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Keeping pace with digital lending


Posted on: October 13, 2017 by Kuldip Chiheru

Lending is central to the economy. It is the engine of growth. Consumer lending is growing at between 3-10% in Europe depending on the market and segment. For the banks this is arguably one of the most profitable products.

However, lending is the subject of intense government scrutiny. On the one hand to ensure that funds reach the right part of the economy and on the other to ensure that lending practices are ethical and affordability is considered to avoid bad debt.

Consequently regulations are changing constantly. Imposing change creates cost for financial institutions and can impact processes and systems.

This is why consumer banks must embrace digital lending.

What can digital lending do?

Digital lending can allow financial institutions to make loan decisions in real time. It can remove the barriers to lending and make it easier for consumers to access loans without delay and without having to supply large amounts of information.

Identity verification software and data analytics can manage this task easily.

This can allow lenders to use data to make their offerings more personalized and less risky. Not only would this help to avoid bad debt, but this would also offer a differentiator in a crowded market, growing market share.

Currently, consumer banks aren’t embracing digital lending in the way they should. At the heart of the matter, they must transform from a reactive stance on lending to proactive. They must understand their customer enough to know what, when and how they could benefit from lending.

Where does the industry sit?

I spend a lot of time talking to the industry and there is actually widespread recognition from them that digital transformation is necessary in the area of lending. Not only this, the majority also believe that the scale of change needs to be large.

They understand that this is also the time when it would be prudent to tackle inconsistent operating models and fragmented technology platforms that make bringing new services and products to the market slow and costly.

There is a desire to take advantage of innovation.

So why isn’t it happening?

Technology is not the barrier. It exists and can be implemented.

Often, the biggest barrier is organizational inertia and lack of strategic leadership. Change on a large scale is hard. It feels far easier to make incremental changes and hope that by doing so you will manage to keep pace with your competitors.

What’s often missing is the business case. When you put that in place, you will see that the operating model needs to change and you will be able to see how to do that.

The cost of inertia

The slow pace of change is preventing the bigger banks from gaining competitive edge. Right now, they can survive without it but as the digital lending market grows and others follow the technology, it will become an imperative to survival.

It’s time for banks to embrace major organizational change and begin to realize the benefits.

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About Kuldip Chiheru
Global FS S&BD Head
Kuldip Singh Chiheru is Head of strategy in Global Financial Services at Atos. Kuldip has been with Atos since 2008 and his particular area of focus is in the lending and loans division looking at how technology can improve this function for our commercial banking customers and for the sector more generally. Prior to this he worked in the Financial Sector advisory team at KPMG and has also worked for ICAP and HSBC Midland International Banking.