What’s this all about?
As the COVID-19 pandemic propels us towards unknown outcomes, technology has become indispensable in helping businesses keep the show on the road across all industries. For banks, lenders and loan servicers, the need for a greater level of adaptability has become ever-more apparent. In the following article, we explain the principles behind building a platform that can enable flexibility throughout the entire business.
Read on if you…
- Want to be able to better react to changeable market conditions
- Are interested in the design principles behind building flexible banking tech
- Want to learn more about modern architecture
Cash-strapped borrowers. Banks inundated with credit requests. Economic uncertainty.
We’re only at the tip of the iceberg of the impact of COVID-19. Indeed, it’s difficult to envision the extent to which life might change with predictions of an economic downturn worse than the Great Depression. Loan servicing technology must now cope with an upswing in the processing of payment breaks. The latest COVID-19 figures from the Banking & Payments Federation Ireland (BPFI), show that over 140,000 payment breaks have been issued (with close to 80,000 of them for mortgages), while the figure is reported to be around two million in the UK.
Things weren’t exactly rosy beforehand, however, with much of the world in a low-interest-rate environment. Added to that, lenders and loan servicers have been dogged by issues relating to efficiency, the cost to service a loan, as well as the need to prioritise compliance, drive profitability and enhance customer service.
In the Dutch market, the LEVERIS Banking Platform is currently live, servicing millions of euros for clients of major financial services firm, Link Group. We’ve written elsewhere about how the technology handles payment breaks in a way that doesn’t necessitate complex manual processes and involvement from numerous actors.
Modern technological design allows features like this to be easily implemented and more – it can equip banks, lenders and loan servicers with the flexibility they so fundamentally need. Here’s how.
Flexibility starts with the design of the platform. A modular structure built on microservices-based architecture allows the components to execute independently while still interfacing seamlessly with one another. So, on the one hand, the normal lifecycle upgrading process doesn’t result in the mayhem associated with older systems. But in fact, any change need only be applied to the affected module(s). And if the platform is also API-driven, the functionality can be extended by swapping partners in or out. It allows a ‘plug-in, plug-out’ approach if you will.
Indeed, upkeep is made a lot more manageable by the use of open source technology, standard frameworks and interfaces, and well-understood languages.
This approach enables other efficiencies, especially if the platform is cloud-native, software-defined, event-driven and if it utilises a high level of automation. For example, a bank, lender or loan servicer using such software can take full advantage of cloud properties such as elasticity and burst capability, allowing them to better handle periods of unusually high activity.
Configurability and product innovation
This forms the basis for a platform that’s highly configurable. Loan products can be built quickly, with numerous variations on parameters (over 720 on the LEVERIS platform) but crucially, they don’t need to be rebuilt in order to be changed.
Simple loans with a single loan part can be easily configured. Equally, so can complex loan structures consisting of multiple loan parts, all independently parameterised. This means specific market segments can be targeted and satisfied with products built exactly according to their needs.
Additionally, every borrower on the LEVERIS platform gets a service account with an IBAN. This allows us to carry out flexible repayments. Borrowers can also draw down loans based, for example, on their uploaded construction work invoices.
This configurability extends to fees and interest. Fees can be manually applied if required but being event-driven allows fees to be attributed to anything that occurs in the system and automatically charged.
At the heart of the LEVERIS approach to loan management is ensuring a Single Customer View (SCV) throughout the entire platform. A powerful data warehouse captures all events, activities, information down to the micro-level and in real-time, integrating it all in one place so that there’s a well-organised, single source of truth of data from which custom reports can be extracted.
Through the SCV module, back-office operators can see everything about a customer’s relationship with the business and make changes to their details, apply fees, carry out necessary servicing activities, etc.
The LEVERIS platform also has an in-built loan manager solution where operators can manage, for example, any changes in a customer’s LTV. Here, loans can be rapidly restructured if needed. Adjustments can be made including lump sum payments, interest-only repayments and payment moratoriums. Any change can be simulated and its impact calculated before being performed on the fly and applied in real-time.
This has a key advantage in reducing the number of binary defaults. If a borrower finds it impossible to make the loan instalments, the repayments can be adjusted until they’re in a better position, also allowing the lender to avoid the debt collection process.
This all feeds into better outcomes for end customers with many ways to repay their loans, while SCV and real-time processing make things a lot faster and more convenient.
The LEVERIS platform also allows the option to self-serve through a (white-label) mobile app or a web portal. Devolving power to the borrower to manage their loan has reciprocal benefits – they enjoy a greater level of control while the bank or servicer needs fewer resources to manage the process behind the scenes.
And, with a platform that’s in-tune with their needs, they can avail of more useful products and services.
As COVID-19 propels us towards unknown outcomes, modern technology can help banks, lenders and loan servicers help their customers by being able to pivot with whatever comes next.
One of the reasons why we at LEVERIS have imagined a better way is so that the business of banking and lending can be conducted in a manner that’s far removed from the rigid limitations of legacy technology. We believe that this is key to improving the future for individuals, businesses and society.
That’s why we built an end-to-end platform according to these principles; a platform that can enable cost savings, power innovation, and allow financial services to keep up with the pace of change.