Actualizing the Tool of Technology: Enhancing Customer Experience, Processes and Compliance
by Rita Garwood July/August 2015
Monitor caught up with the leaders of five technology software companies to explore solutions to the resounding goal of this year’s Bank 50 participants: How to improve technology to enhance customer experience, create internal efficiencies and ease the burden of increased regulatory and compliance requirements.
As diminished margins and dwindling earning asset yields create an environment where improved profitability is a constant challenge, Monitor asked its 2015 Bank 50 participants to identify key areas of focus for the year ahead. The preeminent concerns for U.S. banks this year include process improvement, operational efficiencies, minimizing costs, improving customer experience and adapting to change, as well as ensuring security and regulation compliance.
One top 10 bank equipment finance company may have summarized the overarching sentiment best with this wish for 2015: “Continue to focus on improving technology to a) enhance the customer experience, b) create internal efficiencies and c) help ease the burden of the increased regulatory and compliance requirements.”
To get a pulse on the best ways to accomplish these goals through the use of technology, Monitor checked in with the leaders of five technology software companies that serve the equipment finance industry to discuss the best ways to serve technologically-savvy customers and achieve efficiency through process improvement, as well as how to effectively navigate regulation, security and lease accounting compliance. They also provide a rundown of the best ways to approach technology-based issues, and outline the steps necessary to choose the perfect technology vendor and software.
Catering to the Techy Customer
Today’s customers are digital and mobile — technology delivers ease of use to almost every aspect of their lives — so it’s easy to see why customers have the same expectations for their leasing experience. “Leasing customers expect immediate online access to their information that is also mobile,” explains Madhu Natarajan, CEO of Odessa Technologies. “They expect to interact with their leasing companies without having to pick up the phone, and require a new level of transparency that simply wasn’t there even five years ago.”
“Think how convenient, fast and reliable it is to book and pay for a cab using Uber, rather than phoning a local firm,” adds Richard Raistrick, global marketing manager of CHP Consulting. “We look for the same opportunities in equipment finance, enabling customer self-service through excellent integration and mobile technology.”
“Because customers today are more technically savvy, they expect vendors to invest intellectually and financially in understanding and consistently meeting their evolving expectations,” says Jeff Van Slyke, VP of Business Development and Strategy with LeaseTeam. “They expect their vendors to anticipate their needs and streamline their processes, providing an experience that is relevant to their business and a process flow that fits their individual requirements,” he says, adding that customers also look for accessibility and multichannel communications, transparency into their data, enhanced reporting and seamless integrations with business partners, suppliers and vendors.
“An enterprise level technology suite must allow organizations to harness the power of data through strong predictive business analytics to anticipate client needs,” says Farooq Ghauri, chief operating officer of NetSol Technologies. “Through the use of customized mobile and web applications, successful enterprises can make clients aware of products and services that offer timely value, while allowing clients the freedom to manage their account on their own schedule, anytime and anywhere.”
“Leasing companies want to deepen their relationships with customers through the use of technologies to make it more productive and efficient for all parties involved,” adds Natarajan. “There is definitely a growing competition imperative that leasing companies are starting to face as their peers upgrade their technology to respond to changing customer service expectations.”
Raistrick says that users frustrated by old systems are relieved when new technology is implemented: “Tasks that would have taken multiple phone calls, paperwork and hand offs to other operators can now be done, real-time, in one step. Workflow and business rules enable greater responsiveness, fewer process steps and quicker action on customer requests.”
As equipment finance companies align their businesses with new technology, Van Slyke says it becomes clear that there isn’t a one-size-fits-all approach. “To address these growing needs and improve their customer engagement, equipment finance companies are looking to leverage the technology of their lease/loan management systems to develop a business strategy that focuses and redefines business processes with the customer’s viewpoint in mind.”
Van Slyke believes this is where intuitive automated workflows, faster processing, visibility into data and reporting become crucial. “At each touch point, the customer learns something that will either strengthen or weaken the relationship, defining their desire to return, spend more and recommend your business.”
Efficiency Through Processes Improvement
Most of the software executives Monitor spoke to agree that the best way to achieve the efficiency through technology that banks are seeking is through continual review, analysis and improvement of workflow processes.
“To remain competitive, businesses must boost process efficiency, which is only possible through constant process improvement,” says Ghauri, noting that this improvement includes defining organizational goals and objectives as well as documenting, mapping, analyzing, redesigning, implementing and continuously reviewing processes. “Process improvement is never ending,” he says. “As the world market is dynamically changing, so is the need for efficiency.”
Michael Campbell, CEO of International Decision Systems, says executives are being asked to improve the top and bottom lines of their portfolios within historical budget levels. “Balancing liquidity and available credit with regulatory pressures and the inherent risks of credit policies presents a unique opportunity for technology-enabled businesses,” he says. “This means automation and streamlining of business processes across the enterprise and automated decision making are critical drivers.”
“Having the ability to automate and track workflows also provides visibility into any bottle necks, and streamlines the decision process by ensuring accurate data is available when it is needed,” adds Van Slyke. “Automated workflows also reduce errors, improve internal and external communications, and provide important tracking and analytics that help define more streamlined and relevant processes to meet regulatory requirements and high levels of customer service.”
“Critically, workflow and business rule automation allow human capital to be focused where it makes the most difference — dealing directly with the end customer,” says Raistrick. He notes that CHP has been using workflow to improve clients’ internal processes for years, not only in speed but also accuracy. “The big change over the past year has been the further development of configurable business rules. This extra level of sophistication allows customers to automate many more routine decisions, increasing revenues and ensuring compliance with increasingly complex regulations.”
Regulation & Security Compliance
“Whether a big financial institution, mid-sized bank, captive or independent financier, the requirements to comply with stricter mandates now consume a large portion of any organization’s resources, time and budget,” says Campbell. “Technology can help address this onslaught of new requirements with a focus on compliance-focused architectural elements and systems components.”
Natarajan says the implications of regulation such as compliance reporting, OFAC testing, PII management, changing bank interfaces and feeds, as well as the numerous requirements for concentration and liquidity have created a tremendous downstream impact on technology.“Systems that were built decades ago when the regulatory and security landscape looked absolutely nothing like it does today require a lot more investment and effort, not to mention inefficient and expensive workaround, to pass compliance audits.”
“We can be confident that the burden of compliance rules and regulations will only increase over time — they seldom go down,” adds Raistrick. “We have developed smarter, more efficient and accurate means of automating compliance and tracking results. Real-time compliance processing increases customer responsiveness and greatly reduces the risk of expensive and time consuming compliance issues.”
By creating rules and adding automation into processes, Van Slyke says equipment finance companies can not only ensure that data is correct and reportable for compliance, but also eliminate redundant information and minimize the chance for error. “Implementing a flexible technology solution that can be easily adapted to inevitable regulatory changes in the future is critical to provide a foundation for complying with regulatory requirements now and in the future.”
“With growing regulatory and compliance pressures, technology must constantly be updated ahead of the curve, all while also providing reliability and maturity,” adds Ghauri. “Proper selection of technology as well as review of partners, programs and providers of new technology is critical for success. This can help mitigate risk while also minimizing liability.”
“Security breaches are especially dangerous for financial institutions where reputation and trust are paramount,” says Raistrick, citing several recent high profile security breaches at Walmart, Target and the U.S. Office of Personnel Management.“Increasing online accessibility means vulnerabilities will be exploited in systems that are not well architected.”
“From a security standpoint, it is also important to have a clear, well-planned policy that encompasses device use and how to dispose of secure information, as well as policies around where confidential data is stored, how it is updated and disposed of, and who has access to it,” Van Slyke adds.
Preparing for FASB Changes
Keeping ahead of the ways the FASB and IASB lease accounting changes will affect business and systems is critical to those in the equipment finance space — and to the software vendors who serve our industry.
“Companies using financial software for lease accounting should ensure that their software provider is aware of these changes, know how these changes may affect the software and know what the provider’s development plan is for accommodating these changes,” says Ghauri.
“The results of the FASB’s and IASB’s deliberations after the second exposure draft will require simpler systems changes from a lessor point of view,” Raistrick says. “However, there could still be a few changes required, depending on existing systems’ functionality and the characteristics of the lessor’s portfolio, such as the recognition of sales profit on lease commencement. The changes to lessee accounting are much more significant, and lessors may see opportunities to provide more information to their lessees as part of improving the customer experience.”
As equipment finance companies prepare for the lease accounting changes, Van Slyke stresses the importance of seeing the changes from the perspectives of both accounting and customer service. “It is important that you engage with your provider to ensure they understand how the changes will impact the accounting in the system, the timeline for completion and the potential costs and process to migrate in order to be compliant with the new accounting rules,” he says. “However, equally important is taking the opportunity to speak to your customers about the lease accounting changes, to educate them and also discuss what information you will need to provide so they can appropriately account for leases on their side. Interacting with your customers and arming yourself with this information is a great opportunity to be viewed as a partner to your customers.”
Approaching Technology-Based Issues
As most Monitor readers can attest, even the best plans and preparations can be thwarted by technology-based issues. The technology executives Monitor spoke to share the best ways to approach these seemingly insurmountable problems.
“The first step in addressing technology-based issues is to look beyond the technology to identify the root of the problem,” says Van Slyke, adding that the real issue may not be technology itself, but could be attributed to a variety of factors. Is the technology no longer aligned with business processes? Perhaps, due to turnover, employees must be educated on the best use of the technology, or maybe the platform simply doesn’t provide the functionality the business needs. “It’s important to ask the right questions, because each challenge requires a different approach,” he adds. “Sometimes issues can just be manifested in the use of technology.”
“The very nature of technology requires proper planning, experience and understanding how to properly leverage,” adds Ghauri. “Many times, technology is incorrectly used, not fully understood or not utilized correctly for consistent results. It is critical that technology be thoroughly vetted, reviewed and proven prior to adoption or else issues may arise.”
Natarajan cautions that the decisions made today will set a company’s long-term technology trajectory. “More than ever before, technology is evolving and improving from right under our feet,” he explains, adding that generational shifts can occur in less five years today, as opposed to the 10 to 15 year shifts of the past. “The impact of your technology decisions today is significant,” he says. “You need to be ready for what’s coming and — more importantly — give yourself the broadest platform you can to best leverage future technology improvements.”
Choosing the Right Vendor
Let’s face it. Most equipment finance leaders are not equipped to chart the technological future of their companies alone. That’s where the right vendor comes in. How does an equipment finance company find ‘the one’?
“Selecting a partner and software platform is a decision that has huge implications for an equipment finance company,” Raistrick says. “Get it right and a successful project and strong competitive positioning are in your grasp. Getting it wrong can have terrible consequences.”
Whether an organization is looking to add or replace a single component, or considering a complete replacement of their technology infrastructure, Ghauri says there are a few main factors to consider — beyond the detailed functionality of the solution — when selecting a partner. “Industry knowledge, maturity of product and processes, and capacity to support and maintain the solution are all important boxes that must be checked,” he explains. “But in today’s ever changing software and IT world, it is vital that your partner have an eye toward the future.”
Natarajan lists three important factors to keep in mind when selecting a vendor: size, ownership stability and expertise in leasing. “The size of the vendor matters — they need to have scale,” he explains. “Look for a technology partner that has the bandwidth to take care of its existing customers, invest in ongoing product development and install new customers without compromising on any of those three imperatives.
“Stability in ownership with a demonstrated commitment to the leasing industry is paramount to the success of software vendors,” he continues. “Ownership stability means that management isn’t under the constant pressure of satisfying the short term interests of shareholders. A specialized industry like ours requires investment in technology initiatives that sometimes only have long term returns. This does not align well with investors looking for quicker returns.
Natarajan believes the biggest advantage Odessa brings to the table is a depth of knowledge in leasing. “A software vendor needs to have deep leasing expertise, not just in lease accounting and the diverse go-to-market strategies of different leasing lines and models, but also in leasing industry best practices. We focus energies in cross-training our employees in both technologies and leasing so that all employees, from developers to project managers, can not only execute and implement efficiently, but can also create efficiencies for our customers by bringing best practices and a true understanding of their business.”
Raistrick says a vendor with a solid track record of delivery for equipment finance companies will have a strong methodology that caters for the unique demands of our industry. He adds that the best way to deliver a project is to closely integrate the business and technical teams involved. “The chemistry has to be right,” he explains. “You need to feel common cause and genuine affinity. Get face to face time with the vendor’s implementation team members to ensure that, not only are their business and technical skills up to scratch, but also that you are going to be able to work with them successfully.”
“A software provider must be more than just great products and services,” says Van Slyke. “They must understand your business, your growth objectives and your operational challenges in order to truly be a partner. This is achieved by partnering with an organization that employs great people with industry knowledge, technology knowledge and a commitment to finding innovative solutions to difficult problems to ensure your future success. In the end, you are partnering with an organization of people, so one of the most important things you can do is understand the culture of the organization that you are going to partner with.”
Van Slyke suggests ensuring that your software provider not only does business with companies similar to yours, but also has a diverse install base that represents a wide array of portfolios and ticket sizes, business types and financial products within the equipment finance industry. “This will ensure that the provider and the system have the experience and flexibility to support your growth strategies that may entail different business channels than what you are in today,” he explains.
Singling Out Software
When it comes to selecting software, Raistrick says the functional fit should be good straight from the box. “You should look for a firm foundation of functionality for your business needs and for a system that has been delivered successfully for similar organizations. Make sure that the software is as good as the claims made and look for those efficiency features such as workflow and business rules. “Look for software that is genuinely based on modern technology,” he continues. “You will need a modern technology stack, web based front end, service-oriented architecture, mobile ready, scalable, robust database and proof of a strong security framework. It should also come with a comprehensive library of integration services, including a range of standard interfaces for third party systems such as tax, payments, and other agencies.”
Natarajan advises selecting a vendor with a product roadmap.“Can you trace the functional growth and technological evolution of their product on a continuum that is systematic and logical?” he asks. “The history of a software system is tremendously important. A system that has gone through a consistent maturation process is more ready to adapt to future changes. It is certainly more stable than a system that gets rebuilt in completely new technology every 10 to 15 years.”
Ghauri agrees: “A clearly defined technology road-map and the resources to continuously innovate and improve the solution are paramount to insuring your technology infrastructure drives your business for years to come.”
Campbell lists several key technology trends that should be essential components of a software and services roadmap and development, including: software extensibility; security and compliance; broad and deep ties across enterprise workflow, balanced with increased self-service demands supported through web service capabilities; and geographic expansion, coupled with cross-regional platform consolidation.
A Technological Revolution
“Technology visionaries argue that this decade is just the beginning of a technology revolution,” Raistrick says. “The sophistication of the equipment that our industry finances is advancing all the time and it will become normal for equipment to be automated and connected to the internet.”
Keeping an eye on the future while improving current technology will set equipment finance companies up for success — on multiple levels — in the rapidly-evolving technological future, says Natarajan, “To keep up with the dynamism of the market, companies need to plan for the future with the decisions they make today.”
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