In last month’s article Achieving Lending Nirvana for Your Credit Union and Members, we introduced step one on the road to “lending nirvana,” a concept for credit unions seeking to offer best of breed online lending technology. Literally translated from sanskrit as “ultimate bliss,” lending nirvana will increase volume of loans, cut manual labor and provide anytime service. For members, lending nirvana translates into a loan review in under 30 seconds.
The first step dealt with the unification of the front end experience and maximizing the point of sale. The overarching goal of step one was sameness. Whether online, on the phone, or in the credit union’s brick and mortar location, the goal is for a loan applicant to receive the same services and the same decisions across all three points of entry.
Inherent in this search for sameness is automated decisioning technology. Your automated decision engine needs to mirror the complex underwriting logic regularly developed by underwriters and render decisions quickly and efficiently, regardless of each member’s unique lending requests. Acquiring and mastering this decisioning technology is step two on the road to lending nirvana.
Technology That Thinks Like You Do
Touting masterful decisioning technology will create one of your greatest benefits: speed. You’ll render loans – both approvals and denials – faster, without exceeding your desired level of risk.
Any institution that loans money is familiar with character, capacity and collateral: the “three C’s” of underwriting. As with classic “human” decisioning parameters, these three need to be of equal weight within the automated decision technology you use, whether decisioning takes place online, in person, or over the phone. But how?
The key is a Boolean, true/false decision engine. Don’t panic: we won’t get too technical on you. But it is important to understand the difference between superior Boolean decisioning technology and its lesser technological rivals. Boolean logic is able to weigh out different criterion, much like a “live” loan officer would. Linear, or matrix logic – the logic currently used in many existing decision engines – have inherent limitations.
The difference is in the details. A decision engine fueled by proprietary Boolean, true/false logic...
- Duplicates complex underwriting logic
- Provides specific, configurable adverse actions and loan conditions across all channels
- Renders consistent, automated decisions
- Delivers customer specific, rate adjusted and risk-based pricing across all sales channels
”Drop and Give me Boolean!” – Lending Boot Camp Works
How does one create this seemingly magical Boolean, true/false decision engine? This is where the “service” in service provider is put to the test. Digital Insight, for example, spends an average of two days at each client’s site reviewing its underwriting process and follows up with weeks of detailed analysis. This lending “boot camp” forces underwriters and senior staff to explain how their credit union currently decisions loans, how they set pricing for loans based on risk or relationship, how they offset risk by weighing different factors in their decisioning, and how they set loan conditions for what they call “risk based processing.” This hard-core consultative approach will make your technology mirror – and maybe even improve upon – your existing underwriting process.
Lending boot camp challenges the credit union to identify best practices that can then be automated, supporting all type of loans no matter what the channel. The end result is a custom application that ...
- Enables loan officers to change and add decision rules easily based on underwriting criteria and capacity for risk tolerance for every type of consumer loan product.
- Supplies the loan officer with a recommended decision based on your credit and underwriting policies. So even if the decision engine doesn’t make the final decision, it can still provide adverse action reasons or loan conditions based upon your specific lending policies.
- Automatically resubmits the loan application to the decision engine for ‘what-if’ scenarios by paying off or excluding liabilities when critical application information is modified.
Four Star Decisioning Technology: Your Members Deserve It
Superior lending technology even helps improve loan officer training and overall lending performance by comparing “live” loan officers’ overrides and approvals to that of the custom, Boolean-based decisioning engine. Imagine the knowledge-based horse power inherent in this on-going decisioning analysis. Nirvana indeed!
Achieving step two of lending nirvana – best of breed decisioning technology – empowers your credit union. Your judgmental analysis is reduced yielding standardized decisions that can create more predictive portfolios. Human error is minimized. Risk management is enhanced. Consistency and compliance is achieved and regulatory requirements are met. And best of all, more loans are rendered. If this sounds like lending nirvana to you, then it’s time to join the savvy credit unions that have already customized superior, all-channel lending technology, and reap the rewards.
For more information, contact Digital Insight at 888-344-4674, option 6 or visit us at: http:digitalinsight.com.