Top Five 'Must Haves' for Your Lending LOS

Financial Institutions can't go a day without utilizing the benefits of automation. A workflow based Loan Origination System or LOS has distinct advantages over legacy lending systems and standalone software. Through adoption of BPM and RPA technologies, Banks and NBFCs are targeting better customer satisfaction, accuracy, productivity, 100% compliance, and cost savings. These are achieved by transforming processes into digital journeys, doing away with manual steps with automated decision rules, and using all available information for better credit decisioning and reporting. Clearly, automation is driving betterment of lenders and borrowers alike.

Choosing the right LOS is a strategic decision and involves a thorough mapping of business needs with solution features. The overall mapping sheet should contain all the points related to customization, scalability, time-to-market, after-sales support, licensing and hosting expenses, and throughput. If the aim of adopting a LOS is enabling automation and staying competitive in the industry, the following are the ‘Must Haves’ that any lender should discuss with technology partners in detail.

1) Compliance: As a lender, you cannot settle for anything less than 100% compliance. The system should ensure compliance to not only the Regulator’s guidelines but also to the internal business guidelines laid down as the basic foundation of the organization. This automatically raises the need for a solution maintaining a complete audit trail for each activity/action performed while processing an application.

2) Multi-Channel Triggers: With internet connectivity increasing continuously, there has been a major shift in customer preferences on how they want to deal with the lenders. Mobile apps, advertisements on social media, kiosk, one-click, aggregator apps, etc. are few primary channels. The system should preferably follow micro service architecture to allow the adoption to different degrees of information passed by different sourcing channels.

3) Multiple use cases, one process: The lending products have now become more of an à la carte menu that offers multiple variants of lending products to fulfil the specific need of the borrower. A strict distinction between products is now disappearing as all lenders have their custom features to attract more borrowers. The workflow of LOS solution should support creating variants of the same loan product at any point of time.

4) Scoring and Rule Based auto decisioning: The Law of Productivity advocates the skilful distribution of work within the workforce. Obviously, automation should allow auto-distribution of work. But the lead distribution should be smart enough to judge the best person to work on a particular lead. Rule based routing delegates it to best fit depending on a combination of factors like location, risk category, designation, etc. Score cards help in balancing the workload.

5) Straight Through Processing: "Instant" is the most dominating trend. Lowering of TAT from first touch point to disbursement has its benefits contributing towards customer delight, market share, and productivity. The replacement of manual activities with bots allows instant system generated approvals. The bots here are the event-triggered and rule-driven set of instructions.

Exception handling is an important feature which pure play RPA tools often miss out on. A combination of Business Process Management (BPM) and Robotic Process Automation (RPA) could be a great approach to ensure the delivery of both technical and operational requirements. If you are evaluating a new Loan Origination System (LOS), consider the “Must Haves” focused in this article.

Hareish Gur, Director, Servosys Solutions