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Velocity in Small Business - Auto Decisioning

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This session highlighted industry best practices around the use of automated decisioning best practices and success stories of banks and credit unions that have been able to leverage this functionality to increase efficiency in small business and consumer work flows. While automated decisioning may not be a strategic initiative for all financial institutions, speakers discussed cultural and credit appetite barriers that are necessary to overcome. We outlined a step-by-step process that will position your small business and/or consumer lending teams to drive velocity, enhance the client experience, and approach automated decisioning in a responsible and credit-centric way.

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Velocity in Small Business - Auto Decisioning

  1. 1. David K. Smith – Sr. Originations Consultant, FICO Velocity in Small Business – Auto Decisioning
  2. 2. Agenda • What I’m NOT saying… • Why Expedite/Automate Decisioning? • How is the market auto-decisioning? • What tools are needed to begin? • What is the first step?
  3. 3. What I’m NOT saying… • Change the culture of your organization today! – Automated Decisioning may not be well received in some lending cultures – Cultures don’t change overnight • Use a single score to decision million dollar loans – Not even FICO is saying this • Book riskier loans more quickly – Risk management is always priority #1
  4. 4. Why automate SMB decisioning? • Competition – FinTechs are aggressively going after the small dollar lending market – Large Banks are pushing small dollar requests to commercial cards – <$10B Banks and Credit Unions have a 9% market share of the <$100,000 loan market* • Expense – Cost to manually decision a $38,000 loan: approx. $2,500 – Cost of a completely digital decision: $38,000 loan: approx. $200* * https://www.cuinsight.com/business-case-adopting-digital-automation-small-business-consumer-loans.html
  5. 5. Why automate SMB decisioning? • Applicant experience • Andy’s story: A small bus. owner trying to borrow $35,000 https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf
  6. 6. What is the market doing? • Automating/Expediting small dollar loans/lines/leases – Loans and Lines: $10,000 to $250,000 – Leases: < $25,000 • Small dollar lending is moving to an ‘App Only’ borrower experience – FinTech’s leading this charge – Collect small amounts of information on the business and guarantors – Rely on the bureau information, analytics (SBSS score), and proven strategy rules
  7. 7. What tools are required to begin? • A Loan Origination System that allows throughput decisioning – Baker Hill technology and experience • A proven SMB lending strategy – Data Driven Strategies are ideal (Empirically proven strategies work, too ) • Data – Data from the application, consumer, and business bureau – Collateral? Financial? • Analytics – SBSS score
  8. 8. What are the first steps? • Analyze account performance – Which accounts perform well, which don’t • Talk to your underwriters – Use their experience to determine KPI’s • Run a ‘soft’ rollout – Have the solution ‘suggest’ a decision and compare the suggested vs the actual outcome • Start Small (ticket)
  9. 9. Thank you!

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