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Credit Factory of the Bank is the Core of Retail Lending Business

The highly profitable retail lending business is increasingly attracting more and more banks. However, as it turned out, the transition from the business of corporate lending to individuals lending business requires special training and effort due to of fundamental differences between these activities.

Thus the services provided to corporate customers are based on building close relationships and mutual comfortable relations, while retail customer service is based on efficient processes and discipline. In the corporate business of the bank around 30% of the staff is employed in sales and 70% in administration, while in the retail business the emphasis on the contrary should be placed on sales and the management and processing should involve the minimum effort of the staff. The requirements to the staff qualifications are fundamentally different: the staff working with corporate customers should have higher education, it should have professional universal qualification, while the education of staff employed to assist the retail customer can be "lower", and their qualification should be of narrow specialization. There are many other differences between these two businesses that need to be taken into account during the transition to a new domain.

However, the biggest challenge is the creation and automation of the business-processes of retail lending of the bank. Since the volume of tasks performed by the staff assisting corporate customers is relatively small, failing to cover the whole business-process of provide full automation is not a big problem for the business of the bank. In the retail segment creation and automation of business-processes by examination within a streaming conveyer are the basis of this business.

The solution for this problem is the so-called "credit factory". It is correct to speak about a "credit factory" instead of a "credit conveyer" because it implies a more complete coverage by automation and integration of all business-processes in retail lending, not just the process of entering and processing of loan applications, which is the responsibility of the "credit conveyer". The "credit factory" shall implement the following processes:

• first, quick and easy adjustment and issuance of new retail products for sale. In conditions of high dynamics in the retail lending market the competitive advantage will belong to the bank which can issue new products into the market as quickly as possible. From the moment of conceiving and shaping of the idea of a new product and until issuance of this product for sale there should be no more than 2 weeks.
• second, the automation of the processes of applications creation and processing, scoring assessment, monitoring, verification, decision-making and lean granting. It should be noted that for each loan product the "credit factory" should allow any adjustment of its individual business-processes, including the structure of the fields of the loan application, criteria for the scoring evaluation, the structure of the users involved in the processing of applications and decision-making structure of the processing steps and actions of the business-process.
• third, ensuring a variety of channels to receive the repayments that provides high performance of operations to repay the loans. On the one hand, the "credit factory" should strive to simplify and speed up the work of cashiers, and on the other hand, there should be a possibility to integrate with other channels for repayment: the network of cash-in machines, ATMs, internet banking, etc.
• fourth, automation in monitoring the fraud, monitoring and processing of overdue payments and of all stages of debt collection. Ensuring high quality of the loan portfolio while providing large loaning is a very important and at the same time a very difficult problem. It is important to not only learn how to sell the loans, but also how to ensure their repayment. Failing to provide proper automation and quality of this process there can be no successful retail business. "Credit Factory" should allow the adjustment of business-rules to monitor the negative events and to transmit the problems identified for the analysis and processing at all stages, starting with automatic sending of notifications by SMS and emails referring to soft and hard collections by the collectors until preparation of information and submission of the case to the court in order to repay the loan by the legal means.

In addition to the complete automation of all above mentioned steps "credit factory" also provides their effective integration and interaction with each other, thus forming a continuous processing flow and organizing the joint work of all branches of the bank as a whole. Only such kind of approach may ensure high productivity of the process and the quality of the result.

In addition to the automation of the main streaming process the "credit factory" shall interact with the Bank Core Banking System. Getting from the CBS the information on the customer, accounts, contracts, repayment schedules, debts, as well as introduction in the CBS of new customers, conclusion of new contracts, operations on issuance and repayment of loans should be fully automated and should not require any manual operations by the staff. An important feature is the integration with CRM system of the bank. On the one hand CRM system sends new customers or additional sales to the existing customers for processing to the credit factory, and the credit factory transfers to CRM system for processing and analysis all information on the new customers and updates the information on the existing ones. Together with the integration with the internal systems of the bank the "credit factory" should be open to interaction with external systems. Connecting to external scoring systems, bureaus on credit history, other sources of information will significantly improve the quality of decisions and the retail banking business in general.

We would like to mention the need to ensure a few important aspects to achieve high efficiency of the "credit factory". It is important to ensure the ability of the "credit factory" to make operational changes to the settings of any business-process anywhere whenever it is necessary. Any changes should be operated easily, simply and quickly, without attracting expert solutions from the solution provider and with minimum participation of the bank IT specialist. It is also necessary to continually provide general high system performance. Particular attention should be paid to the administration of the system and to the tuning of its parameters the proactive rather than a reactive mode. There is also another important aspect, namely building a strong and continuous interaction with the solution provider. Due to a very dynamic retail business the classic relationship between the bank and the supplier as the customer and the contractor, as a rule, is not effective and cannot provide adequate efficiency. It is necessary to build closer relationship of strategic partnership based on modern, flexible interoperability standards.

The results that the "Credit Factory" can provide to the retail business may be brought on the example of one of the banks where we have implemented our solution. Thus in just one year the sales increased by 10 times, from 5.3 thousand to 54 thousand loans per month. Last year the Bank has provided an average of 2.5 thousand sales a day, while in particular days the sales exceeded 4 thousand loans. Moreover, the average time of one sale comprising input and processing of the application, scoring evaluation, verification, decision-making, printing and signing of the agreement and the issuance of the loan was 20 minutes. With the introduction of the "Credit Factory" efficiency of loan officers increased by 5 times, from 44 to 220 sales per month. The number of non-performing loans on 31 December of the last year did not exceed 2.76% of the retail loan portfolio as a whole. The speed of issuing new retail loan products in this bank constituted an average of 2-4 weeks, depending on the complexity of adjustments and functional improvements.