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The Commercial Loan Origination Market – Darwinism at its Best


October 27, 2021 | Jonathan Pryer

Darwin’s theory of evolution stated that not only does evolution occur but that it does so through natural selection. 

Species that were able to change their inheritable traits and instinctive behaviors over time ensured survival over extinction. A great example of this is the green sea turtle of the Jurassic period that developed a wide array of “adaptive survival techniques”. When times became tough, the green sea turtle found alternative ways to adapt and enhance itself.  When thinking about the Jurassic period the green sea turtle isn’t exactly the first species to come to mind however. The dinosaur is undoubtedly the most famous of the Jurassic period species but sadly the species did not have the same insight and ability to change and evolve as the green sea turtle. You can still spot a green sea turtle in tropical and sub-tropical oceans around the world.  As for the dinosaurs you can always find these online or in the natural history museum.

This same concept of evolution can also be applied to the Commercial Loan Origination (CLO) market and its lending behaviors.  Commercial lending is an increasingly important area of focus however there are a large number of banks that still rely on outdated, legacy technologies to support this key business line.   According to the CEB 2016 Technology Adoption & Investment Survey, 56% of banks plan to increase spend in CLO systems with 36% replacing the systems prior to 2018.  According to CEB TowerGroup many of these legacy CLO systems were installed prior to 2010 and others prior to 2005.

The green sea turtles in the bunch recognize that operating a CLO business on decade old software has obvious implications such as system and process redundancy, lack of automation, inconsistent data and processes limiting decision making abilities and agility to respond to regulatory pressures.   In order emerge with the “survival of the fittest” CLO system three things need to occur as outlined in the recent CEB TowerGroup report entitled “Commercial Lending: The Imperative to Evolve”.  First, business and technology stakeholders need to be aligned strategically in regards to what technology solution to invest in and the boardroom in general needs to value the importance of the underlying technology.   Second the solution needs to deliver a single, scalable origination platform  to enable quicker and efficient responses to market changes, evolving regulatory requirements and the entrance of new competitors in the space.  Third, lenders with sound data processing across complex commercial loan origination will enable their ability to grow and scale their commercial lending origination business.

Just like the dinosaurs, lenders that fail to view lending as a key profit center for their overall business and the importance of an underlying CLO system may miss out on revenue and growth opportunities.

Download a copy of the report here to read more about the evolution of the CLO market. Learn about Provenir’s extensive loan origination capabilities including according to CEB TowerGroup “powerful adaptors for bringing together data and information from multiple sources automating data entry and easing integration efforts….extensive 360-degree views of customer, loan, and collateral data enable the efficient decisioning and ongoing servicing of loans through a user-friendly, front-end system.”

Don’t be the dinosaur, be the green sea turtle and keep on swimming.

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