Smart Lending

Updated On : September 2017

The word Smart once meant fashionable, stylish, chic, modish and so on. Normally it was used as an attribute to humans, and in some cases to pets.

"Smart" of late has outgrown its original definition. We have now, smart buildings, smart cities, smart phones etc., Business processes that involve a set of predefined actions or events automated in workflows also deserve a precursor "Smart". Smart solutions are not simply fancy statements. Applications on lending, trading, health care are being developed as a smart solution.

The BFSI sector is highly process driven and efforts have been put in place to address efficiency,accuracy and security of financial transactions, that demand very stringent regulatory controls and MIS through adopting Core Banking Solutions.

Core banking solutions, enabled customers to do smart banking. More customer centric approaches are required in the portfolios of borrowing and lending of banks. Now the banks are more focussed in lending to improve their spread. The actual lending process goes through a series of events. To cite a few, customer capture, credit appraisal, KYC norms, collateral management, inspection, disbursement, monitoring asset quality, repayment, recovery, and closure of accounts.

The lending systems in vogue are partly automated, controlled in disparate systems and partly manual. For years, lenders have employed relatively static, tedious and highly complex lending models that lacked focus on consumer interest, experience, preferences and priorities.

In this, context, smart lending is a natural corollary, given that core banking solutions and payment systems are already in place. Smarter, faster, agile commercial lending: the future is all-in-one

Smart lending solutions at the centre seems to be artificial intelligence based new software algorithms that price and rate individual as well as business credit. Moreover, thanks to digitalization, paperless (digital) processing seems to have eliminated the slow and tedious pushing of paper between retailer, borrower and lender.

Take a peek at the features of smart lending solutions.

Desirable high level requirements.

General features
Web-based platform- data centre or cloud hosted. Integration with CRM

Comprehensive data capture for all application types Tightly integrated single point of credit assessment Enable lenders to streamline and holistically improve their loan processing capability for all commercial loan segments, including

• Large Corporates
• Commercial and Industrial
• Small and Medium-sized Enterprises

Data flow- to and from core banking Query engine and report writer Integration with payment systems.

Desirable Modular components

Loan originating module

• Instant Duplicate Check
• Rules-driven Tailor-made Document Checklists
• Credit Reports and Eligibility check
• End-to-End Straight-Through Processing (STP)

Credit risk and limit management

• End-to-end workflow for credit requests and credit applications
• Flexibility to maintain View/Maintain borrower and Group
• Comprehensive Database for All Counterparties
• Parameter Maintenance
• Limit Allocation

Collateral & Limit management module

• Collateral Maintenance
• Complete Documentation Workflow
• Security Completion Certificate (SCC)
• Single View of Customer (SVC) Limits
• Data Warehouse Integration

Collection and recovery

• Queue Management
• Call Management
• Field Management
• Collateral Management
• Document Generator
• MIS Reports
• Performance and Incentives Management
• User Administration
• Collection & Recovery Integration

Stressed assets settlement

• Waivers and write off
• Suit file and follow up
• Securitisation
• Factorisation

The next challenge would be to address inclusiveness. Millions cannot reach credit owing to trust deficit created by lack of credit scores, no collaterals and no bank accounts. Recently, in Kenya, a mobile based credit lending application Mkopo Rahisi (Wall of Love) owned by InVenture,Kenya has made waves in micro lending. With the user's permission, InVenture collects data from the applicant's mobile device to verify identity, build financial, behavioural, and social characteristics for proprietary algorithm, and to customise the loan terms to his or her unique circumstances. So far, it has been downloaded over 130,000 times, has more than 50,000 active customers and has disbursed 120,000 loans to middle and low-income Kenyans.
Now that's smart!!