Why Some Lenders Are Still Stuck Using Spreadsheets for Almost Everything

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Odd as it may seem, many lenders still use spreadsheets and emails to manage entire loan portfolios. Despite a widespread push toward digitalization in banking services, some companies still cling to procedures they view as tried and true in the face of upheaval.

Even lenders with clear and detailed plans for renovating their technology stacks can inadvertently put themselves at a disadvantage by clinging to outmoded technologies.

But this isn’t a knock against spreadsheets. Those versatile tools have a range of applications, from record-keeping and file storage to analysis and calculation, and many businesses still put them to good use. At TurnKey Lender, we have quite a few spreadsheets too. Still, adhering to manual-input forms and other legacy tools can make systems maintenance and improvement far more difficult than it needs to be.

Further, “while comprehensive technology reviews and updates are vital to platform development and oversight, quality assurance, and business analysis, lenders find that their efforts to keep operations in fighting trim can be impeded by cumbersome in-house workarounds,” say Dmitry Voronenko, CEO and co-founder of TurnKey Lender, a leading provider of lending software and services with clients in more than 50 jurisdictions around the world.

In effect,” Voronenko adds, “taking a DIY approach to behind-the-scenes lending processes automation puts most creditors at a disadvantage they may not even grasp until they go through meaningful digital transformation.

Why make innovation more difficult?

We can get a better appreciation of lenders’ DIY dilemma by looking at the top challenges companies face — including those that have tackled digitalization as a strategic priority. According to IT-staffing firm TEKsystems, organizations in this vanguard confront a litany of obstacles on the road to digitalization, among them:

  • 38% struggle to cope with evolving complexities in technology and resist “siloed mindset and behaviors”
  • 26% complain of too many competing tech priorities
  • 26% see significant gaps in staffing for in-house tech positions
  • 24% worry about meeting security concerns and compliance requirements
  • 23% run afoul of change management and other internal impediments to implementation
  • 23% say existing business processes are too rigid 
  • 23% claim company brass doesn’t support their efforts enough
  • 20% see economic headwinds denting IT budgets
  • 17% fret about a lack of specifically earmarked funding for digitalization
  • 16% see a clash of digital and traditional business priorities

If companies that have been identified by TEKsystems as digital-transformation leaders complain of such obstacles, what must it be like for laggards who are committed to using in-house tech to achieve digitalization?

In a word, they’re sunk.

Here’s the problem. Well over 80% of spreadsheets used in business contain errors, according to a 2009 study — based on “a century of human-error research” — on the role spreadsheets played in the financial collapse of 2008. About half of spreadsheet models used by large businesses have “material defects,” the study asserts. The report contends that the mid-2000s credit derivatives market was largely built on “opaque financial instruments based on large spreadsheets with critical flaws in their key assumptions.”

In plainer terms, the study suggests that many firms underwriting credit derivatives prior to the financial crisis were operating in the dark without knowing it. As a result, many were caught off guard when the collapse came, having had a low-ball sense of the amount of risk they had taken on in the run-up.

Old thinking, half measures, and cost paralysis

Let’s be clear. Lenders absolutely can make, find, or buy spreadsheet templates to:

  • Record payments
  • Calculate late fees/pre-payments
  • Manage escrow
  • Create notices 

But why on earth would they want to? Sure, spreadsheets have been go-to tools for decades now, and in business scenarios where IT has to work with product development they’re often a quick way to achieve functionality — not necessarily a sustainable way, but a quick one. 

Organizations that provide financing to their customers and still rely on spreadsheets do so for several reasons. First, they may be trying to save money. In this view, spreadsheets function as a gateway technology to full-on, budget-altering digitalization. They may also be reacting to lending-platform demos they’d seen years earlier featuring ugly and cumbersome interfaces. Or they simply fear the learning curves associated with deploying new technology.

In fact, the technology has advanced so much in the past 10 years or so that lenders using a BaaS — “banking as a service” — provider like TurnKey Lender for their loan-management operations are in a realm where the old look and feel of such systems is moot. 

It’s rather like the evolution of professional websites. Twenty years ago, a company keen on having its own website might hire some coders and set them to work on a unique web platform. Now companies can achieve better results in less time for less money using a plug-and-play provider like Wix, Squarespace, or WordPress. Sure, a company can always build its own website from scratch, but, in most cases, why would it? 

In this light, ruling out lending platforms from a market leader like TurnKey Lender is like launching a website developed entirely in-house — one whose customizations are easily matched by any reliable vendor out there.

Too much for spreadsheets to handle

Of course, a lending platform is going to cost more than a spreadsheet, in the short run. But, armed with better gear that provides customization, modularity, and push-button scalability, the lender will work more efficiently, and be more responsive to customers than it ever could working from a homemade, Excel-based platform.

In plainer terms, it’s hard to imagine a lender using spreadsheets to automate all lending steps, as they certainly could using a platform like TurnKey Lender to cover:

With TurnKey Lender providing bank-grade functionality around these mission-critical tasks, lenders are positioned to: 

  • Cut credit risks, thanks to credit scoring fueled and enhanced by artificial intelligence 
  • Replace outdated processes with software tailored to the needs of the enterprise
  • Eliminate unnecessary paperwork throughout the lending process 
  • Reduce operational cost of running a lending business    
  • Minimize the impact of human error throughout the crediting process 
  • Cut costs and time-to-market linked to launching an e-lending business 
  • Unify all loan-management tasks in one end-to-end platform

In sum, while spreadsheets have a hallowed and enduring place in the office worker’s toolbox, they’re not a replacement for a well-designed and purpose-built lending-automation platform, says TurnKey Lender chief Voronenko. “It’s simply a role they weren’t engineered to fill, and no amount of tweaking can change that.” 

Share:

Odd as it may seem, many lenders still use spreadsheets and emails to manage entire loan portfolios. Despite a widespread push toward digitalization in banking services, some companies still cling to procedures they view as tried and true in the face of upheaval.

Even lenders with clear and detailed plans for renovating their technology stacks can inadvertently put themselves at a disadvantage by clinging to outmoded technologies.

But this isn’t a knock against spreadsheets. Those versatile tools have a range of applications, from record-keeping and file storage to analysis and calculation, and many businesses still put them to good use. At TurnKey Lender, we have quite a few spreadsheets too. Still, adhering to manual-input forms and other legacy tools can make systems maintenance and improvement far more difficult than it needs to be.

Further, “while comprehensive technology reviews and updates are vital to platform development and oversight, quality assurance, and business analysis, lenders find that their efforts to keep operations in fighting trim can be impeded by cumbersome in-house workarounds,” say Dmitry Voronenko, CEO and co-founder of TurnKey Lender, a leading provider of lending software and services with clients in more than 50 jurisdictions around the world.

In effect,” Voronenko adds, “taking a DIY approach to behind-the-scenes lending processes automation puts most creditors at a disadvantage they may not even grasp until they go through meaningful digital transformation.

Why make innovation more difficult?

We can get a better appreciation of lenders’ DIY dilemma by looking at the top challenges companies face — including those that have tackled digitalization as a strategic priority. According to IT-staffing firm TEKsystems, organizations in this vanguard confront a litany of obstacles on the road to digitalization, among them:

  • 38% struggle to cope with evolving complexities in technology and resist “siloed mindset and behaviors”
  • 26% complain of too many competing tech priorities
  • 26% see significant gaps in staffing for in-house tech positions
  • 24% worry about meeting security concerns and compliance requirements
  • 23% run afoul of change management and other internal impediments to implementation
  • 23% say existing business processes are too rigid 
  • 23% claim company brass doesn’t support their efforts enough
  • 20% see economic headwinds denting IT budgets
  • 17% fret about a lack of specifically earmarked funding for digitalization
  • 16% see a clash of digital and traditional business priorities

If companies that have been identified by TEKsystems as digital-transformation leaders complain of such obstacles, what must it be like for laggards who are committed to using in-house tech to achieve digitalization?

In a word, they’re sunk.

Here’s the problem. Well over 80% of spreadsheets used in business contain errors, according to a 2009 study — based on “a century of human-error research” — on the role spreadsheets played in the financial collapse of 2008. About half of spreadsheet models used by large businesses have “material defects,” the study asserts. The report contends that the mid-2000s credit derivatives market was largely built on “opaque financial instruments based on large spreadsheets with critical flaws in their key assumptions.”

In plainer terms, the study suggests that many firms underwriting credit derivatives prior to the financial crisis were operating in the dark without knowing it. As a result, many were caught off guard when the collapse came, having had a low-ball sense of the amount of risk they had taken on in the run-up.

Old thinking, half measures, and cost paralysis

Let’s be clear. Lenders absolutely can make, find, or buy spreadsheet templates to:

  • Record payments
  • Calculate late fees/pre-payments
  • Manage escrow
  • Create notices 

But why on earth would they want to? Sure, spreadsheets have been go-to tools for decades now, and in business scenarios where IT has to work with product development they’re often a quick way to achieve functionality — not necessarily a sustainable way, but a quick one. 

Organizations that provide financing to their customers and still rely on spreadsheets do so for several reasons. First, they may be trying to save money. In this view, spreadsheets function as a gateway technology to full-on, budget-altering digitalization. They may also be reacting to lending-platform demos they’d seen years earlier featuring ugly and cumbersome interfaces. Or they simply fear the learning curves associated with deploying new technology.

In fact, the technology has advanced so much in the past 10 years or so that lenders using a BaaS — “banking as a service” — provider like TurnKey Lender for their loan-management operations are in a realm where the old look and feel of such systems is moot. 

It’s rather like the evolution of professional websites. Twenty years ago, a company keen on having its own website might hire some coders and set them to work on a unique web platform. Now companies can achieve better results in less time for less money using a plug-and-play provider like Wix, Squarespace, or WordPress. Sure, a company can always build its own website from scratch, but, in most cases, why would it? 

In this light, ruling out lending platforms from a market leader like TurnKey Lender is like launching a website developed entirely in-house — one whose customizations are easily matched by any reliable vendor out there.

Too much for spreadsheets to handle

Of course, a lending platform is going to cost more than a spreadsheet, in the short run. But, armed with better gear that provides customization, modularity, and push-button scalability, the lender will work more efficiently, and be more responsive to customers than it ever could working from a homemade, Excel-based platform.

In plainer terms, it’s hard to imagine a lender using spreadsheets to automate all lending steps, as they certainly could using a platform like TurnKey Lender to cover:

With TurnKey Lender providing bank-grade functionality around these mission-critical tasks, lenders are positioned to: 

  • Cut credit risks, thanks to credit scoring fueled and enhanced by artificial intelligence 
  • Replace outdated processes with software tailored to the needs of the enterprise
  • Eliminate unnecessary paperwork throughout the lending process 
  • Reduce operational cost of running a lending business    
  • Minimize the impact of human error throughout the crediting process 
  • Cut costs and time-to-market linked to launching an e-lending business 
  • Unify all loan-management tasks in one end-to-end platform

In sum, while spreadsheets have a hallowed and enduring place in the office worker’s toolbox, they’re not a replacement for a well-designed and purpose-built lending-automation platform, says TurnKey Lender chief Voronenko. “It’s simply a role they weren’t engineered to fill, and no amount of tweaking can change that.” 

Share:

RELATED SOLUTIONS

img_Turnkey-Lender_Benefits-of-Buy-Now-Pay-Later-services-for-consumers-and-businesses-1920-scaled

Benefits of Buy Now Pay Later services for consumers and businesses

img_Turnkey-Lender_Just Some of the Things TurnKey Lender Standard Platform is Capable of -1920

TurnKey Lender Standard Platform Capabilities (With a Bonus White Paper) 

Platform   

Flexible loan application flow

Automated payments and loan servicing

Efficient strategies for all collection phases

AI-based consumer and commercial credit scoring

Use third-party data and tools you love.

Consumer lending automation done right

Build a B2B lending process that works for you

Offer payment options to clients in-house

Lending automation software banks can rely on