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Challenges and optimization of the commercial credit process

credit loans

For many banks, commercial lending is an important source of income and an important business area. A current study has examined the commercial credit process and shows possible approaches for optimization.

Medium-sized companies are the success factor of the German economy. As a result, for many credit institutions, commercial lending is an important business area and also an important source of income. However, the ongoing low interest rate phase, increasing competition and regulatory requirements are putting pressure on margins and costs. The trend towards digitalization, technological progress and constantly better informed and increasingly flexible customers present banks and savings banks with additional challenges. The goals of the study are to ascertain the current situation, identify the most important challenges and drivers of change, and point out possible solutions. In total, decision-makers from 24 institutes from the sectors of the savings banks as well as the Volks- and Raiffeisen banks were interviewed.


Diverse approaches to optimize credit processes

credit processes

Both the examined savings banks and the cooperative banks see room for improvement, particularly in the areas of costs, capacity utilization and lead times. There is a particularly wide range in sales. Here, the duration for the time between customer advice and loan application varies from 3 to over 10 days. However, there are also considerable fluctuations in the processing, ie from drawing up the contract to archiving the documents. With some outliers, this process alone can take over 10 days.

Often mentioned as “time wasters”:

  • Document review,
  • Contract creation,
  • Document archiving,
  • Customer data change and
  • all collateral management.

A low level of automation is often complained about for the functions mentioned.


Control of the credit business

The credit institutions primarily use the classic key figures such as lead time (71 percent), number of items (63 percent) and loan volumes (58 percent) to control the credit business. Compliance with service level agreements (38 percent) and credit default risk (33 percent) follow at a clear distance. Capacity utilization, process costs and number of customer complaints play only a minor role. What is striking is that every sixth institute does not use any key figures.

The basic process framework of commercial lending business forms the basis of the study.

At first glance, the majority of institutes are satisfied with the current fulfillment of the key figures. A closer look reveals a differentiated picture. The quality of the results is correct in almost all cases. On the other hand, dissatisfaction is particularly evident with regard to the total throughput time (over 40 percent) and the costs and complexity (around 30 percent each) of the process.


Increased IT support desired

Control of the credit business

Further starting points for improvements are primarily seen in the increased use of IT. According to 63 percent of the respondents, this affects the customer’s IT integration with extended online offers and the institute-wide data link between data silos. 92 percent of the institutes see additional improvement potential in achieving greater consistency in the entire credit process. However, the implementation of these approaches, with the exception of customer involvement and data linking, is often not yet concrete.


Outsourcing is stagnating

When it comes to outsourcing, hardly any approaches to change are noticed. 33 percent of the institutes have outsourced parts of the process and are not planning any further outsourcing. 13 percent of the other institutes are planning to outsource part of it. The primary areas for outsourcing are workout and risk management. The institutes are largely satisfied with the services of the service providers of functions that have already been outsourced. Reintegration is not planned.


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