Industry experts discuss the approaches & actions required to modernize LMS software:
Loan Management Systems (LMS) supports multiple facets of loan portfolio starting from prospecting to closure and monitoring. A comprehensive loan management solution facilitates banks and financial institutions to automate the procedures for achieving cost savings and better customer experience.
ACTIONS TAKEN IN LMS
The LMS software is not directly impacted by the changes in customer experience as most consumer loans are either term loans repaid in EMIs (like a personal loan or auto loan) or lines of credit (like a credit card or overdraft). Prithvi Chandrasekhar, President, Risk and Analytics at InCred Finance says: “The basic LMS level requirements for these products have not changed for a long time. Where there will be changes is in enabling features (eg. rewards on a line of credit product, or more flexible repayments on a term-loan). These were less common a few years ago. LMS systems across the industry will be upgraded to address these needs.”
Rachit Chawla, CEO, Finway, using an LMS, hands-on features should be provided to customers on a real-time basis. They should be able to download their SOAs and real-time receipts. It is highly crucial to keep their data safe so that they can access it. For certain NBFCs, TDS is a big issue wherein the credit in the customer’s account happens with a delay, which ideally should be in real-time. Businesses need to think from a customer’s perspective.
He maintains: “Covid-19 has caused significant restructuring when it comes to the LMS. The reporting doesn’t provide the details. There is uncertainty regarding the rationale behind it and how the said amount has changed. The increase has not been specified, but the LMS should be able to cater for that. Rather than keeping it limited only to internal accounts. It should be customer friendly and give them all details automatically and on a real-time basis.”
Most of the activities and workflow under Beacon loan management processes has been transformed digitally. Vinod Puliyakote, Vice President – Banking Solutions at Speridian Technologies shares details: “Customer onboarding with video KYC, video-enabled loan application processing and scrutiny, credit bureau check, automated financial statement analysis, online disbursement, smart collection and follow-ups, mobile-based customer communication and updates, etc, are a few of them. Regulator reporting is another area which has evolved.”
MODERNIZE BACKEND APPLICATIONS
Instead of making the backend applications heavy, Finway FSC focused on a dynamic platform. Rachit explains: “APIs can function as it has been doing. So, even if there is a need for modification in time coming time, the main hardcore software does not need to be tweaked, they can only change the API as per the customer needs and get it sorted. That is how you can modernize your backend applications as technologies are changing very rapidly.”
Incred’s technology architecture is based on a modular micro-services framework. Each application is like a Lego block, which snaps into other Lego blocks through an API. The company’s architecture is intrinsically scalable and easy to modify. Prithvi says: “InCred is a digital-native and cloud-native company. Organizations with older legacy systems will have a harder time migrating their applications to more modern architectures.”
Interfacing between external agencies platforms has matured a lot in these times. Data entry work has been reduced. Getting the information that you need can be fetched from other portals because it is available on various other repositories.
Vinod believes the industry is evolving in such a way that interfacing is getting seamless facilitating communications. For example, if GST number provided that required data can be pulled out from the GST portal, financial statements can be made available from the registrar of companies, income tax statements can be made available from their portal, etc. He explains: “This helps not only just reduce data entry efforts, but it also improves speed and accuracy, reduces the chance of manual errors and helps reduce fraud due to intentional manipulations.”
Beacon LMS is helping FIs become more efficient digitally. With all these, the TAT and overall operational efficiency has improved while at the same time, accuracy has increased with reduced man efforts. Beacon helps to improve the efficiency of FIs in loan management process by 50%, says Vinod.
Nowadays, partners are well-positioned to lead the industry in areas like compliance, cyber-security, etc. These issues impact the entire industry. Vendors who work with many players are well-positioned to understand the needs of client organizations across the ecosystem, and proactively approach them with packaged solutions.
Finway FSC has a proprietary in-house software. Rachit says: “Outsourcing technology is a very costly affair. Now, there are no companies that can dynamically keep on upgrading the systems depending upon the users of financial institutions. Most financial institutions are stick to their integrated proprietary platforms.”
He adds: “Certain players work with top-of-line IT software services like Infosys, TCS, etc, but that’s a different ball game.”
Vinod says that technology keeps on evolving. All of them help institutions one way or the other. But to adopt evolving technologies organizations cannot always go back and start over again. There lies the importance of component-based architecture. That is why many organizations are adopting it. Easy implementation, flexibility in post-implementation maintenance, and support are all other benefits adding value. Beacon LMS is also component-based.
Beacon has an umbrella branding for a bunch of financial solutions encompassing delinquency management, collection applications, early warning system, and mobile banking applications, apart from the enterprise solutions such as core banking, loan management system, loan origination system, etc. Beacon LMS provides AI/ML-based predictive analytics for various use cases such as loan default, next best action for loan collection, etc.
Vinod dives deeper: “All these solutions are fully component-based and can be interfaced with any of the leading solutions in the industry and can work in the sink with all such systems. This gives customers flexibility in adopting Beacon because any of these modules can be seamlessly fitted into your IT ecosystem and start realizing the benefit out of it.”
He maintains that this approach is required to ensure the adaptability and flexibility of our customers and it helps reduce the stickiness to one vendor, thereby reducing risk.
Finway FSC is adding a new feature in their application in which PDs will take place virtually using mobile phones. The company is also adding a feature to assign a dedicated relationship manager attached to all the customer’s files and all the customer’s queries. With a click of a button, customers can access the relationship manager not just by WhatsApp call but even by face-to-face meetings. The application also helps to access all the data on a real-time basis so that customers get a very dynamic response from the company’s end.
Rachit shares additional details: “With all the apps at their disposal, users choose easy and intuitive ways to fulfil their needs. By integrating ML, we fetch predictions more simply. Subsequently, AI will allow the users to get the info within the blink of an eye. Long story short – AI and ML are also in the works to meet modern requirements.”
Prithvi says: “Our customers are looking for more flexibility in their repayment terms. This is true for term loans as well as a line of credit product formats. So, we will enable more features that allow customers to manage their cash flows actively, to get more value from their loan products.”
COMPLIANCE & CONTROLS
Beacon LMS is built on robust and secured architecture. It consistently follows the regulatory guidelines defined and revised by regulators regularly. Beacon solution undergoes security audit and gets certified by any of the globally leading audit firms at least once a year. That way we ensure the solution gets continuously improved to suit the evolving security requirements and enhanced to itself helping mitigate newly evolving security risks.
Vinod shares examples: “Due to DHFL and ILFS incidents, the regulator has become more cautious and introduced few more stringent practices for the segments to follow. These practices when followed helps FIs to become more robust and Beacon helps them to cater to these requirements seamlessly without affecting their day-to-day operations.”
The regulator is keen to introduce controls as well as provide new avenues to boost the industry. It is a fact that during 2018-19, because of the failure of these biggies, everybody was hesitant had a risk aversion. The pandemic too added to these concerns. RBI came up with options such as co-origination model, securitization option, partial credit guarantee, and various other schemes ECLGS scheme to help covid-19 hit MSME sector.
All such requirements are built in the Beacon solution. It has a sound architecture and framework and so is quite adaptable to accommodate these requirements. Also, a strong and dynamic team updates the solution according to market needs to help FIs scale up and grow without any delay.
Vinod added: “We are very aware of the basic fact that our customers are eager to expand, and the Beacon team’s role is to be a growth catalyst so that our customers can achieve their business targets.”