Innovating credit decisioning using no-code process automation
The lending industry is undergoing rapid change where product agility and speed of credit decisioning has become a major differentiator.
The innovation challenge
The lending industry is undergoing unprecedented change. Innovation in product and the user experience surrounding the application (origination) process are key focus areas for institutions, as well as the usual pressures of reducing cost and satisfying ever-increasing compliance demands.
In consumer lending, product agility and speed to decision has become a major differentiator. The ability for institutions to ideate and deliver innovation rapidly, regularly and fearlessly has resulted in immense pressure to rethink methods and infrastructure needed to support modern lending.
However, institutions are continuously challenged by the dichotomy of agility and governance. Added to that, innovation is like painting the harbour bridge – you’re never actually finished. People, process and technology remain at the forefront of innovation and key to countering the hindrances of innovation.
Innovating lending through smarter credit decisioning
Credit decisioning is the interesting intersection of consumer want and institutional credit policy – classic demand and supply. The demand side is simple – as a consumer, I just want your money, here’s my info. But in the credit decisioning world, supply is throttled by the organisation’s risk appetite and although, on the surface, every lender appears to be doing the same thing, behind the scenes credit rules are often considered to be what really differentiates them.
Credit policy essentially is the rule book – the interpretation of risk based on data presented, measured through a series of rules. Credit decisioning is the application of those rules to the case in hand.
Innovation in credit decisioning is typically made up of:
- Product innovation – creating entirely new decisioning paths, or adjusting current ones, to service new products
- Rule innovation - rethinking how data is interpreted and how rules are applied to data
Smart credit decisioning gives access to new customers, avoiding others, and resulting in book of loans that contains the type of customers the institution wants (often a moving target). Smarter, faster, automated credit decisioning materially impacts acquisition, customer satisfaction and operating costs.
Credit decisioning underpinned by technology
Technology plays an important role in credit decisioning, taking the rule book and turning it into something that takes the manual work away, or at least tries to. The outcome can be automatic approval or decline of an application, but often it stops just short, instead calculating parameters needed to assess, which are then handed to a human for review. Automating as much of the decisioning as possible is a pathway to efficiency (manual assessment is expensive), compliance (zero chance of misinterpretation or application of credit policy) and a great customer experience.
Automated credit decisioning is key to a lender’s ability to establish and maintain a competitive edge and the technology choices made have a major influence on an institution’s ability to keep up with the pack. Poor choices might still deliver what’s needed today, but limit what’s possible tomorrow.
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No-code process and decision automation
Challenged by new products, new data and new decisioning methods, an increasing number of institutions looking towards custom development, recognising that off-the-shelf credit decisioning platforms fail to deliver the flexibility they need to meet modern needs, let alone support future innovation.
There is a growing trend within this community though, where escalating skills shortages and other overheads and challenges that come with traditional development have led institutions to join the no-code movement – a wave of organisations leveraging no-code platforms to accelerate and simplify bespoke solution development, thereby minimising, if not removing entirely, the need for code.
Speed to market and total cost of ownership are often the deciding factors behind the move to no-code or low-code. The right platform brings with it all of the enterprise robustness you would expect – security, stability and governance – with the ability to build anything you want in a fraction of the time.
However, the real benefits start to emerge when these organisations recognise how no-code platforms address the factors that traditionally throw a wet blanket over innovation.
The right platform brings with it all of the enterprise robustness you would expect – security, stability and governance – with the ability to build anything you want in a fraction of the time.
When it comes to credit decisioning platforms, the traditional options have been to buy off-the-shelf, or build. Put simply, you buy when you’re somewhat happy to conform to established methods defined by the solution; and you build when you recognise that your point of differentiation comes from an ability to do things your way. A new, increasingly popular, alternative has emerged, however.
Technology change can be slow, can break things and is often well outside of the control of the person requesting it – just some of the factors that contribute to a sense of fear and inertia related to innovation.
With credit policy implemented in a human-readable form, analysts and product owners often find themselves playing a different role in the identification and implementation of change, inspired and encouraged to interact with the credit decisioning solution and less reliant, if at all, on specialist technical skill.
The modular design ethos provided by some no-code platforms enables organisations to look at credit decisioning and loan origination as the sum of many smaller parts, all individually developed and managed, without a single line of code. The flexibility, speed and control surfaced as a result is often the spark behind a new culture of innovation.
At Digital Experience Labs, we live and breathe process and decision automation. We also have a soft spot for the lending industry, recognising it as an industry ripe with opportunity to innovate and delight a new era of digital native consumers. We’d love to talk to you and your team about your innovation strategies and share some of our thoughts on the role no-code automation can play in them.