How data is optimizing the lending process

How data is optimizing the lending process

How data is optimizing the lending process

Lending is a core component of modern finance. But it’s not as simple as granting credit. Today, lenders have a responsibility to make sure borrowers clearly understand the details of a loan, as well as carrying out any checks so they can be confident that the amount of credit approved is suitable for their circumstances.

In short, the lending process should be fair, consistent and transparent in its decisions. However, it must also be swift and seamless in order to support positive customer experiences that are so critical to success. Because if you can’t make credit decisions in a timely manner, one of your competitors will.

To this end, data, technology and automation in the decision-making process have emerged as an essential means to reduce risk, remove the need for subjective assessments and leverage the power of insights to optimize responsible lending. Yet, there are still many businesses where the lending process involves several manual steps. 

In this blog, we explore the power of data and technology – and how you can leverage smart solutions to manage risk, while identifying growth opportunities and winning the right type of business.

Data is the backbone of the decision-making process 

In your role, it’s likely you can spot the warning signs of a delinquent account, or when things look too good to be true. But while these hunches are important, they may not always be right – so it’s key for credit professionals to use data to inform this gut feeling to always arrive at the correct, logical decision of what customers to onboard and what credit terms and limits to set.

Credit scorecards, made up of a formula that uses data elements (or variables) to determine a score that represents a company’s level of tolerance for risk, are essential to this. But of course, essential to every scorecard is the right data.  

In its simplest form, a scorecard comprises four to five variables, but it can include more than a dozen. Some examples include a Delinquency Score, which predicts the likelihood a company will make an overdue payment. Another is a Failure Score, which goes a step further to calculate the likelihood a company will experience financial instability in the next year by seeking legal relief from creditors or perhaps even filing for bankruptcy. 

These are just two examples of scores and ratings that third parties, such as Dun & Bradstreet, use to feed into credit scores, guide your decisions and protect your business. 

Stay on top of risk (and opportunities) with effective account management

Credit decision making is just one part of the process. Risk is present throughout the customer lifecycle, with financial situations subject to change – especially in a volatile business landscape where something such as government decisions to retract funding could drive defaults on CBIL/BBIL loans, for example. 

It’s therefore key to stay on top of risk by having an oversight of movements in the market and changes in a customer’s situation. But of course, with credit teams already stretched, this is near impossible. Fortunately, there are solutions out there that enable you to proactively manage potential risk by delivering automated reviews that scan for changes in credit risk quality. 

If needed, accounts are then flagged for review, so you can re-evaluate credit, change terms, or if a risk is identified, place a credit hold – before they go to collections or impact your bottom line. However, automated reviews can also help you to identify positive changes in the market, presenting potential upsell opportunities in the process.

Ultimately, effective process and account management – underpinned by automation – can transform your lending process by helping you to quickly adapt and respond to customer needs, while seizing opportunities and navigating risk.

Transform your finance operations with Finance Analytics from Dun & Bradstreet

The landscape for lending is changing constantly, and finance leaders are facing pressures from every direction. So, to reduce risk and seize opportunities, all while being a responsible lender, the importance of quality data, technology and automation is the key to unlock sustainable, ethical growth.

It’s therefore essential to work with third parties that can provide the best of both. D&B Finance Analytics is one such example of this, where the world’s most comprehensive business data and analytics is integrated into a powerful credit management solution.

But don’t just take our word for it, see how Securitas increased its credit auto-approval rate to 90%+ with automation.

Intelligent, flexible and easy to use, D&B Finance Analytics combines powerful insights and technology to help finance teams manage risk, increase operational efficiency, reduce cost and improve the customer experience.