Workflow Engine - The Brains of the Loan Origination System
Community bankers face a growing challenge in driving profitably. Net interest margins are believed to be permanently tightened and our big-bank counterparts possess a 10% - 20% advantage when it comes to efficiency ratios. This leaves us with a real need to examine how we get better at playing the game. One strategy that community bankers can deploy is to leverage workflow technologies as part of an overall Loan Origination Solution to drive material improvements to the cost of delivery.
Before diving into details about the Workflow Engine, lets first define a Business Process Flow. For simplicity, I like to think of a Business Process Flow as an Assembly Line. Much like a physical manufacturing company produces widgets through a series of manufacturing steps, Banks produce services by moving information through a series of processing steps - this is a bank’s assembly line. In the case of lending, information such as the customer’s financial statement, business objectives, and desired deal terms serve as the “Raw Materials". These Raw Materials are systematically transformed into a funded loan by completing a series of defined processing steps.
A Business Process Flow for Community Bank Lending looks something like this…
There are three inherent challenges that Community Bankers face when managing the Business Process Flow for their lending activities.
Information Overload - The amount of information required to “manufacture” a loan is significant (and continues to increase). The type of information that must be collected also varies greatly based on the structure of the loan, borrowers, and collateral. As regulations evolve, so does this complexity. As a result, Bankers often key (and re-key) unnecessary information and find that they are missing required information at the time of closing. This isn’t the fault of the banker – it’s a breakdown in the assembly line tools.
Lack of Visibility – Community bankers work on multiple loan deals at once. These deals are at varying stages of the lending process flow and therefore have different team members responsible for completing the process step. Keeping track of all the loans in process becomes increasingly difficult with volume. Time is wasted by the banker with phone calls and emails to track down information about the loan status and borrowers are negatively impacted by this lack of transparency.
Activity Management – The amount of time and effort it requires to complete a business loan is staggering. There are a multiple hand-offs that take place during the process flow and the number of detailed processing steps within each department is significant. Most Community Banks have attempted to tame this chaos with manual checklists but the challenge is becoming too great for manual solutions.
Addressing these business challenges is where the Workflow Engine shines! Functioning as the brains of the LOS, the Workflow Engine orchestrates the entire Business Process Flow for the banker. It serves as the helping hands to let the banker know exactly where their loans are within the process and what needs to be done in order to move the loans forward. It keeps up with regulatory changes and information requirements so that the right information is entered at the right time. The Workflow Engine also manages the approval processes and automates activity management with proactive actions such as task assignment, report generation, and borrower notifications. The end-result is substantially improved credit quality, productivity, and client satisfaction.
Functioning as the brains of the LOS, the Workflow Engine orchestrates
the entire Business Process Flow for the banker
The Workflow Engine is responsible for executing a number of independent functions at one time while also ensuring all of the functions are working together in a seamless fashion. With an effective Workflow Engine in place, the Community Banker is able to spend less time tracking down information and more time with clients.
The top 5 features offered by the workflow engine include:
Dynamic Screens - As noted above, time is often wasted keying information about a loan that doesn’t even apply. Dynamic screens are used by the workflow engine to present the banker with intuitive and clear input points that adjust dynamically based on the structure of the loan, borrowers, and collateral. Therefore, you are only asked to enter the information that is relevant to the loan.
Field & Document Validations - With the vast amounts of information being collected during the loan origination process, it’s extremely challenging to know what information is required at each stage of the process. Field & Document Validations are leveraged to help bankers know when specific information is a "nice to have” or a “need to have”. Examples include requirement of an Interest Rate prior to approval or the requirement of a flood letter before documentation. These validation rules will also vary based on the structure of the loan, borrowers, and collateral. The end result is improved data quality and less rework for everyone involved.
Approval Routing & Signature - Each Community Bank has a unique set of policies governing their loan approval process. The Workflow Engine can assist the banker through the approval process with intelligent approval routing and online approval capabilities based on the loan structure. including both signature and committee based approvals.
Unique Workflows - Much like manufacturing has different assembly lines for the production of standard widgets versus custom widgets, bankers need the ability to produce loans under different Business Process Flows. A consumer loan, for example, should have a flow that is quick and minimally customized. A complex commercial credit, on the other hand, may require an extended flow with more customization abilities. The Workflow Engine should be leveraged to support this variance in order to optimally move all of the loans through the process.
Process Automation - Process Automation enables bankers to be more productive by reducing the effort and time it takes to complete the Business Process Flow. The Workflow Engine delivers these benefits by shifting work from the employee to the computer. This may be something as simple as assigning a follow-up action item to a team member at a specified time or a more complex activity such as automatically notifying a borrower that their financial statement is about to expire.
In this post, we discussed the challenges that Community Bankers face when managing the lending Business Process Flow. We then outlined how the Workflow Engine (The Brains of the LOS) serves as the helping hands to the banker in order to overcome the inherent challenges of the lending “assembly line”. We concluded with five specific Workflow Engine features that directly improve the productivity of the banker, the quality of the data, and the experience of the client.
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