTextBPM.com
Participate in the Global Lending Survey today!
www.opentextbpm.com/lendingsurvey2012