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Myths vs Reality in Upgrading Your Credit Decisioning Technology

Allison Karavos
April 14, 2023

Powering Up: How Banks Can Leverage Automated Credit Risk Decisioning for More Agility and Speed

Financial institutions are under pressure, and banks are feeling the heat. Consumers are even more resistant to friction in their customer experience journeys, whether they are buying appliances, vacations, vehicles, or applying for credit. So how can banks focus on growth and meeting consumer needs and expectations, while still managing risk effectively? In many cases, it means it’s time to look at your data and decisioning technology. 

Upgrading your credit risk decisioning technology sounds daunting. But we’re here to talk about some of the myths that persist around upgrading your tech – and the reality counterpoint. 

Myth #1:
Traditional Credit Data is Good Enough

Reality:
Traditional credit data is rarely enough to paint an accurate, holistic picture of a customers’ creditworthiness. Alternative data sources, including mobile/telco info, rent and utilities data, social media/web presence, and open banking info can help you gain a more comprehensive view of a potential customers’ financial health as well as their ability and willingness to pay.

The Data Challenge:
There is a ton of data out there, and it can often reside in siloed environments, making it difficult to access and costly to integrate into your decisioning. On top of that, it can be easy to assume that more data is the answer. But it’s not always what you need. The key to optimizing your data strategy is not necessarily more data but having the right data at the right time. According to IDC, in 2022“over one hundred thousand exabytes of data will [have been] generated, crossing the 100k threshold for the first time.” Yet 74% of decision-makers we surveyed said they struggle with their organization’s credit risk strategy because data is not easily accessible, and 70% say alternative data is not easily integrated into their current decisioning system. The use of alternative data to supplement traditional credit data (primarily bureau data) is critical to not only giving you a more accurate, real-time view of your customers’ creditworthiness, but it also expands your lendable market. By being more inclusive and saying yes to individuals who may have lower traditional credit scores, you’re improving financial inclusion and ensuring greater access to financial services andgrowing your business at the same time.

Myth #2:
It’s Too Costly to Upgrade Your Decisioning Tech

Reality:
It can be easy to assume that changing your decisioning tech will involve a massive amount of upfront investment (not to mention the fear of ‘wasting’ previous investments in your legacy tech). But can you afford not to upgrade? And keep in mind additional cost savings realized with self-sufficiency when changing your decisioning workflows and launching new products.

The Cost Challenge:
Cost pressures are everywhere. So it’s not surprising that sometimes banks are reluctant to consider changing technology platforms. With the hours of time and monetary investments made in implementing decisioning infrastructure, it can seem wasteful to transition away from legacy systems. But it’s important not to let the fear of past investments hold you back. Because with increased competition, demanding consumer expectations, and a shifting regulatory environment, having next generation decisioning tech is key. The cost of doing nothing will catch up to you – acquiring new customers, keeping your existing customers, preventing fraud, satisfying compliance requirements… non-action is a non-option. Upgrading your decisioning tech results in a lower total cost of ownership, thanks to eliminating product launch and iteration delays that lose you customers, the ability to automate risk decisioning workflows for more efficient processes, and improved fraud detection/prevention.

Myth #3:
It’s Too Difficult to Overhaul our Current Systems

Reality:
It’s not an all-or-nothing situation. Look for decisioning solutions that can run in parallel to your current software, or for ways to orchestrate your data more efficiently with a data ecosystem. This can create buy-in with other departments and lines of business when they see the improved efficiency and the way upgraded tech improves the overall decisioning process.

The Difficulty Challenge:
We’ve talked about the cost aspect of upgrading, which sounds daunting, but it’s about more than just money. Many people-hours are often put into choosing and implementing decisioning platforms – so why opt to do it all over again? Because the long-term benefits are worth it, and it may not be as difficult as it sounds. Rarely do you need to rip and replace all of your decisioning tech in one go. There are more flexible, agile decisioning platforms available that can integrate into or run alongside your existing workflows or you can choose to upgrade one line of business at a time. The key is choosing a technology platform that makes this easy and has experience with swapping out competitive decisioning platforms. (Provenir for example has vast amounts of experience replacing legacy, competitive decisioning systems, and can get you up and running, fast – however large the implementation may be).

How to Run the Smarter Race

One of the most common challenges banks are currently facing is competition – and the subsequent need to power risk decisions faster in order to keep up. But the key is to do this without sacrificing your risk strategy. It is possible to become more agile and self-sufficient, which allows you to make faster, more accurate risk decisions and launch new products in less than half the time – and one of the best ways to do this is upgrading to next-generation decisioning technology. Look for a partner that can offer you these key elements:

Real-time data access to hundreds of data sources through a single API
  • Advanced analytics based on your unique risk profiles
  • Integrated case management for a complete end-to-end perspective on credit applications
  • The ability to handle evolving compliance regulations and security demands
  • Low-code, business-user-friendly UI that enables self-sufficiency when changing processes and iterating workflows
  • Experience with swapping out legacy technology/competitive decisioning platforms to ensure a seamless transition
Leveraging automated, integrated data and more agile risk decisioning technology can help you increase your flexibility, accuracy, and speed. With the right tools on hand, you can keep up with new entrants in the market and also meet regulatory compliance requirements, all while making more informed credit decisions that improve the customer experience – and do it faster than the competition. Because in the race for customers… speed is everything.
Ready to improve your agility and run the smarter race?
Learn more about Provenir for Banks
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