Harnessing the Benefits of Automation and Integration in Small Business Lending

by Jacob Jegher, April 24, 2006

Abstract

Celent examines two banks that have automated and streamlined the small business loan origination process.

Small business customers have spent a long time falling through the cracks. While community banks have historically positioned themselves to catch and forge relationships with small business clients, many larger banks have been slow to develop offerings specifically designed for small businesses. With the market for small business products and services heating up, increasing numbers of large banks are turning their attention to this segment.

In a new report, Celent explores two banks' forays into this segment and provides an overview of the small business lending market and the lending process.

Small business lending presents an opportunity for large banks to target a market that they had not been serving in an effective manner. Marketing and promotional efforts have ramped up, and many banks are on the prowl for new small business clients and opportunities to cross-sell to existing ones. Small business lending is an excellent entry point for financial institutions to sell new and additional products, and they are stepping up to the plate with a variety of offerings.

"As banks recognize the potential for automation and integration, they will undoubtedly attempt to maximize profitability, grow their client base, and use resources more efficiently," says Jacob Jegher, senior analyst in Celent's banking group and author of the report. "There are a number of North American banks that are looking at deploying a single, end-to-end platform that would handle and automate business loans geared to companies of all sizes. This type of deployment would allow banks to guide corporate clients through various growth stages and serve markets of varying sizes."

The report presents case studies on National Bank of Canada and Commerce Bank, both of which have taken the plunge and automated small business loan origination.

National Bank of Canada. This Canadian bank has deployed a solution from CapitalStream to fulfill small business lending requirements, increase automation, improve customer service, and maximize profitability. The primary objectives of the bank were to implement a web-based small business lending product; become the leader in the Quebec small business lending market; and improve customer satisfaction and retention. The bank's perseverance in getting a small business lending solution off the ground has already started to pay off. The bank has seen efficiency and automation rise in a variety of areas and is enjoying a multitude of time and cost savings.

Commerce Bank. This fast growing New Jersey-based bank engaged Ramco Systems to assist them in realizing their vision of end-to-end small business and commercial loan processing. The bank was aiming to augment its delivery platform, improve control over processes, adapt to changing and evolving business conditions, and strengthen its competitive position. Commerce Bank has projected staff efficiencies in a number of functional areas including the loan documentation process, the credit analysis process, lending administrative functions, and loan closing.

This 31-page report contains 10 figures and 3 tables.

A table of contents is available online.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Boston, MA, USA April 24, 2006

 

Executive Summary 3
Market Snapshot 5
  Green Pastures: The Small Business Lending Market 5
  The Lending Process: Hungry for Automation and Integration 7
  The Importance of Customer Relationship Strategy 8
Case Study: National Bank Of Canada 10
  Background 10
  Decision-Making Process and Objectives 11
  Solution Overview and Implementation Milestones 12
  Growth Opportunities: NBC's Relationship With CapitalStream 14
  Benefits 15
Case Study: Commerce Bank 19
  Background 19
  Decision-Making Process and Objectives 20
  Solution Overview and Implementation Milestones 22
  Benefits 27
Conclusion 29
Objectivity & Methodology 30
 

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