How financial intermediaries can transform lending

Today, the UK economy is navigating the impact of Brexit, the 2019 general election and the onset of a pandemic. As the country experiences a temporary economic shock, financial services — especially the lending sector — will play a key role in addressing supply chain disruptions and increased demand for short-term credit.

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Shuvo G. Roy | Mphasis
7th April 2020
Shuvo G Roy Mphasis
"Such cloud-based data stores provide security, easy accessibility and seamless communication, data exchange and verification across the globe"

Mortgage debt accounts for over 80% of the total UK household liabilities. The lending market is currently characterised by a high number of lenders and products, which results in many consumers missing out on cost-effective deals. At the same time, financial intermediaries need to align with a flurry of new regulations, while paper-based manual processes are slowing turnaround time for customers. As a result, banks, insurers and other intermediaries need to focus on transforming traditional paradigms for a more streamlined process, better compliance and speed. This is where technology can play a key role.

Regulating operations

The Financial Conduct Authority (FCA) handed out £310 million in penalties last year mostly for serious breaches of principles around planning and organization. It has also introduced tighter accountability measures, such as a new update to the Senior Managers and Certification Regime (SMCR), which warrants all advisers and financial services firms to perform additional checks on senior managers and provide formal statements documenting responsibilities. Soon, intermediaries can expect further regulations as the FCA intervenes to combat uncertainties in the economy.

Such a highly regulated ecosystem needs the support of technology to drive compliance and agility. Through automation, intermediaries can circumvent cumbersome mortgage applications and minimise errors in the manual processing of loan packets. Automatic alerts can reduce the possibility of risks filtering into the lending process and minimise penalties of non-compliance with regulations. Intermediaries can also significantly reduce operational costs by cutting down on manual processes to boost productivity levels. A few UK mortgage lenders have initiated measures to align with this digitally regulated ecosystem. Banco Santander announced that the group will invest over €20 billion in digital transformation and technology over the next four years to improve customer experiences and further increase loyalty, while lowering the cost of delivery.

Driving due diligence

As the coronavirus pandemic impacts employment across the United Kingdom, the FCA plans to extend the mortgage payment holiday to borrowers. This means that mortgage lenders have to enhance diligence in processing customer records and comply with regulations strictly. At the same time, they will also have to evaluate customer due diligence processes to align with new anti-money laundering rules that have been introduced in January. As a first step, these organisations must invest in data management platforms that manage the entire flow of data within an enterprise in a structured and transparent manner. These firms must also invest in virtual data rooms to manage numerous files that are exchanged in an audit. Such cloud-based data stores provide security, easy accessibility and seamless communication, data exchange and verification across the globe and drive version control.

In recent times, London’s financial district has been shaken by uncertainties and this must be handled with strong investments in technology and data-driven decision making. While intermediary financial services firms may not have the resources and expertise to implement technology programmes independently, partnering with end-to-end technology service providers can be a winning proposition. As economies battle uncertainties and lending markets take a hit, this is the right time for intermediaries to enhance efficiencies and competencies with technology.

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