How Can Banks Deliver Next-Gen Retail Lending?
Banks want to adopt next-gen technologies for retail lending. But how?
“I read that Claude Monet said he spent 70 per cent of his time when creating a new piece of art dedicated to seeing the big picture, rather than painting. It’s always important to have the big picture in mind.”
Anca Nutiu, executive director at Societe Generale, told this anecdote to set the scene for our masterclass webinar on the future of retail lending.
It perfectly captured the mood.
Banks want to adopt next-gen technologies for retail lending. But how? The panel agreed: the only way to begin is to zoom out and see the bigger picture.
The discussion began with a look at what we mean by digital banking. Nutui put it thus: “It means to move from a one-size-fits-all product-driven bricks-and-mortar bank, to a customer-first omni-channel bank, providing personalised engagement. That is our vision.”
And what do we mean by next-gen?
Forin Boldescu, chief digital officer of BRD Societe Generale, stressed it’s not a technology, nor a one-off event, but a perpetual pursuit of cutting edge technology and processes: “This is not a project to run for a few years. There is no end date. At BRD we target not only to catch up with the market where we are lagging, but reinvent ourselves and size-up the opportunities of the market.”
This approach means the entire dynamic of the bank can be redesigned. Software can change how products are sold to consumers.
“The biggest trend in banking right now is to do with the distribution network,” said Catalin Dediu, VP of Product Management at FintechOS. “We are seeing a switch from distribution-led growth to a customer experience led growth. The importance of a physical branch network is decreasing. Western Europe is more advanced. And Eastern Europe is catching up.”
Products can be built around each customer.
“It’s not just doing digital,” said Dediu. “It’s about the quality of the customer experience, and the personalisation of the experience, and of the products. This involves things like flexible underwriting models and different ways of looking at data.”
Next gen thinking transforms the role of technology. It moves from a function of the bank, to being at the very essence. “The first modern computers were present as a support tool,” said BRD’s Boldescu. “Then we started to use technology for self-service, like the ATM which launched 50 years ago. Then we had internet and mobile banking, but banking didn’t really change its core. What is changing now is that technology is the business. It’s not just a tool or support. We are all trying to learn and behave like tech companies.”
Naturally, transforming a bank is a challenge. The key is to begin with small steps. Maja Mikic, director for digital transformation at BRD Societe Generale, said: “You start where it makes most sense. For the retail business model it makes sense to cover the easy-to-access loans. Or consumer loans, as they are known. The requirement is high when it comes to the velocity of approving, and realising the start of the loan. The experience needs to be end-to-end digital. Then the strategy should evolve towards more complex loans, which are collatoralised.”
Personalisation – a long-held dream for many banks – becomes possible. “There are four important things for personalisation,” said Anca Nutiu. “First, it’s about access to data. Smartphone data, property data, and third party data in order to pre-underwrite the customer and minimise data entry during the manual part of the application. Second, it’s about digital marketing that goes beyond the traditional sell on keyword marketing. You can apply advanced analytic and machine learning to implement a targeted model. Third, it is necessary to create an ecosystem, to integrate the solution into a non-banking ecosystem. Digital banking can help us to engage with multiple ecosystems, where we reduce friction and increase customer access. And fourth is the omni-channel experience. Create a bridge between the physical and digital experiences. If done well, applying for products and using services should be simple for the customer. Like a walk in the park.”
The session ended with a warning. Maja Mikic noted the movement towards digital banking may have a dark side – namely the loss of human interaction. “It’s quite dangerous,” she said. “If we become state-of-the-art, then we get this phenomenon of an automatic machine in a call centre, that we’ve all encountered at one point in time. You find you can’t navigate between options. They are a great example of how you can de-root from the core purpose of a bank, which is facilitating access to service for the client.”
Next-gen banking is an alluring prospect in retail lending. But it is clear there will still be a place for humans, no matter how radical the transformation.