Why Financial Institutions Need a Digitized Credit Origination and Customer Onboarding Platform Now

Finally, after months of contentious negotiations, on December 27, 2020, Congress approved a second stimulus package that included another funding round for the Paycheck Protection Program (PPP). Banks should make sure they have the appropriate technology and operational infrastructure to be better prepared to successfully deliver the third rollout. Having a digitized credit origination and integrated onboarding platform will enable lenders to realize this objective and weather COVID-19 and beyond. Here's why:

Many lenders lacked a digitized credit origination and customer onboarding platform to service the PPP, which would have allowed borrowers to be digitally prequalified to avoid the pervasive fraud and operational problems prevailing across the industry. The few banks, such as Bank of America (BOA) that have engaged in ongoing digital technology investments over the past five years were positioned to deliver and service the PPP loan. BOA's digital platform has catered to small business customers who have become familiar with online banking services and adopt various digital banking products. This set the institution apart from others in how quickly it was able to get the PPP up and running. According to the Small Business Administration (SBA), BOA provided the highest number of approved PPP loans — more than 343,000 and the second-highest dollar amount, $25.6 BN.

Although banks have been talking about moving to a more digital banking model for almost a decade, COVID-19 has helped it become a new normal. The pandemic disrupted much of traditional banking with bank and branch closings, remote working, revised risk processes, and increased fraud attacks. A digitized credit origination and customer onboarding platform will not only accelerate the move to digital but will also be a proactive fraud risk management control, will improve operations and credit origination, as well as have the added benefit of increased sales because of customer convenience.

Detection to stop fraud
According to recent reporting by the Democratic Congressional House Select Subcommittee on the Coronavirus Crisis, more than $4 billion in PPP loans have been red-flagged for potential fraud abuses. Should these loans default, a denial by the SBA of its guarantee would result in lenders having unsecured loans that may not be repaid. Without collateral or personal guarantees, and if borrowers fail to repay the loans, lenders will be unable to seize businesses or personal assets. A digitized credit origination and integrated customer onboarding platform would have front-end preventive controls, eliminating many of the control weaknesses and operational errors incurred in the PPP loan origination and forgiveness process and thwart fraudsters' ability to steal funds successfully.

The first point of contact lenders get with potential borrowers is pre-qualification. With a digitized credit origination and customer onboarding platform, AML and KYC compliance information can be submitted online through the bank's website to verify the identity and potential risks involved with new or existing borrowing relationships. The platform can provide specific PPP portals that will allow for collaborative exchange between the lender and borrower on the application and loan documentation status and lend structure to managing the client relationship.

A digitized credit model can be designed to have the credit origination and onboarding platform integrated with an end-to-end KYC AML workflow to prevent fraud-related activities. An identity screening and document identification verification combined with the KYC onboarding process will make it easier for customers to provide the necessary identity information and optimize the approval process. Built-in verification checks are essential to mitigating fraud and the ability to perform real-time ID document authentication on borrowers along with ID validations against thousands of government-issued documents and photo ID images. The platform can provide a sanctions blacklist management capability and leverage regulatory compliance expertise to ensure that all processes remain compliant as the regulatory agencies publish new rules. It can sync with credit bureaus and other relevant institutions and databases and cross-reference and learn about borrowers' behaviors based on machine learning. This capability will enable banks to more safely onboard, approve, and process customer loans faster and efficiently. It also helps mitigate credit risks throughout the PPP lifecycle as the lender can more quickly assess the borrower's creditworthiness. Automating the credit processes and digitizing the credit value chain's critical functions can also protect a bank's revenue as operations improve.

Improve credit origination and sales
The digital sales capabilities of banks can also be enhanced through this type of platform. Lenders can offer a multichannel, single application where relationship managers and customers complete PPP loan or other credit applications on a shared screen, in real-time. Relationships can strengthen between the institution and its customers, and cross-selling can be facilitated.

Typically, loan approvals take weeks to months, depending on the type of borrower and facility. However, digitization can bring the time to "yes" down to five minutes or 24 hours — not just providing a better customer service experience but also reducing the lender's risk mitigation and operational costs while realizing higher revenue growth.

Improve operations
Institutions need digital processes that can identify bad debtors as well as unreliable and/or fraudulent clients. The credit origination cycle should be digitally integrated with the onboarding BSA/AML compliance requirements in part to determine the selection of borrowers.

Digitized credit origination and customer onboarding platforms would have mitigated many operational problems incurred with the flood of PPP loan applications and improved underwriting capabilities. They would be more efficient in decisioning, lending, and meeting compliance requirements for a socially distanced environment.

Where do we go from here?
Banks interested in investing in a digitized credit origination and integrated onboarding platform should consider the following before beginning the process:

• Determine the objective to be accomplished by the institution for short- and long-term digitization efforts.
• Investigate automation tools with machine learning and proprietary credit scoring. NTT DATA's Intelligent Automation for Credit Risk Management leverages various types of tools designed to enable continuous improvement of the credit process, including credit origination and integrated customer onboarding as well as sales, underwriting, fulfillment, servicing, collection, portfolio management, reporting, and more along with additional best practices. NTT DATA's automation of the credit origination and customer onboarding related processes will improve credit processing and reduce costs as the lending workflow matures over time.
• Collaborate with all stakeholders throughout the different stages of the lending process and the BSA/AML/KYC compliance SMEs and obtain their buy-in to avoid easy-to-miss details and regulatory requirements.

Find out more
Learn more about NTT DATA's risk and compliance offerings.