Speed, simplicity and transparency – IT’s vital competitive role

Funders are on a quest to make lending applications easier, while seizing opportunities to automate high-frequency manual tasks

Technology is becoming the new battleground for lenders, with cutting edge IT systems now on the front line of winning business, transforming internal efficiencies, and allowing challenger finance houses to compete with long-established rivals.

Distilled into three strategic differentiators of speed, ease-of-use and transparency, lenders are looking to simplify the application process for both brokers and customers, accelerate the time it takes to confirm credit decisions, and communicate the progress of applications throughout the process.

Increasingly, however, customers want to apply at their own convenience, which is typically outside the standard nine-to-five when they are running their own businesses.

“So we’ve started our origination investment there, bringing risk-based pricing into our automated journeys, so we can give customers instant prices based on their circumstances and the assets that they’re funding,” said Leyland.

This automated decision making applies to lending of up to £250,000, and has gone hand-in-hand with automated invoice management processes and e-signatures, to cut the origination journey to as short as 40 minutes, he added.

“If the battle becomes speed and simplicity, and the battle is with unsecured loans, which are inherently easier to arrange, then the more automation we can do in our origination journey is really, really important to compete,” said Leyland.

Lombard has recently re-platformed, integrating half a dozen origination platforms that covered pricing, decisioning and documentation, as well as four contract management systems that relied on a combination of automated and manual processes to work.

“We knew that there was no way that that would enable us to deliver our future strategic goals,” said Leyland. “Scale was always a good barrier to entry, but going forward the battleground won’t be size. The important thing is that your strategy is driving your technology solutions and not your technology solutions driving your strategy.”

Captive finance houses have the advantage that they are working with their dealers right at the start of the customer’s buying process, but solutions need to be customer-driven, not process driven, said Fiona Daniells, Director, Digital Delivery Area Engagement, Volvo Financial Services.

Achieving this level of integration across a large, multinational organisation with 22 different LMSs across 43 markets is enormously difficult, but it is still possible to make progress in specific areas. Consequently, Volvo Financial Services has focused on its data and standardising definitions across all its markets. This will allow VFS to use data captured during originations for other processes, without having to integrate its legacy systems, effectively establishing a parallel approach.

While certain internal frictions may be inevitable, it is vital for lenders to ingest data from brokers and customers without burdening either, said Dan Bailey, Managing Director, Arkle Finance, adding that it’s essential to provide both parties with clear communication about the progress of applications through the lending journey.

He likened the process to ordering a pizza from Domino’s via the takeaway’s app, which confirms receipt of the order, signals when the pizza is going into the oven, when it is cooked, and when it’s on the delivery bike.

Digitising this process not only paves the way for better communication, but also has the capacity to eliminate errors. Automated software, for example, has the ability to ‘read’ and load proposals received via email into lenders’ IT ecosystems.

The business finance specialist has installed a new end-to-end LMS (Learning Management System) in the last couple of years, which covers all areas from proposal through to pay out, collection and recoveries.

“We felt that was an important aspect of the system because it gave us that confidence in the single source of truth,” said Orr. “We can extract whatever data we need from the system, both scheduled and real time, at whatever point we want.”

For new lenders without the millstone of legacy IT infrastructure, ease, speed and transparency are merely “hygiene factors, not differentiators,” according to Ylva Oertengren, Chief Operating Officer, Simply Asset Finance, which moved to a new Lendscape platform at the start of 2024.

She said the industry’s focus should be on getting the most out of every interaction with customers.

This involves solving as many problems for customers as possible with each interaction, while also maximising Simply’s operational efficiency as it continues to grow. The solution is Kara, a new virtual agent powered by AI and designed to optimise the user experience, streamline processes and speed up lending decisions.

Kara can already receive and process credit applications from brokers, conduct quality assurance on payouts, carry out underwriting and support customer communications.

“She also assists with nudges, making sure that we tick all the boxes when we look at a credit proposal,” said Oertengren.

She highlighted insights from the US auto finance market, where the need for speed is paramount. A recent implementation included a service level agreement that dealers should be able to access prices within six seconds.

The US market also wants flexible, multidimensional pricing campaigns, where prices are based on the individual dealer and customer.

The challenge is to implement this in the UK broker market, giving brokers the flexibility to edit quotes in real time while they are on the phone to a customer. This requires access to all of a lender’s data pools, so that, for example, a customer’s arrears history can be factored into new originations.