Confidential – Commercial Bank in Asia-Pacific Region
- January 22, 2020
Headquarters
Asia-Pacific Region
Business Model
Commercial Lending, Invoice Factoring (4,000+ transactions per month)
Employees
1000+
Customers
85 000+
Purchased Product
TurnKey Lender Enterprise
Background/Opportunity
A well-established commercial bank in the Asia-Pacific region was evaluating invoice factoring as a new product line to complement their lending program.
The strategic planning group conducted an in-depth analysis, and gained two key insights. First, they were able to estimate the revenue potential for accounts receivable financing, which supported a “go” decision for this new profit center. Second, they were able to quantify the negative impact of outdated lending technology and manual processes on the bank’s growth potential.
The bank had been struggling to manage ongoing problems caused by outdated technology and manual, paper-based processes. Their brand image was eroding in the marketplace, and they were in danger of being seen as a dinosaur. In fact, several approved commercial loan applications had been declined by borrowers, because they’d already received funding from another bank. These issues were making it more and more difficult for business development directors to close new commercial accounts, and for account managers to retain current clients.
In order to launch the invoice factoring program the bank would need to automate complex credit decisions and complicated account servicing workflows. These processes could not be supported by the bank’s current technology. A cost/benefit analysis supported a “buy” decision for specialized financial technology.
The strategic planning group conducted an in-depth analysis, and gained two key insights. First, they were able to estimate the revenue potential for accounts receivable financing, which supported a “go” decision for this new profit center. Second, they were able to quantify the negative impact of outdated lending technology and manual processes on the bank’s growth potential.
The bank had been struggling to manage ongoing problems caused by outdated technology and manual, paper-based processes. Their brand image was eroding in the marketplace, and they were in danger of being seen as a dinosaur. In fact, several approved commercial loan applications had been declined by borrowers, because they’d already received funding from another bank. These issues were making it more and more difficult for business development directors to close new commercial accounts, and for account managers to retain current clients.
In order to launch the invoice factoring program the bank would need to automate complex credit decisions and complicated account servicing workflows. These processes could not be supported by the bank’s current technology. A cost/benefit analysis supported a “buy” decision for specialized financial technology.
Business Problem
The invoice factoring program forced the bank to take a hard look at their technology issues. The nature of purchasing invoices and processing invoice payments was a far more complicated process than originating and servicing a loan portfolio. An approved factoring facility requires credit evaluations on the client as well as the client’s customers, because it’s the customer who makes the monthly payments to the bank.
On the origination side – the bank needed an automated, intelligent credit evaluation solution that could quickly review a large number of SME customers in an accounts receivable portfolio. A good factoring evaluation typically includes a combination of traditional business credit bureau scores plus alternative scoring methods like behavioral factors and social media signals on business and personal social media accounts. On the account servicing side – the bank needed a system that could automate a large number of monthly transactions. It would need to calculate and manage invoice advances, retainer funds, customer payments, discount fees, reconciliations, and retainer funds releases. And it would need to adjust the client’s factoring line as it fluctuated with the volume of outstanding ARs.
When it came to their technology the bank felt like they needed to replace a bicycle with a high-performance vehicle that could accelerate from 0 to 200 miles per hour in a matter of seconds.
The preliminary system requirements included:
1. Automation technology for client review, client customer review, and account management
2. Machine read factoring application analysis in multiple languages
3. Social signals on business and personal social media accounts
4. Alternative scoring models that evaluated business financial statements, bank account statements, and invoice payment management behaviors
5. Automated credit scoring with preprogrammed rules, decision trees, cross-checks, and calculations
6. Firmographic data analysis to fine tune future targeting efforts
7. Integration with business and personal credit bureaus
On the origination side – the bank needed an automated, intelligent credit evaluation solution that could quickly review a large number of SME customers in an accounts receivable portfolio. A good factoring evaluation typically includes a combination of traditional business credit bureau scores plus alternative scoring methods like behavioral factors and social media signals on business and personal social media accounts. On the account servicing side – the bank needed a system that could automate a large number of monthly transactions. It would need to calculate and manage invoice advances, retainer funds, customer payments, discount fees, reconciliations, and retainer funds releases. And it would need to adjust the client’s factoring line as it fluctuated with the volume of outstanding ARs.
When it came to their technology the bank felt like they needed to replace a bicycle with a high-performance vehicle that could accelerate from 0 to 200 miles per hour in a matter of seconds.
The preliminary system requirements included:
1. Automation technology for client review, client customer review, and account management
2. Machine read factoring application analysis in multiple languages
3. Social signals on business and personal social media accounts
4. Alternative scoring models that evaluated business financial statements, bank account statements, and invoice payment management behaviors
5. Automated credit scoring with preprogrammed rules, decision trees, cross-checks, and calculations
6. Firmographic data analysis to fine tune future targeting efforts
7. Integration with business and personal credit bureaus
Solution
The bank replaced their outdated technology with a cloud-based, custom solution that incorporated lending and factoring functionality. They leveraged the TurnKey Lender Enterprise platform as the foundation, which brought their lending operation up-to-speed with online lenders. And they added the invoice factoring module to automate those origination and servicing processes.
TurnKey Lender credit specialists partnered with the bank to develop a sophisticated, AI-driven credit decision engine. It integrated traditional and alternative approaches, deep neural networks, and proven statistical modeling techniques. In addition, the solution uses machine learning to constantly fine-tune the algorithms. The end result is a credit decision engine that delivers faster, superior credit scoring for commercial credit lines as well as factoring facilities that require multi-level credit reviews for each account.
In order to complete the deployment process the TurnKey Lender solution was integrated with the core banking system, plus third-party data providers, and online subscriptions tools.
TurnKey Lender credit specialists partnered with the bank to develop a sophisticated, AI-driven credit decision engine. It integrated traditional and alternative approaches, deep neural networks, and proven statistical modeling techniques. In addition, the solution uses machine learning to constantly fine-tune the algorithms. The end result is a credit decision engine that delivers faster, superior credit scoring for commercial credit lines as well as factoring facilities that require multi-level credit reviews for each account.
In order to complete the deployment process the TurnKey Lender solution was integrated with the core banking system, plus third-party data providers, and online subscriptions tools.
Results
This Asia-Pacific commercial bank has gained four key benefits from their TurnKey Lender system:
1. Successfully launched a lucrative invoice factoring program
2. Upgraded their lending technology as part of one seamless deployment process
3. Began to outperform every competitor in their marketplace for speed and accuracy of credit decisions
4. Compete effectively with smaller, more aggressive online lenders
1. Successfully launched a lucrative invoice factoring program
2. Upgraded their lending technology as part of one seamless deployment process
3. Began to outperform every competitor in their marketplace for speed and accuracy of credit decisions
4. Compete effectively with smaller, more aggressive online lenders
Testimonial
TurnKey Lender helped replace outdated paper-based application processing and loan origination with an advanced solution that did the same job in seconds.
Executive Director
Commercial Bank in Asia-Pacific Region
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