Effective credit management is more important to the global economy than ever before, yet many businesses still struggle to achieve it. This paradox poses significant consequences for companies and customers alike. Credit granted too freely harms markets by increasing the likelihood that borrowers will default. Collections undertaken without data driven insights or proven treatment strategies are apt to produce suboptimal results and antagonize otherwise valuable customers in the process.
Many financial institutions are integrating digital strategies into their business and technology environments as a means of enhancing competitive advantage, improving collections revenue performance, and retaining greater customer loyalty. These organizations realize that credit management is really about the customer journey—from loan origination to repayment to new loan application. This journey can be clear, coherent and concise or full of lapses, miscues and frustrations.
The difference digital transformation can make
Digital transformation helps to ensure that each step along the way leads to constructive results—eliminating costly mistakes and confusion in the process. Consider just a few examples of the positive difference implementing digital strategies and the enabling services and solutions can make:
- At loan origination, a firm understanding of the customer’s behavioral statistics and history can mean more personalized offers delivered more quickly and accurately while yielding larger and better loan portfolios.
- During customer onboarding, digital experience methodologies and analytic insights can help speed the loan application and approval process.
- In loan repayment, predictive analytics can encourage automated repayment to reduce late payment backlogs and help avoid defaults.
- In the case of delinquent accounts or defaults, predictive analytics can help determine the customer’s probability to repay, facilitate communication and personalize resolution terms.
- For generating follow-on business, digital enabling technology supports payment appreciation, rewards with additional offers, and insights gleaned by looking across expanding loan portfolios.
Through the implementation of digital strategies, processes and technology, credit management interactions can be more robust, productive and useful for all concerned. So why isn’t every financial institution pursuing the strategy to become digital?
Achieving true digital transformation
Achieving true digital transformation is as much a shift in mindset as it is in servers and software. Change means addressing credit management with new perspectives, business processes and underlying technology. For many organizations, legacy business rules, processes and systems slow their responsiveness to changing market conditions. Maturing technology itself is becoming increasingly expensive and difficult to maintain. For these firms, their “business as usual” thinking and doing may even be contributing to revenue declines and customer turnover.
Today’s market leaders know, however, that change is unavoidable. Customer expectations are rising on a daily basis. To meet them, financial institutions must offer credit interactions that are accurate, timely, convenient, secure and confidential.
To remain competitive, there is simply no time to lose. A recent CGI Client Global Insights report capturing the viewpoints of executives across 14 industries and subsectors found that 77 percent in the financial services industry have a defined digital strategy. Digital transformation, these executives clearly indicate, is the way forward.
Leading financial institutions are wisely leaving the world of isolated, one-off credit transactions behind. Instead, they are using real-time data and risk differentiated collections strategies to achieve dramatically better levels of credit management performance—performance that features customer defined modes of contact, 24x7 self-service options, privacy and security, overspending alerts and more.
While numerous digital services support the digital transformation journey, three are particularly useful: digital experience, digital insights and artificial intelligence.
- Digital experience means utilizing a lean UX approach for the research, design and implementation of web-based information architectures and web-enabled interactions, along with monitoring and testing to ensure peak performance and goal attainment.
- Digital insights are generated using tools to extract new value from data and to help transform legacy processes with new applications.
- Machine learning and other forms of artificial intelligence accelerate analytic trends and push computers with cognitive capabilities to the point where human-like decision-making isgleaned from images, words and sounds.
In today’s credit economy, standing still means falling behind. In a field made ever more competitive by digital innovations and new market entrants, falling behind could mean failing altogether.
Where do your credit management operations stand today and where will they need to be in the months and years ahead? CGI can help your organization achieve digital transformation through the right combination of credit management expertise, end-to-end services and IP solutions.
A new CGI white paper, The Digital Transformation of Credit Management, is a great place to start or accelerate your journey. Please download a copy now, and feel free to contact me for a conversation.
About this author
Director of Consulting
John Jensen leads a CGI U. S. banking practice focused on end-to-end strategic consulting for clients seeking to optimize their processes and technologies. He has an extensive background in leading consulting engagements in the areas of default management, loss mitigation, foreclosure, bankruptcy, performance optimization, consumer ...