© 2005 CRIF Group

Outsourcing in data management:Credit Application Processing

Giovanni CatinariBusiness Consultant

CRIF Decision Solutions

Warszawa, 9th September 2005

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Table of contents

• Introduction to credit application

processing

• Credit Process Automation: the

Outsourcing solution

• CRIF software for credit application

processing

• A possible scenario for Polish

Cooperative Banks

• Main Benefits

• Some achievements

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Credit Application: different perspectives

Bank’s objectives:

- Consistent assessment of credit risk

- Grant credit only to creditworthy applicants

- Efficient management of all the necessary steps

Bank’s objectives:

- Consistent assessment of credit risk

- Grant credit only to creditworthy applicants

- Efficient management of all the necessary steps

Consumers concerns:

- Get a fair evaluation

- Avoid complex procedures and bureaucracy

- Obtain credit quickly

Consumers concerns:

- Get a fair evaluation

- Avoid complex procedures and bureaucracy

- Obtain credit quickly

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Consumers concernsConsumers concerns

Credit Application: outstanding issues

The main issue for credit Institutions nowadays is then to

• structure • automate• speed-up

• streamline all the task needed to be performed in order to grant credit

The main issue for credit Institutions nowadays is then to

• structure • automate• speed-up

• streamline all the task needed to be performed in order to grant credit

Bank’s objectivesBank’s objectives

“A desired result is achieved more efficiently when activities and related resources are managed as a process”

Principles of ISO 9000

“A desired result is achieved more efficiently when activities and related resources are managed as a process”

Principles of ISO 9000

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Main Objectives of Credit Process Automation

W

T

Objective 1: Cost Optimisation(Workflow & Resources)

• Reduce amount of work and resources needed to perform the process

• Reduce time required

Objective 1: Cost Optimisation(Workflow & Resources)

• Reduce amount of work and resources needed to perform the process

• Reduce time required

Objective 2: Achieve Business Goals(Quality of Decisions)

• Optimise the results of the process by constant improvement of the decision processes

Objective 2: Achieve Business Goals(Quality of Decisions)

• Optimise the results of the process by constant improvement of the decision processes

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Credit Process Automation: the outsourcing solution

IN-SOURCEIN-SOURCE OUTSOURCEOUTSOURCE

Manage and finalize a

PROJECT

Manage and finalize a

PROJECT

Buy a SERVICE

Buy a SERVICE

Need for:

• Project management

• IT skilled resources

• Statisticians /risk management

• …

• Focus on core business

• Use service only when needed

• …

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Credit Process Automation: the outsourcing solution

• Relevant (and uncertain) fixed costs have to be sustained (both for solution development and maintenance)

• It takes time to build the solution starting from scratch

• High impact on resources (several kinds of skills needed,…)

• Relevant (and uncertain) fixed costs have to be sustained (both for solution development and maintenance)

• It takes time to build the solution starting from scratch

• High impact on resources (several kinds of skills needed,…)

IN-SOURCEIN-SOURCE

Suitable for Banks of considerable dimensions high volumes needed to

repay the investment

Suitable for Banks of considerable dimensions high volumes needed to

repay the investment

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Credit Process Automation: the outsourcing solution

• Well known variable costs instead of fixed costs correlation with market and business trends

• Flexible and customisable on different levels (solution grows along with the Bank’s needs)

• Low or null IT impact (web based), eliminate labour issues

• Well known variable costs instead of fixed costs correlation with market and business trends

• Flexible and customisable on different levels (solution grows along with the Bank’s needs)

• Low or null IT impact (web based), eliminate labour issues

OUTSOURCEOUTSOURCE

Suitable for all kind of Banks but especially for small/medium institutions

Possibility of using up-to-date technology and methodology at a fraction of cost

Suitable for all kind of Banks but especially for small/medium institutions

Possibility of using up-to-date technology and methodology at a fraction of cost

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Crif software for Credit Application Processing

Credit Workflow Credit Workflow Management SystemManagement System

Decision engineDecision engine

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Crif software for Credit Application Processing

Crif software are particularly suitable to be used in Application Processing Servicing on an outsourcing basis, because:

• They are Multiple Institutions software possibility to manage different customers and their respective internal organizations

• They can manage different product types (loans, credit cards, mortgages,…)

• They can manage different segments (consumers, microbusiness, SME,…)

• They are easily integrated with external data sources

• …

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Result notification/

Contract Printing

Result notification/

Contract Printing

Data Storage

(monitoring)

Data Storage

(monitoring)

Strategy Execution

decision making

Strategy Execution

decision making

Score Calculation

Crif software for Credit Application Processing

External Data Base

inquiry (Credit

Bureau,..)

External Data Base

inquiry (Credit

Bureau,..)

Application data

retrieval, customer

identification

Application data

retrieval, customer

identification

Applications

Final Decision

Clients• Individuals (Consumer)• Companies

Crif software supports Banks in managing the entire credit application processing.

In credit granting the following main activities have to be managed.

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upProcess Configuration

Process Configuration

Crif software for Credit Application Processing

Crif software is moreover easy to use, thanks to its graphical interfaces that allow users to perform most of the configuration without the need for peculiar IT skills…

…The Application Processing Service can be smoothly managed by organizations with light IT resources

Decision Strategy Configuration

Decision Strategy Configuration

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A possible scenario for Polish Cooperative Banks

????

Workflow DesignerStrategy Designer

WORKFLOW ENGINEWORKFLOW ENGINEBIK

Credit Bureau

Other public external

databases

MIG Databases

KZBS internal

databases

DECISION ENGINEDECISION ENGINE

WEB

Bank 1Branch 1

Bank 2Branch 1

Bank NBranch N

Bank 1Branch 2

Every single banks’ branch is connected via Internet, using nothing else than a common browser, to the application processing system, which logs in the user and enable him to fulfil the application evaluation in all of its steps

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A possible scenario for Polish Cooperative Banks

????

Workflow DesignerStrategy Designer

WORKFLOW ENGINEWORKFLOW ENGINEBIK

Credit Bureau

Other public external

databases

MIG Databases

KZBS internal

databases

DECISION ENGINEDECISION ENGINE

WEB

Bank 1Branch 1

Bank 2Branch 1

Bank NBranch N

KZBS to play the outsourcer role:• define and implement a start up standard process• activate the service for Banks users• customise service on a one-to-one basis for advanced banks

Bank 1Branch 2

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A possible scenario for Polish Cooperative Banks

T F

START UP APPLICATION PROCESSINGSTART UP APPLICATION PROCESSING

Application data input, customer

identification

Application data input, customer

identification

External Data Base inquiry

(Credit Bureau,..)

External Data Base inquiry

(Credit Bureau,..)

Pre - screening

Pre - screening

Score Calculation /

Strategy execution

Score Calculation /

Strategy execution

Decision Notification

and Contract Printing

Decision Notification

and Contract Printing

User inputs Applicant’s and contract data using Web Browser

Applicants’ credit reports are retrieved automatically from the Credit Bureau

Pre screening strategy on Credit Bureau data

Serious delinquency?

Y

Application Rejected

Notification to user

N

Evaluation strategy

Score calculation and policy rules application

T F

Low Risk?

Y

N

ILLUSTRATIVE

Application AcceptedNotification to userContract printing

Application

Rejected

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TIME

POLICY RULES CHANGE

POLICY RULES CHANGE

ADD NEW PRODUCTS - SEGMENTS

ADD NEW PRODUCTS - SEGMENTS

START UP SOLUTIONSTART UP SOLUTION

PROCESS CUSTOMISATION

PROCESS CUSTOMISATIONEach Bank will be able

to choose its own evolution path,

according to its needs and priorities

Each Bank will be able to choose its own evolution path,

according to its needs and priorities

Each Bank will be able to have its own strategies, processes and data kept

separated from other users’ ones

Each Bank will be able to have its own strategies, processes and data kept

separated from other users’ ones

A possible scenario for Polish Cooperative Banks

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• Operational costs decrease

Credit Application Processing: Main Benefits

• Efficient Risk assessment

• Time to market

• Objective and standardized evaluation

Process streamliningLess manual work to carry outNeed for manual assessment reducedFree up resource for value added activities

Advanced risk measurement tools

Customisable strategies

All risk drivers taken into account

Response time minimized

Easy and fast extension to new products / segments / distribution channels

Acceptance criteria decided from the centre and uniformly applied throughout the network

Control on human bias and overrides

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Some achievements

• Approximately 195 banks and financial companies use Application Processing

Services by CRIF, built using

and which enables to accurately and rapidly evaluate both Consumers and

Businesses

Among them having:

• 6 “Major Banks”

• 11 “Big Banks”

• Around 60 Cooperative Banks!

ITALY

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Some achievements

CANADA

SWEDEN

RUSSIA

MEXICO

Local Credit Bureaux

(TransUnion Canada and FIRA)

use to provide value

added services to Banks

NBCH (RUS) and UC (SWE) use

and

to provide credit application

processing services to their

associates

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Conclusions

• To efficiently manage the credit lending activity is essential to structure it as a process, leveraging on advanced risk management methodology and up-to-date technology

• Nowadays this is no longer a possibility only “big players” have: outsourcing and software innovation have made it possible for small Banks to get access to best in class solutions

• Crif software is successfully used for credit request processing in an Application Service Provider context by many international operators thanks to its

• Flexibility and modularity

• Easiness of use

• Customisability

© 2005 CRIF Group

Outsourcing in data management:Credit Application Processing

Thank you and good bye!

Giovanni CatinariBusiness Consultant

CRIF Decision Solutions