Streamlining the loan origination process.

Transcription

1 Streamlining the loan origination process. Improving the speed, efficiency, security and simplicity of the loan origination processes.

2 2 Executive Summary Loans are a bank s most important asset. And now, years after the global financial crisis and the new regulations and consumer mistrust it produced, banks in many countries are at last looking at forecasts of increased consumer and commercial lending activity. But their inefficient, slow and error-prone paper-based loan origination processes could leave many banks at a competitive disadvantage. Loans taking too much time and requiring too much paper are among the leading reasons that customers give up on a bank and take their business elsewhere. Transforming loan origination to eliminate the delays, errors, and costs of paper and manual processes will be key to any bank s ability to compete for, win, satisfy and retain customers. However, the multifunction devices (MFDs), mobile phones and tablets that will be important tools in streamlining loan origination are points of vulnerability that could find banks out of compliance with regulatory requirements. Customers non-public information (NPI) or personally identifiable information (PII) is at risk every time a loan-related document or form is created, scanned, copied, printed, faxed or ed. To strengthen their competitive position, banks need to streamline loan origination and replace manual processes with automated document capture and distribution that eliminates the drag and expense of paper, speeds processing time, improves regulatory compliance, reduces errors, and increases customer satisfaction. With new loan activity ahead, can banks get paper out of the way? The near future should be a good time for banks. Forecasts across many developed nations for growing economies, rising employment and increasing consumer confidence and spending are supporting expectations for growth in both consumer and commercial lending. This is welcome news, since loans the primary source of interest revenue are banks most important asset category. But banks don t have this business all to themselves, as new non-bank competitors threaten to take market share. Those newcomers are succeeding in part by offering a more customer-focused and streamlined loan origination process that banks have been generally slow to adopt. And what banks are slow to do, hurts them. A Forrester Research survey found various forms of inefficiency to be the leading reasons that prospective customers drop out of a banks onboarding process. These included having too many divisions or people to coordinate with (21%), taking too much time to decide on a loan (16%), repeatedly asking for the same information (16%), poor communication (16%) and frustration with paper forms, faxes and signatures (11%).

3 3 The paper problem. While paper was singled out as a direct source of customer dissatisfaction, it s actually a root cause of all of these business-losing inefficiencies. That should come as no surprise. According to a global study by IDC, 37% of document processes in financial services are still driven by paper. Copying, faxing, scanning, printing and manual keying of data off of paper occur at every point of the loan process, from origination, through prequalification, underwriting, terms of agreement and acceptance, to final submission, approval, closing and ongoing servicing. Mortgage loan origination is particularly inefficient and paper-dependent. In the U.S., it can take 40 days or more to close a mortgage loan in a process that can generate hundreds of pages. Even much simpler personal loans can take up to 10 days to close. At many institutions, even if the loan process begins at the branch with a customer completing an application form or a loan officer entering information into the bank s digital system, documents are sent by courier to a central scanning facility for conversion to digital form. Before automating its processes, one bank in France was actually mailing documents from branches to the central office. Sometimes information will be re-keyed off of paper documents because the bank s siloed systems cannot share information. IT integration is so lacking in some institutions that documents that start out in digital form are printed to paper so they can be scanned later. These inefficiencies are widespread: an InfoTrends study found that only 18% of branch banks scan loan-related paperwork directly into back-end electronic systems. The more times the same document must be handled or the same information manually keyed, the more chance there is for error, and delay, and the more the process costs. Transforming the loan origination process to eliminate the delays, errors, and costs of paper and manual processes will be key to a bank s ability to compete for, win, satisfy and retain customers. 40 The amount of days the average mortgage processing takes from origination to closing. 37 % The amount of document processes in financial services still driven by paper. The compliance and security challenge. Strengthening and simplifying regulatory compliance is another reason for banks to speed up loan origination. U.S. laws such as the Gramm-Leach-Bliley Act, Dodd-Frank, Sarbanes-Oxley, and the European Union Data Protection Directive (EUDPD) require financial institutions to identify reasonably foreseeable internal and external threats that could result in unauthorized disclosure, misuse, alteration or destruction of customer information or customer information systems, and to implement administrative, technical and physical safeguards to protect the security, integrity and confidentiality of customers NPI and PII. Penalties for non-compliance include monetary fines against the institution, officers and directors with possible imprisonment for the most serious criminal violations. The regulatory landscape is still changing. Nearly 200 of the rules close to 50% have yet to be promulgated under Dodd-Frank in the U.S., while a framework for revision to the European Union Data Protection Directive (EUDPD) is currently the subject of contentious debate. If preparing for rules that don t yet exist weren t challenging enough, the problem for bank CIOs and compliance officers is that security vulnerabilities and potential compliance breaches exist at every information touch point. Analog fax machines lack controls or activity logging, making it too easy to send faxes to wrong numbers and have that error go undetected. Unsecured digital multifunction devices (MFDs) can be used to make unauthorized copies or scans. In the absence of automated encryption and file destination

4 4 control, customer information can be ed accidentally or intentionally from these devices to unauthorized addresses. Plus, MFDs can store images and retain addresses, network and user IDs, and even passwords in memory all of which can be accessed by someone with the right skills. Paper is inherently insecure. A database maintained by the Privacy Rights Clearinghouse reports numerous instances of paper documents containing customer account information being stolen from employees homes or cars, retrieved from the trash outside offices or even found blowing around city streets. When loan forms or the applicant s driver s license, Social Security card, W2 or proof-of-employment are printed to MFDs and left sitting in the output tray, personal information can be exposed or the document can be picked up by the wrong person. Merely replacing paper forms with digital versions does not in itself eliminate this risk. While malicious or criminal attack was the leading source of enterprise data breaches worldwide in 2013 (at 42%), the Ponemon Institute s Cost of Data Breach Study found human error to be the second largest source, at 30%. That includes mistakes or lapses leading to theft or loss of portable devices such as laptops, tablets, smartphones and USB drives containing customers personal information. This security risk presents a challenge for banks, since mobile devices can play an important role in streamlining processes. In loan origination, tablets and laptops can free bankers from the branch, enabling them to go to the customer and begin the process where and when it s convenient for them. Voice recognition for speaking information into a mobile loan origination app can be faster and more accurate than manual keying on a small device s touch screen. The cameras in smart phones and tablets can be used in place of scanners to capture documents and make them part of the loan workflow provided that image capture happens directly within a secure mobile loan origination app and no image remains on the device. Enterprises still have far to go to bring security and compliance to their mobile devices. Another Ponemon Institute study, The Risk of Regulated Data on Mobile Devices & In the Cloud, found that large numbers of IT executives do not know how much regulated data is on mobile devices used by employees (81%), do not prevent employees from accessing regulated data using unsecured mobile devices (75%), do not take steps to monitor employees access to and use of regulated data on mobile devices (67%) and cannot determine their state of compliance with rules concerning regulated data on mobile devices (40%). To become more competitive, compliant and efficient in their loan origination, banks need to: Eliminate as much paper as possible Automate manual steps and workflows Simplify the sharing of information between business units. But only a system combining user authentication and authorization, encryption, destination and output controls, and audit trails can protect data at rest, data in motion and data in use to assure the integrity of customer information wherever paper is required and on whatever device information is accessed or transmitted. It s the everyday lapses of people being careless or malicious in their use of office and mobile technologies that give CIOs and compliance officers headaches 75 % The amount of IT executives who reportedly do not prevent employees from accessing regulated data using unsecured mobile devices

5 5 Transforming loan origination to make banks more efficient and competitive. Nuance Document help banks transform their loan origination process into a faster, more compliant and better customer experience. Nuance Document eliminate the drag and exposure of paper by allowing banks to digitize all the paper required in lending. At the same time, the solution adds a layer of security and control to electronic information and the output of required paper documents, increasing visibility into the loan process for customers and employees alike. Replacing manual processes with secure and automated workflows, Nuance Document Finance Solutions enable banks to: Capture documents at the point of service Connect branch activity with centralized operations Minimize the chance of human error Reduce the risk of compliance violations Promote customer cross-selling and retention Lower operating costs significantly. Banks that do not automate their loan processes, and improve the customer experience by doing so, are essentially ceding business to competitors that will. A simple, streamlined process in action. A typical loan application scenario illustrates the speed, efficiency, security and economy of the Nuance Document process. Digitizing documents at the point of origin. In this example, a well-prepared customer seeking a loan comes to the bank branch with all of the supporting materials needed for her application, including tax returns, pay stubs, employment verification, photo ID and more. The branch loan officer initiates the bank s loan process, enters information into his computer and collects the customer s documents as part of assembling the loan package. At an institution lacking branch scanning into the central loan processing system, the loan officer would then place all the documents in a courier pouch, for 1- or 2-day delivery to the bank s service center. With Nuance Document, the banker uses the branch s multifunction device (MFD) at the time of collection to scan all of the customer s documents instantly and directly into the bank s loan system. Within seconds, the banker can receive an automated notification confirming the successful scan, including the total number and type of pages. To unlock the MFD, the loan officer authenticates himself by swiping a proximity ID card or entering his username and password or PIN number on the machine s front panel or on a mobile device. With the banker securely logged in, the MFD touch screen displays buttons for the functions or pre-defined workflows he s been authorized to use. In this case, one of these workflows will scan the documents and transmit them to the bank s service center, eliminating the logistics, time and costs of manual handling and physical delivery. As before, the banker is immediately notified of the submission s success and its contents. Automating error-prone manual tasks. Everything about the Nuance Document process is designed to simplify use, minimize user tasks and reduce risk. Types of loans and their relative importance Consumer: loans to individuals 1/3 Home, Personal, Auto, Credit Card 2/3 Residential Mortgages Commercial: loans to businesses Real estate development loans, capital investment loans, etc. --12% Commercial Real Estate --11% Commercial & Industrial --76% Large Business Loans

6 6 Automated data extraction, document type identification (with or without barcode), document correction and cleanup, blank page removal and double-sided scanning speed the handling and processing of loan documents, increase accuracy of the package and eliminate the delay and errors of manual rekeying. Bi-directional database lookup can auto-fill fields for faster completion of applications from prior or current customers. Scanning functions are fully automated, transforming data into industryspecific formats without the user needing to know or specify any input or output settings. Also automated are routine, error-prone tasks such as barcode-based naming, batching, splitting, filing and indexing of scanned documents. Validation and filtering at the point of origin ensure accurate document handling and routing, including the immediate routing of documents requiring wet signatures. Again, within seconds the banker can receive an automated notification confirming and summarizing the successful scan. He can access this information, and future updates, at any time through a History/Status function on the MFD, his desktop PC or mobile device. Entire workflows can be pre-defined and saved to a single button, but when additional user action is required, visual prompts make it clear and limit human error. Meanwhile, seamless and secure integration makes appropriate information available to the institution s core banking, enterprise content management, business analytics or marketing systems. Accepting documents from any input source. Suppose the customer s tax return or pay stub was missing from the scanned documents because the customer left the document at home. This doesn t mean there has to be a delay. The system will notify the loan officer of the exception immediately, providing a barcoded cover sheet to assure the document gets correctly appended to the customer s application when it becomes available. The customer can scan the needed document and fax it with the barcoded cover sheet. Or she can send the document by , with or without the barcode identifier, either to a one-time address linked specifically to the exception or to the banker s business address. Nuance Document capture documents from any input source, including scanner, , fax, Web forms, and mobile devices. So in whatever form the information exists, it can become part of the customer s loan package. The banker, in turn, using his smartphone can receive and review the ed document and, using the same solution interface as on the MFD, can add the document to the loan package. Using his same ID, he can securely access the same predefined workflow buttons, allowing him to add the customer s document, resolve the exception and check the loan s history and status to confirm that the electronic loan package contains all required documents. Increase customer satisfaction. Nuance Document eliminate the manual processes and human errors that can delay closing and lead to customer dissatisfaction. Auto-filling of loan application fields, automated data capture from scanned images, instant document transfer from branches to central offices and continual visibility into loan status increases accuracy, speeds processing and assures customers their application is on track. The forecast: increased borrowing ahead The American Bankers Association s Economic Advisory Committee is forecasting business lending to grow at nearly 10% for the next two years, with consumer lending to grow more modestly. The Credit Union National Association is forecasting loan growth of 9.6% in 2014 and 10% in 2015, the fastest since By some accounts, it s already happening. The FDIC says that in the second quarter of 2014 banks recorded their largest quarterly increase (2.3%) and 12-month growth (4.9%) in total loan and lease balances since The Federal Reserve reported in November 2014 that total U.S. non-mortgage consumer debt had risen to a record level, led by a 7.3% increase in student and auto loans. At the same time, the quality of loans is steadily increasing.

7 7 Simplifying compliance. While the automated loan origination process eliminates unnecessary production and improves distribution of loan documents, the only way documents containing NPI or PII can be scanned, copied, printed, ed or faxed within regulatory compliance is under a system incorporating technological security and authentication. Nuance Document meet all of the requirements for security, integrity and confidentiality of customers information: Authorization: Password- or smartcard-based authentication assures that only authorized staff can access specific devices, network applications and resources. Network authentication is seamlessly integrated with document workflow, ensuring optimal security. Authentication: User credentials must be verified at the device, by PIN/PIC code, proximity (ID), or by swiping a smartcard to access documents containing customer information. Once users are authenticated, the solution applies rules and permissions to control what they can do on an MFD. Controls include redacting and even prohibiting documents that contain NPI or PII from being printed, faxed or ed. Encryption: Communications between smart MFDs and mobile devices, the server and allowed destinations are encrypted to ensure documents are only visible to users with proper authorization. File destination control: Simultaneous monitoring and auditing of information in documents ensures proper management before it ever gets to its intended destination. A complete audit trail captures all MFD and document activity. Content filtering: Automatic enforcement of security policies proactively prevents NPI or PII from leaving the bank by filtering outbound communications and intercepting documents headed to unauthorized destinations. Secure output: When documents need to be printed, the Nuance solution prevents exposure of customer information by holding print jobs in a secure print queue and outputting them only when the bank employee signs in at the printer and selects the specific documents to output. Nuance Document Finance Solutions extend this same level of security to mobile devices, allowing bankers to create, receive, access, route and output documents from smartphones or tablets. Secure completion of forms on mobile devices, including electronic and digital signatures, helps to eliminate the need for paper. Since data is never stored on the device, including document images captured in the solution, there is little risk of customers information being compromised if a device is lost or stolen. Differences that matter Nuance has years of experience serving highly regulated industries such as financial services, healthcare and even government. Nuance Document reflect both our industry-specific experience and exclusive focus on the vulnerabilities and compliance exposures of paper processes. That s also why we offer complete solutions enabling companies to securely capture and distribute information not only at point of origin but anywhere throughout the loan process where documents must be accessed, output and shared. To help customers contain their IT costs, Nuance Document Finance Solutions support the largest number of hardware devices and backend systems in the industry. Integrating with existing software and systems, the solution simplifies deployment and helps customers leverage existing technology investments. By adding comprehensive print management to a document capture and workflow solution, organizations can consolidate printer fleets and reduce overhead. At Cleveland-based Key Bank, for example, it took only 18 months for the combination of Nuance Document, greater employee awareness and vendor-operated managed print services to reduce annual print volume by 40 percent, from 211 million pages per year to 123 million, reduce color printing by 35 percent and return cost savings of more than $2 million. In addition to its cost-saving benefits, rules-based printing is also an effective green initiative, allowing an organization to set up the print rules necessary to reduce paper waste and conserve printer materials at all levels, from energy consumption to ink usage. In fact, Network World Magazine named the Nuance platform one of the Top 12 Green IT products in the Going Paperless category, identifying it as one of the best environmentally friendly solutions for reducing an organization s reliance on paper. With its extreme ease of use, non-disruptive operation and transparent security and control, Nuance enjoys one of the highest rates of user adoption and satisfaction in the financial services industry.

8 8 Delivering measurable results at financial services providers. The operating improvements that can be achieved with Nuance Document are not merely possible, but are already being realized by banks and other financial services firms around the world every day. At AgStar Financial Services, a Farm Credit association serving 69 counties in Minnesota and Wisconsin, Nuance replaced manual document processing with a one-click automated workflow that enables scanning of every type of loan-related document, including application forms, letters of credit and collateral templates, directly into the organization s existing SharePoint document management system and MYSITE. More than 550 employees in branch locations can quickly access and retrieve documents that are scanned at headquarters. Plus, documents can be converted into multiple formats, including searchable PDFs, Word, and Excel. Intelligent document routing speeds distribution and archiving by summarizing an entire document workflow into a barcode on a single printed or electronic cover sheet. After physical filing cabinets failed to keep up with the massive volume of paper received from 460 member banks, Nuance provided the Federal Home Loan Bank of Boston with a streamlined, automated solution that processes documents in seconds and digitizes them for rapid storage and retrieval. The paperwork includes forms, applications, support documentation, legal documents, and authorizations all of which must be organized, indexed, processed, distributed and stored in compliance with the strict requirements of the Federal Housing Finance Agency. Documents must also be easily retrievable, so the information automatically captured from each document allows for sorting, querying and searching from users desktop PCs and other devices. The Bank is saving workhours and improving performance in areas such as security, disaster recovery, document retention and accessibility. Nuance Document integrated with the Bank s existing infrastructure assets provide a robust document scanning solution. A flexible module-based licensing model allows the Bank to grow and extend its investment, one project at a time, adding new technology as required. Conclusion. Banks need to automate their costly, inefficient and error-prone paper-based loan origination processes or risk losing business to forward-thinking institutions and non-bank competitors who use streamlined processes as a foundation for delivering better service that builds stronger customer relationships. Plus, only modernized processes that control, monitor and record all use, transfer and output of documents, both paper and electronic, can help banks satisfy regulatory requirements to keep customer information secure. Nuance Document eliminate paper from the process, automate manual steps, capture loan documents from any input source and reduce the risk of compliance breaches, all while significantly lowering operating costs. And because new and different challenges and regulations are always on the way, the Nuance solution provides the flexibility to adapt as requirements change. Nuance Document Finance Solutions enable banks to instantly capture loan documents from any input source, connect branch activity with centralized bank operations, ensure accurate document handling and routing and meet their regulatory requirements to protect the security, integrity and confidentiality of customers nonpublic information and personally identifiable information. About Nuance Communications, Inc. Nuance Communications is reinventing the relationship between people and technology. Through its voice and language offerings, the company is creating a more human conversation with the many systems, devices, electronics, apps and services around us. Every day, millions of people and thousands of businesses experience Nuance through intelligent systems that can listen, understand, learn and adapt to your life and your work. For more information, please visit nuance.com. Copyright 2014 Nuance Communications, Inc. All rights reserved. Nuance, and the Nuance logo, are trademarks and/or registered trademarks, of Nuance Communications, Inc. or its affiliates in the United States and/or other countries. All other brand and product names are trademarks or registered trademarks of their respective companies. 73-NDFS DEC 2014