Competition in the lending business of banks and savings banks will increase. Speed and efficiency become important success factors. Process design and digitization are important levers.
Most institutes are planning further growth in the credit business in the coming years, expanding their capacities and increasing their performance with investments. However, competition in the lending business will continue to increase in the coming months.
FinTechs in the credit business rely on end-to-end digitized credit lines and thus new market standards in efficiency and speed and advertise with commitments and payments in the shortest possible time.
In addition, the economic situation is expected to cool down, which is associated with increasing investment uncertainty. Thus, the banks’ ambitious goals meet a decreasing demand for credit.
Speed and efficiency in the credit business
For banks and savings banks, speed and efficiency in the lending business are crucial. As part of the “Credit processes of the future” study, the management consultancy David & Partners asked experts from banks, savings banks and special institutes about the levers of efficiency and success factors in the credit business. The results are divided into the focal areas of efficiency in the lending business, efficiency levers in process design and digitization in the lending business.
Credit processes of the future
Here is an overview of some of the core results of the study:
- Institutions with a high number of efficiency levers implemented in the lending business perform above average across all types of credit (installment loan, mortgage lending, commercial lending business)
- Most participants use installment loan specialists who offer an end-to-end digital loan process
- The efficiency in the installment loan business is high at 58 percent of the participating institutions. Installment loans are processed there directly or in less than 15 minutes on a case-by-case basis
- The processing time for mortgage lending is less than half a day at almost two thirds of the institutes (62 percent) and is therefore at a high level
- Lead times for commercial loans are the longest on average. For 53 percent of the institutes, this is more than 5 working days
- In consumer credit, around half of the participants use the opportunity to generate additional business via digital platforms, while in commercial lending business only a quarter of the respondents
- In the institutes surveyed, digitization is particularly widespread in terms of credit approval, balance sheet analysis and electronic credit files. In contrast, RPA solutions are hardly used
- The use of data analytics in the credit business is not widespread and only takes place at around a quarter of the institutes surveyed
Recommendations for action for the lending business of the future
Credit institutions should be active in three areas to increase their speed and efficiency in the credit business:
- Performance management (target setting, measurement and benchmarking) of processing and throughput times in all types of credit.
- Implementation of the key proven efficiency levers in process design and digitization.
- Opening for cooperation with third parties such as FinTechs, platforms and other cooperation partners to increase the speed of implementation.