Need to Grow? Try Data

October 3rd, 2016

growth-10-3-16.pngTo survive, a plant at a minimum needs soil, sunlight and water.

Plants that grow better than others have usually received fertilizer on a regular basis. Think of the vegetable garden that produces bushels of produce throughout the summer.

Farms that produce commercial volumes utilize all of these resources, but they also have someone directing strategy based on a big-picture view including weather forecasts, equipment maintenance needs, field reports on pests, research on future risks to the crop, etc.

Banks, too, can subsist on the basics: good staff, products that meet the market’s current needs and essential data about the customer or operations. These financial institutions may be able to get by without analyzing the tons of data in their systems. Other banks may “fertilize” their growth by analyzing some of their data to shape product development or efficiency processes.

However, even at these institutions, a common factor stunting growth is disconnectedness between analysts, teams and departments when it comes to day-to-day operational or regulatory information. Just as the data is siloed, so is the insight and communication, making it challenging to provide either top-down or bottom-up strategy reviews. When people from multiple departments try to piece together data from multiple systems, it can be nearly impossible to glean actionable insight for outpacing current and future competitors. This quandary is magnified at top management levels, where executives must balance strategic objectives and pressures without a data-driven big picture.

Indeed, bank CEOs, directors, chief information officers and chief technology officers responding to Bank Director’s 2016 Technology Survey recently overwhelmingly indicated their institutions are plagued by the inability to effectively use data.

Financial institutions using data over the life of a loan are better able to manage and direct the big picture, shaping institutional strategy for superior growth. They can help determine not only where the institution has been making money, but also where it can expect to make money, how it can maximize profits and how it can minimize risk.

For example, at an ill-equipped institution, loan pricing decisions may be based only on competitive information. While comparability of terms is important to borrowers, it can also lead the institution into a disadvantageous relationship—one that could lose money for the institution. However, at an institution using a life-of-loan system, the loan officer would have an accurate measure of risk and overall profitability of the relationship, providing the loan officer with a range of acceptable terms that still ensure the bank meets its targets. When decisions aren’t made in a vacuum or from a single lender’s spreadsheet, the bank benefits from better decisions, and when better decisions happen across the commercial portfolio, the institution wins.

In addition to pricing, an integrated solution streamlines and automates much of the:

  • loan origination process
  • credit analysis
  • loan approval
  • loan administration and
  • portfolio risk management.

Connecting the data throughout the entire loan process allows bankers, underwriters and risk management professionals to communicate better and more efficiently. These systems also tend to unify employees with diverse skills into a more cohesive unit while building in a layer of awareness and appreciation for the full life of the loan.

All of this enables the financial institution to make better lending decisions based on relationship profitability and strategic goals, and it makes it easier for management to make informed decisions that ensure outperformance—even in an environment where interest rates and loan demand remain low and compliance risks are high.

In short, an integrated solution addresses the three greatest business concerns cited in Bank Director’s Technology Survey: regulatory compliance, becoming more efficient and competition from other banks.

The intersection of insight provided through an integrated solution not only creates more opportunity to develop an effective strategy, it can also guide the strategy. It gives bank management the ability to pivot, and the knowledge of where best to pivot to, so that the institution can focus its investments, development and sales efforts on the right areas for growth. In this way, the financial institution can flourish, rather than simply survive.

Want to learn more about integrated banking solutions? Sageworks has a free guide for bank executives.

mbiery

Mary Ellen Biery is a research specialist at Sageworks, a financial information company, where she produces content for the company’s blogs and websites, as well as for other outlets. She is a veteran financial reporter whose work has appeared in The Wall Street Journal and on Dow Jones Newswires, CNBC.com, MarketWatch.com, Nasdaq.com and other sites.