The article discusses how the Philippines can be your path to automation for your loan operations.
These days, few executives need to be sold on the benefits of modern automation. A list of perceived advantages will almost certainly begin with increased productivity and production rates, more efficient use of labor and materials, and higher work quality output. Each of these variables would have a favorable impact on end-customer satisfaction and the business bottom line. On the other hand, lagging in the successful deployment of automation of loan operations would leave an enterprise less competitive and less relevant in their market category.
“KPMG reported last year that most intelligent automation projects underway or in the pipeline at that time would fail.”
Despite the inevitable advantages of automation, however, as one would imagine, the challenges associated with effective implementation are considerable. As Connext engages with clients, prospective clients and talks with others directly struggling with their implementations, it is becoming increasingly clear that the road to effective automation runs through the Philippines. At first, this may seem counterintuitive; however, with further thought and experience it quickly begins to make sense. The most basic and most underestimated challenge is that nothing about an organization’s existing business processes and personnel was created to enable the easy deployment of new automation. Some of the known challenges to loan operations include:
- Workload
- Time Management
- Process Clarity
- Process Documentation
- Technological Capabilities
- Change Management
- Cost Management
“Forrester claimed that more than half of early digital transformation efforts were stalled in 2018 due to lack of organizational readiness.”
Workload – The current business environment for commercial and retail banking is extraordinarily complex. Loan operations managers are being asked to do more with fewer people, and possibly, a distributed workforce, while using antiquated, legacy systems. Low interest rates are now driving a refinancing boom so origination volumes are high, but at the same time as borrowers refinancing existing loans have to be closed out. Workload variability is difficult to manage because it takes time to staff to required levels, train, and get personnel to optimum proficiency in system utilization, as well as process and regulation compliance.
Time Management – Operations managers and executives simply do not have the time to undertake challenging new automation projects. It follows that inadequate focus will likely lead to inadequate results.
Process Clarity – There is variability built into tribal knowledge. Everyone on the team “knows” what happens in loan operations; however, it is unlikely that any two people would create exactly the same detailed process maps. In our discussions with operations executives who have undertaken this, there are multiple pathways, subtle decision points and an underestimated and underappreciated number of human touch points. These small differences make an accurate understanding the overall process extremely challenging. And it stands to reason since the subject matter experts have a far more targeted and far less broad view of the process as a whole.
Process Documentation – It is common to see procedures and pieces of the process documented in various forms, but thorough end to end documentation is rare. It is also quite common that very little actionable documentation exists.
Technological Capabilities – If budget is a determining factor, some of the largest international banking organizations have technology budgets bigger than the US Coast Guard’s operating budget. At that scale, a tremendous amount of investment in technology, used wisely, can enable very robust customization and feature sets. For state and regional banks, that level of technology budget and capability, simply does not exist. Off the shelf products are extremely powerful and customizable, but most organizations do not have the scale, budget, and expertise to rapidly overcome implementation challenges given the factors discussed here. Technology changes so quickly that banks need to perform a continual cycle of projects to keep up both, from a capability perspective and using systems that are still supported while configuring the effective integration of multiple applications.
Change Management – This is a multilayered onion. Most managers do not understand exactly how process automation will work in their context and specifically how it will help them overcome their challenges. This creates reluctance and the desire to proceed cautiously, which resonates with the culture at most banks. Thus, progress is at a less than desirable rate. Additionally, banks are generally employee friendly and great places to work with the culture of creating and supporting a stable workforce. It not uncommon for many longtime employees to have a reluctance to change. This is compounded by any fears, warranted or otherwise, of losing their jobs. The dynamic is exacerbated by the current deep economic crisis.
Cost Management – Lower interest rates equal lower margins for banks, period. Increasing loan-loss reserves also creates margin pressure. Even without these factors, very few organizations have the excess capacity, or slack, necessary to undertake transformational initiatives.
Why the Philippines and Connext is the Solution
Moving 20 to 40% of the work to a Connext team in the Philippines neatly addresses most of these issues.
Workload – Existing teams at Connext now have the capacity for undertaking the work necessary to implement automation and there is slack in the team to take on more work as needed. Banks with slack can turn up marketing to increase the flow of new business to take advantage of market conditions.
Time Management – There is an old saying, “management would be easy if it weren’t for the people.” Implementing a remote Connext team instantly removes most of the people issues. The Connext team of trained and capable operations and human resources leaders handle sourcing, recruiting, selection, training and intra-day management as part of our basic service package. Yes, it takes only a small amount of time and effort to begin implementing a remote off shore team. Connext clients realize that this effort immediately pays dividends which is evident through our high retention rate. They quickly appreciate how partnering with Connext allows them to increase their focus on supporting their customers.
Process Clarity – We have found, time and time again, that one of the biggest yet unanticipated benefits of implementing a Connext remote team is that it forces process clarity and process improvement. Sure, automation would force this as well; however, human to human transition of tasks is dramatically easier and a natural evolution to RPA implementation.
Process Documentation – Connext teams always thoroughly document processes as they implement them. In some cases, this involves updating existing client documentation, and in many cases, requires starting from scratch. This documentation creates a proper positive spiral for process improvement and further builds the foundation for automation. Having consistent and well-documented processes enables the organization to quickly implement automation projects because requirements are clearly understood and translated to the technology team.
Technological Capabilities – The counterintuitive and underappreciated benefit of implementing a remote force is there is almost zero new technology or technology implementation required. Almost every financial institution has multiple locations. The Connext team can use the same technology as any other location. It is also quite common for Connext to deploy client configured and managed firewalls and computing devices.
Change Management – Implementing a remote workforce does involve change management; however, it is a well-trodden path that most organizations are already doing in some form. If implementation is undertaken steadily and thoughtfully, local staff quickly begins to enjoy working with remote Connext team members. The cultures are infused, assisted by Connext’ robust videoconference capabilities and the Connext-to-Client window with CCTV cameras and screens in both offices, creating a contiguous working environment.
Cost Management – The fully weighted cost of Connext staff should be between 25% and 50% of current costs. We would not advocate the wholesale replacement of teams; however, using a Connext team for 25% to 50% of volume creates cost-saving and capacity for local teams to work on automation initiatives.
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