The new 4 C’s of commercial lending

The new 4 C’s of commercial lending
Last week, I participated in a Finextra webinar on the topic of “Connected Credit and Compliance for Lending Growth” with panelists from ING, Vertus Partners, Misys and Credits Vision.  As I prepared for the webinar, I thought back to my first exposure to commercial lending when I worked for a large regional bank and I recalled the 4C’s of commercial lending from credit training:  character, capacity, capital and collateral.  All of those original 4C’s are still relevant in today’s environment when evaluating borrowers, but when considering the state of the commercial lending business in 2016, we need to think about an entirely new set of 4C’s:
  • Constraints on capital and liquidity
  • Cost of compliance
  • Changing client expectations
  • Competition from new entrants
On a global basis, banks are being forced to restructure their business models, technology platforms, and organizational processes in order to grow their portfolios, remain profitable, and stay in the good graces of their regulators.  All the while, meeting the evolving demands of clients who can view and manage their personal finances on demand, at their convenience, using the device of their choice. Despite these challenges, the panel remains optimistic that banks can and will evolve to grow this critical line of business. finance590x290_0 Where does this optimism comes from? Alternative lenders provide both a threat and an opportunity for banks as they make the difficult decisions on whether and how to serve a particular segment of the commercial lending market. Fintech partners offer more modern solutions than the decades-old clunkers that many banks still use; providing for more efficient and accurate decisioning, enhanced visibility and processing within the bank, and where appropriate, self-service capabilities.  Connectivity with clients and partners will increasingly be the hallmark of a successful commercial lender. For more insights from the panel, please register for the on-demand version of the webinar here: Finextra: Connected Credit and Compliance for Lending Growth.  

Corporate digital delivery channels and the customer experience

Corporate digital delivery channels and the customer experience

Celent feels (and others agree) that it’s important that banks deliver an omnichannel digital customer experience, but the term means different things to different people. Based on our own research, we believe that omnichannel is about delivering a customized but consistent financial institution brand experience to customers across all channels and points of interaction.

An omnichannel experience is even more critical when delivering services to corporate clients. Each client has a unique set of business and technology requirements based on their corporate treasury organizational structure, geographic footprint, and treasury technology sophistication. A consistent financial institution brand experience is important to corporate clients, but the experience needs to be tailored to each client segment’s unique needs. For the largest, most complex organizations, an even more bespoke and customized experience is critical.

With banks investing increasing amounts of capital in technology incubators and startup accelerators, the pace of innovation in digital channels continues to grow. But for corporate clients, innovation isn’t about incubators, accelerators, or hackathons. Innovation is about simplification — increasing usability, straight-through processing, and digitization. As outlined in the new Celent report, Tailoring the Customer Experience: External Forces Impacting Corporate Digital Channels, the competitive environment, regulatory climate, economic conditions, and technology impacts are shaping the evolution of corporate digital channels. But emerging technologies will have the largest impact. External Forces Corporate digital channels are just one component of a complex treasury technology landscape, but a critical one. Corporates maximizing the efficiency and transparency of digital channels today are enabling and preparing themselves for innovative technologies for the future.

Multichannel Management: Avoiding Channel Myopia

Multichannel Management: Avoiding Channel Myopia
BAI Banking Strategies recently published an excellent piece on multichannel management featuring an interview with Jim Di Ciaula of BMO Harris Bank. Reading the article inspired me to share two common pitfalls in multichannel management: following the customer and listening to the zealots. Both are examples of channel myopia. Following the Customer In a previous post we addressed the all too common method of determining channel priorities – following the customer. In a Fall 2010 Celent survey of North American financial institutions, the most common mechanism for determining channel spending priorities was simply measuring and reacting to channel usage. In other words, as channel usage goes, so goes channel investment. The inevitable result of this approach is to continually lag the market. Bad idea, but way too many financial institutions are stuck in this rut. Listening to the Zealots An apparently less common approach is to let hype drive distribution channel decisions. As example, one analyst whose focus included social media castigated me for not including social media as a unique distribution channel in our 2010 research as evidence of myopia. Apparently in that analyst’s mind, social media is every bank’s way to riches and rightfully belongs as a #1 channel priority. I’m still wondering how social media constitutes a delivery channel. Seems to me, social media might be more usefully considered a growing array of communications mechanisms that need to be integrated into multiple delivery channels. One interesting observation Celent uncovered as part of its research on branch channel transformation was a pervasive multichannel discipline among financial institutions having highly advanced branch channels. Going into the research, I fully expected to find branch channel zealots among FIs having highly evolved branches. Stands to reason, we thought, that FIs with staunch branch advocacy would be investing most heavily in the branch channel and perhaps neglect the others. What we found was just the opposite. Instead, in nearly every case, FIs having the most highly evolved branch channels were also committed to a rigorous multichannel management discipline and had competitive (and increasingly integrated) ATM, internet and mobile channels too. Jim Di Ciaula is right; multichannel management is both art and science. But, avoiding some common pitfalls can help financial institutions get beyond channel myopia towards a more balanced objective of maximizing their collective effectiveness.