• 2023-08-11

Automate Banking Workflow for a Risk free Credit Management

Automate Banking Workflow for a Risk-free Credit Management

Banks have been the primary lenders to retail and corporate borrowers for ages. 

Banks mobilize funds from investors and governments to lend for slightly higher prices to support enterprises with a calculated risk. Most of the time, banks did calculate them without a scientific measure and often fell into trouble.

The 2007-2008 financial crisis is one the best examples of the financial risk banks encounter. 

There was a slump in the real estate markets because the finance sector institutes failed to recover loans from the Mortgage-Backed Securities (MBS), resulting in the collapse of the realty sector in 2008. Banks suffered heavily due to toxic asset accumulation, without yielding them no returns.

Is there a way for the banks to take measures to assess risks before lending?

Banks over the years are making lending decisions based on the biased information collected following unscientific methods. Fintech companies have effective solutions to mitigate such risks to reinstate faith in investors.

Since no two-risk management technique is akin and can address diverse cases, financial institutes can initiate measures to minimize risks and maximize profits. 

Simplified User Identity Authentication 

Bankers can create customized loan application forms to share with the intended customer only through the email the customer provides in the digital form.  The electronic signature for banking reaches out only to the intended customer with an authentication code to their email. When the customer replies with details, eSigns offers a cloud-based central repository to save these documents. When a customer is signing electronically with an eSignature, the document gets protected with a digital seal and the signature remains legally valid. The platform maintains a digital ledger and digital log, allowing a digital audit trail. This feature prevents companies from producing fraudulent reports. 

Relying on Tried and Tested Customer KYC details

For ages, the banking business process has been very complex. Credit seekers that are retailers and corporates must approach the banks with several documents and proofs to prove their identity and eligibility to secure loans. Instead of the customer approaching companies with evidence, which may be fake, banks can collect customer information from independent sources such as credit card payment history, company balance sheet submitted to the tax department, and the company’s loan repayment history.

Finance sector institutes can approach businesses upfront with a simplified verification and underwriting process rather than the business approach them multiple times.  esignature for financial services authorizes remote verification of documents that simplifies and offers a scientific document verification process.

Standardizing Business Processes

Banks should standardize their business process by automating and digitizing their business process to avoid errors and manipulations that may happen due to manual operations. Digitized finance sector operations allow companies to produce paperless application forms, contracts, and agreement documents to serve customers in a customized manner as a workflow for easy customer onboarding and signing the loan document to avoid inconvenience. In this process,  customers apply for loans by filling out an online form by attaching evidence in digital form with their electronic signature. A standardized lending process simplifies the lengthy loan processing procedure and enhances the customer experience.

Compliance with Local and Global Laws

Countries across the globe, including North America, Europe, Asia Pacific, and Australia have enacted laws to legitimize electronic signatures. Banks can accept documents produced as evidence in digital form with an electronic signature to avoid risks. 

Behavioral Economics to Assess Customers’ Background 

Several fintech companies have introduced customized software solutions for the banking and financial sector institutes to predict customer behavior. eSigns, the electronic signature for banking is embedded with analytics and sheds insights on customer document transactional history, including the date of availing the loan, repayment schedules, defaults, and penalties if any to predict the customer behavior in advance. This will also act as an early-warning system for the retail and small, medium-size-enterprise segments to honor deadlines based on the alert messages they receive. Using analytics, banks can sense the risky behavior of customers who overestimate their capabilities or hide fraudulent practices.                                                                                                                              

Centralized Data Management and Digital Dashboard.

 Data-driven platform economies are vulnerable to cyber-attacks that expose customer data to fraudsters. eSigns offers digital document management solutions to integrate customer information in centralized data repositories, offering data safety while honoring customer privacy. The eSignature for financial services also integrates internal and external data with a digital dashboard to offer valid data for managers for unbiased decision-making backed by evidence. The digital dashboard also helps banks allocate budgets and design efficient credit and recovery policies.

Automating Workflow for Effective Credit Distribution and Recovery

Workflow automation creates an alert mechanism that warns banks and customers related to EMIs and loan repayment in time. An automated workflow dispatches emails and SMS messages to customers on loan repayment deadlines. Workflow automation allows banks to create customized solutions to serve customers in a personalized manner to drive customer satisfaction.

Reduced Operational Costs Reduces Wastage

Banks spend more than 50% of the revenue they generate on operational costs that is repetitive, routine, and erroneous. Automation of a bank’s lending operations reduces costs spent on voluminous paper-based contracts, agreement forms, application forms, and credit deeds. Digitization and automation of credit workflow help banks reach customers effectively. Digital document management features streamline credit distribution and recovery and build an efficient credit risk management model. 

Effective Regulatory Mechanism

Federal governments worldwide have started enacting laws to regulate companies from exploiting customers. Banks are not exceptional to the regulatory measures of the governments. Banks cannot jeopardize customer interests at the cost of inefficient bank operations. Banks at the same time, cannot deny the customers' right to earn profits. Efficient risk management measures using esignature for financial services alone allow banks to safeguard their customer’s interests.

Final Thoughts

It is time for the banks and the financial institutions to have strategies that would not let banks on the receiving end. Banks must have an effective risk management strategy to remain competitive in the financial sector market. Although risk-taking is inevitable for credit agencies to develop a thriving and sustainable economy, digitization and workflow automation using electronic signatures for banking allow banks to take calculated risks that minimize losses. Banks cannot rely on the government’s bail-out policies to overcome challenges. Bailout programs would adversely affect the credibility of the banks and customer loyalty.