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Why does it take so long to get a commercial loan?

Ewan Hutton, CTO at BankNorth UK | 14:30 Wednesday 3rd April 2019

In today’s digital and agile world, businesses move fast. They optimise their products, sales, marketing and innovate in weeks not months.

Yet, after speaking to a group of commercial finance brokers recently, they were bemoaning the fact that it can take traditional banks months, even six months, to process a loan for SMEs in the UK. So why does it take traditional banks so long?

Technology is a big factor and, of course, the organisation and processes that the technology supports. The priority for fintech has mainly focused on the high-volume financial services businesses, such as retail banking, where transaction and data volumes are high, and the ROI is clear cut.

That said, transforming large legacy banking IT is not a trivial task and the industry is littered with examples of failed programmes. The delivery pain experienced by the boards of these banks has also made them wary of rushing tech investment into their commercial lending businesses.

The accountants will also point to a low-volume business which requires significant employee skill and experience to handle the big deals and consequently underestimates the wider positive impact of removing the legacy technology and transforming the processes.

The result, we believe, is that SME commercial lending in the £500,000-plus category is poorly served by the majority of institutions in the UK. Significant time is lost for the customer inside these organisations using processes that have been welded in place using old technology.

Time lost in inputting and processing data is a small part of the problem. More significant is the stage-gates designed around 20 years ago and the siloed organisation passing the case from department to department. The legacy is also passed on as a given when new employees join these organisations and need to be shown how to manage the problem, use the workarounds and try to make it work as best as possible.

Challenger banks such as Project BankNorth have it easy. No legacy. Transform the process design and pick the best enabling tech and the ball is certainly rolling. Of course, the technology is one part of the problem, but transforming it with the right design both removes the old thinking of how work is completed and presents opportunities with automation and data that were hard to do before.

What is even more significant than just replacing the old tech is the rise of business-enabled technology. Technology that lets non-technical people change and manage the business process, rules and content is not a new thing — it is just late to the party for the commercial lending businesses. This agility — coupled with significantly richer data sources and applied AI — will enable these businesses to continue to optimise the experience and efficiency for their SME clients.
It’s why — before attempting to build or buy any solutions — Project BankNorth focused on the end-to-end commercial lending journey design and experience first. The technology choices then followed, and now the project is tailoring the user experience to match its vision for the end-to-end SME lending journey.

A key aspect of the solution will include engaging the broker market by saving them time using the automation of data entry, initial checks and document management. Communication and processes between the bank’s roles and broker roles, and even legal teams, are seamless and ensure accurate and timely progress to deal completion.

The transformation is coming to the SME lending market, which, in turn, will enable SME businesses to execute on their investment opportunities while they are fresh and not many months down the line.


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