EDB Business Partner, an IT service provider, has
launched a new version of its self-service lending service that
claims to revamp the lending sector. Farah Halime spoke to Mikael
Krohn, vice-president of the firm, and Hilde Karlsen, who heads the
new service, about taking lending a step further.
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EDB Business Partner, Norway’s second-largest IT provider
after US-based firm IBM, has enhanced its self-service lending
solution to allow consumers to apply for and receive complex loans
via an automated system.
Mikael Krohn, vice-president of
EDB, told RBI: “We’re not talking about simple loans.
We’re talking about complex lending. The whole application process
is now self-service where you can get a response directly.”
The company insisted that the
solution goes a step further than the standard online loan
application process available from countless bank websites.
For Krohn the secret lies in an
automatic answer, based on a scoring system that will see
applicants never coming into contact with a member of staff or any
“manual systems”.
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By GlobalDataKrohn questioned the number of
banks that claim to have self-service as a concept and said often
users on these services do come into contact with an “officer” and
have to continue in a manual way.
“I would be surprised if you had
self-service all the way. [EDB has] a different ambition,” he
said.
Hilde Karlsen, product manager of
self-service lending at EDB, said the new solution has a lot of
automatic processes going on underneath that are invisible to
customers.
“If you’re applying for a home
loan, it’s not enough to have a nice presentation layer so it looks
self-service to the customer. You also have to have a fully
integrated system for all the applications that the bank employees
are using, so it’s self-service for the bank as well,” she
said.
Tapping into a connected
market
The latest venture builds on an electronic identification system
called BankID, initially launched in 2003. Available on smartcards
and mobile phones, BankID certifies the identity of a bank customer
electronically.
EDB said that with 2.5m Norwegians,
or over 60% of the population using BankID, now is the time to put
the product to market.
Karlsen said two years ago the
market for capitalising on BankID was not mature enough, but as the
number of users of the solution has increased, the easier it is to
implement the latest self-service lending technology.
EDB is attempting to tap into one
of the most innovative retail banking markets in the world.
Norway is home to an active
internet-using population. Over 70% of the general public used the
internet to buy or order goods or services during 2008, beating the
UK, in second place.
In terms of internet banking,
Norwegians’ use of internet banking increased by 13% during 2008
and the volume of executed SMS services jumped 27.7% to 4.6m in
2009, from 3.6m in 2008.
“[The internet] is a very, very
strong driver in Scandanavia, where there’s a change in customer
behaviour. We have to follow that and invest a lot,” Krohn
said.
The company wants to capitalise on
its presence in Scandinavia, which spans 120 banks, and its 30 UK
bank clients.
Without naming specific banks,
Krohn and Karlsen said large banks, banks with a strong internet
presence and direct banks (those that conduct all their business
online, such as the UK’s First Direct) would be the prime targets
for the new venture.
“It’s a very natural step for them
to take,” Krohn said.
Selling
self-service
It is easier said than done without targets, however. The
self-service lending system for complex loans is not forecast to
launch until the first quarter of 2011 and will only apply to the
“pilot” bank – Norway’s Gjensidige Bank.
Karlsen added that even when
Gjensidige Bank takes on the system, it is unlikely that the system
will be up and running across other banks in Norway for a period of
up to four years.
Nevertheless, EDB expects about 40
banks in Norway that already use the BankID self-service solution
to sign up to the advanced version.
The concept of self-servicing,
around for four to five years, is becoming a favourite with many
banks looking to improve their customer service, remain competitive
and cut operational costs.
McKinsey, the management consulting
firm, has identified that an average bank with revenue of €6bn
($7.5bn) can save between 15% and 20% on its entire cost base by
addressing the complexity in the products it offers.
EDB identifies self-service to be a
part of this solution and could potentially represent between €600m
and €800m of annual savings.
Of course, like many automatic,
computer-reliant systems, errors are liable to arise.
“The goal for the bank is that EDB
calculations are so exact, that we can approve most of the
applicants. Either you get a loan or don’t,” Karlsen said.
She admitted that while errors are
often unpreventable, EDB is working to reduce the “grey area” that
the current scoring system for applying for a loan presents.
Krohn added that the system has to
mature. “You have to learn a bit more and fine-tune this
model.”
The air of doubt about the new system reflects the early stage
of EDB’s new self-service lending tool. But if, as Krohn said, it
has been part of a long-winded process, EDB could revolutionise the
way people apply for loans.
