Decisions made long ago and often forgotten, can come back to haunt. Banks and financial services discovered this to their chagrin during the 2008 financial crisis.
Ever rising customer expectations, aggressive non bank lenders are forcing banks to actively personalize their credit offerings for seamless digital lending journeys. Lenders are looking to mitigate losses, while delivering more financial power to their customers for both retail lending & corporate lending.
How can banks tighten control over risk with precise risk modeling system, while at the same time, deliver borrower delights?
The key pillars to strengthening risk management models in digital lending are-
1. Developing a robust risk ecosystem-
You need a digital LOS that can fetch accurate rating and other relevant data, in real time, through seamless integration while performing credit assessment for designing digital lending journeys. This intelligence can be used to fine tune existing risk rating platform and configure external and internal triggers. A strong risk ecosystem can also create an impact analysis on potential changes to macro regulatory, economic, capital and provisional changes. Monitoring can be aided through intelligent analytics, dashboards and real time alerts, notifications with E-KYC.
2. Proactive data management-
Creating & capturing valuable data insights with consistent processing & operational models requires both structured (transactional data) & unstructured (e-mails, social media, text messages) data. The more accurate and reliable the data, the more robust the risk framework. Taking the help of digital journey designers can make it simpler to configure, maintain and fine-tune data models to meet the needs of underwriters and other users through efficient robotic underwriting.
3. Real time end to end visibility-
A digital LOS platform will give lenders the ability to track new applications with E-KYC and finalize, reject, edit and reassign applications with real time alerts and status updates for retail lending as well as corporate lending. Credit officers can note down any reasons for credit extensions and mention any deviations while performing credit assessment. This is possible only with end to end visibility that also gives a detailed audit trail for automated regulatory compliance with risk rating platform.
4. Faster lending approvals through robotic underwriting–
Approvals were a major element in disbursal delays. This is changing with visual journey designers that seamlessly integrate with multiple data sources with E-KYC feature. Automating approval workflows allows lenders to flexibly configure credit policies for retail lending & corporate lending while leaving the nuts and bolts to robotic underwriting.
5. Ability to monitor financial covenants-
Financial covenants lay down the rules of digital lending for designing impactful digital lending journeys. Lenders can create customisable financial covenants that they can actively monitor in the system. A powerful digital lending platform can identify signs of borrower default through proactive monitoring of a borrower’s financial activities. Lenders can get real tie alerts and status updates to aid quick collections.
A strong risk management is crucial for digital lending. It is imperative that banks and financial services build robust risk through effective risk modeling system and governance as they grow their lending portfolio.
ORIGINATIONNEXT risk rating platform, represents strong risk management by creating tighter integration between model developers, risk modelling system & business teams. It provides intelligent robotic automation with upstream & downstream processes, risk scenario analysis, stress testing & other regulatory compliances while performing stringent credit assessment for digital LOS.