THOUGHT LEADERSHIP

Sponsored by Banking Works

Today, lenders think less about becoming digitised (almost all already are) rather they consider how they can deepen their digitisation. How they can acquire and implement the technologies that reduce labour-intensive, manual processes to a single button click. Technology that interrogates their data and produces detailed reports on everything from portfolio performance to customer behaviour. That allows them to get ahead of their competitors and stay ahead. 

With Covid-19 forcing people to remain in their homes, the need for technologies that adequately serve an audience that is newly reliant on the internet, has intensified. Previously, questions of technological transformation presented as a dilemma; do lenders invest in developing their own inhouse tech? Or do they outsource to a third-party? The luxury of time to mull over this quandary has been eradicated by the pandemic. 

If actions haven’t been taken yet, they need to start happening right now. With time being a scarce commodity, many lenders are opting to partner with a third-party. In this piece, we explain why that is.

Let’s start with the biggie. Though developing your own technology might lead to a system that is tailored to your business and which you own outright, it is an enormously expensive endeavour. There is also no guarantee that it will even work as envisioned.

Once the costs of sourcing and onboarding a team of developers has been ringfenced, lenders will then need to find the budget to pay them. If experience and expertise are desired, they then need to start accounting for six-figure salaries for each developer. Then comes the actual work. 

The daily costs of developing inhouse technology is eye-watering enough. When you consider that product development can take years to complete, it becomes downright scary. Moreover, ‘complete’ doesn’t even mean the project has ended, it just means the technology is ready to go live. Throughout its shelf-life, it will require near constant maintenance, regular upgrades, and continual scaling to meet changing business needs. 

Turning to a third-party eliminates pretty much all of these challenges. A technology provider will already have a team of IT experts including designers, developers, product owners, and software engineers who are immediately at your disposal. The capital required to maintain and upgrade the software is managed by them. All you need to concern yourself with is covering the agreed monthly or annual fee. 

It’s also worth pointing out as well that, although the technology acquired from a third-party won’t be specifically designed for your business, the latest solutions are highly adaptable. There’s also the option to integrate Cloud component-based solutions. Here, your partner will be able to identify the various individual options available to get the best possible solutions that your budget allows. 

This takes us back to the development stage of designing bespoke, inhouse technology alluded to above. Two years is about the average time it takes to go from scratch to a functioning system. 

Now, bearing in mind that technology continues to evolve at an exponential rate and companies themselves become more adept at leveraging the power of modern tech, two years is a long time to be unarmed.

It is 730+ days during which you will be operating without the available power of the contemporary solutions that many of your competitors most certainly will be. Of course, you could outsource while the technology is being developed, but you’re going into levels of complexity and cost there that few businesses could tolerate.

It’s a quandary that only really leaves one viable alternative and that is to go straight to a third-party provider. Rather than taking years, the timeline from identifying the right partner, to the tech being integrated and staff trained on its usage, can be just a few months. A good partner will also build a roadmap tailored to your objectives which identifies quick wins as well as longer-term system overhauls.

The traditional means of applying for a loan; gathering the relevant documentation, sending it off, waiting for approval, agreeing repayment plans etc, is reserved now only for unusually high value products. People looking for a moderate sum want and expect quick decisions, quick access to funds and flexible repayment options that can be managed digitally. Ideally, they’d prefer to get all of this without even speaking to anyone. 

Contemporary tech solutions can facilitate these requirements. Working with the right partner, lenders can access platforms and technologies that join up existing systems and orchestrate processes across the entire lending lifecycle. For the lender, it means transactions that can take minutes, rather days or weeks. And the quicker transactions are completed, the more you can do. 

It’s not just about quicker transactions either. Expert financial service delivery partners will design their solutions with your customer at the heart. They understand that delivering customer experience is imperative to lenders and how they stay relevant and competitive in today's market. More business and happier customers. If ever there was a recipe for success that is it, and if you start your search for a tech partner now, it could be a reality for the start of 2021.

Lenders should remain focused, as much as possible, on their core objectives. Objectives which do not include developing and managing high-end technologies.  

Even those lenders in the fortunate position to have their own in-house engineers are unlikely to have a team with the necessary expertise to develop sophisticated technology capable of meeting their business needs. And even if they do, in order to keep their skills and knowledge up to date, significant capital must be ringfenced for ongoing staff development and for line magers whose experience is better directed at more business-critical objectives. 

These engineers, and those that would have been tasked with managing them, are much better deployed developing other areas of your business that can lead to both quick and longer-term wins. Indeed, many incumbent lenders have recruited teams in the past only to disband them once the realisation set in what an enormous culture shift it is to embed, manage, and develop them. 

By partnering with a third-party provider that understands your business and your goals, your staff – all your staff - are freed to focus on lending-specific, revenue-generating activities and other strategic initiatives.

The lending sector is one of the most heavily regulated sectors of all. Contravening rules and regulations, even if doing so unknowingly, can invite devastating fines, damaged reputations, and even criminal prosecutions. It adds another layer of risk for those lenders developing their own technologies. Not only must the technology be functional and merit the revenues invested into it, it must also satisfy all legal mandates.  

Those technology companies who include the lending sector within their core customer base, ensure as a matter of course that their technologies are compliant with all existing and emerging regulations. Better still, are those tech providers who work in financial services exclusively. These companies should have specific expertise in delivering for similarly regulated businesses, and in some instances, may even be regulated themselves.

It means that, not only does the lender benefit from the potential unleashed by digital transformation, they do so in such a way that the risks associated with non-compliance are significantly reduced, often to zero. 

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