Data is not only a massive opportunity for your business, it is also a huge potential threat that needs robust controls in place to limit risk. For this exact reason, a number of commercial banks are embracing document automation as a method of ensuring that all documentation produced is faultless.
The Mortgage Bankers Association recently quoted the average cost to originate a loan as $7,195. When we consider this figure, the need to streamline document creation and reduce production times is glaringly obvious. Much of this operational cost is driven by salaries for employees performing manual processes such as document review and audit, data entry, document tracking, internal and external communication and collaboration with third parties.
Other than the cost savings to be had, the main reasons why document automation is a “no-brainer” within the commercial banking sector boils down to increased regulation, scalability requirements, company-wide standardisation and risk reduction.
Meeting changing market regulations
Since the financial crash ten years ago, the banking sector has come under increased scrutiny and is constantly under the microscope to perform both efficiently and ethically. The validity of commercial credit and loan agreements hinges on the accuracy of the documentation, with mistakes in commercial lending often having dire consequences to banks, in terms of fines and reputational loss.
Traditionally, the process of creating banking documentation has been a manual one, which inevitably may lead to mistakes being made (whether we think so or not, we all make mistakes). Even though the management of customer information may appear to be accurate, no bank can state that all clauses and legal obligations are water-tight, without having stringent control methods in place.
Document automation software gives users the power to update approved, company-wide documentation instantaneously. Updates can be performed by someone who understands the document themselves, so in other words if there is new regulatory compliance that has to be included, it can be done in a single template published internally. The business users that need to use that template can then access it without relying on I.T. or significant software programming changes – the kind of technology that allows this is typically known as low-code software.
The probability of being able to produce a single document accurately is normally pretty high, as you can refine and double-check that content is as it should be. However, when this production level is scaled-up, it is proven to lead to problems. Commercial lending is an area of business that is more exposed to risk and similar contracts are needed for customer agreements, but no single detail is ever exactly the same. Phrasing in the document may need to be to the industry standard, but personal details, loan amounts, securities and percentage rates all typically differ on a case-by-case basis.
Document assembly tools need to be able to deal with internationalisation and multiple languages. We live in a 24/7 global world that operates 365 days a year and this environment needs to be able to cope with increased demand in banking and the requirement for world-class document automation software really shines through here.
Standardisation and digitisation
Within highly regulated industries, such as commercial banking, document accuracy is absolutely integral to business performance, risk reduction and continuous improvement. Inaccuracies can have a detrimental impact on company reputation, as well as major cost implications from mistakes and here we see the reward of document automation really coming into its own.
Document automation has the power to bring an end to common and error-prone practice of reusing out-of-date or archived documents, “find and replace” and “cut and paste”. Document automation gives banks greater flexibility to manage and control standardised documentation.
In terms of scale, commercial banks operate globally and typically across multiple brands. Many of the legal clauses may be used across many brands and this can all be executed within the same template by using document automation. All that needs to be changed is specific company branding and the customer details. Digital transformation streamlines processes and lowers the cost of lending. It is vital that document automation is done by the business and for the customer – thus adding customer value.
Digitising the onboarding process enables customers to generate their own documents. A main benefit here is that banks do not need to manually generate the internal document – customers can do it online and gain an instantaneous result and approval. The power held by APIs (Application Programming Interfaces) offer limitless opportunities to integrate the loan approval process with complementary products, such as digital signatures. The streamlining of this process also saves time and money, whilst repositioning accountability and risk.
Reducing operational risk
Established and FCA-driven regulations such as Dodd-Frank, Sarbanes-Oxley (SOX), Basel and the forthcoming rollout of MiFID II, seek to aggregate and improve how banks protect themselves against threats to governance, risk and compliance (GRC).
Quality management and documentation control act as a keystone in risk management and has the power to change the “garbage in, garbage out” viewpoint to “quality in, quality out” with a standardised and clean output format. Document automation offers a simple route for commercial banks to navigate the storm of regulation and limit risk through better compliance and document accuracy.
In turn, this aids compliance with the likes of Basel and more dated regulations such as SOX, in terms of execution and reducing data entry errors by having better delivery and business process management. It is of utmost importance that the validity of information and the quality of data is not compromised during processing and output - as the financial and reputational repercussions here are huge.
Why document automation is a “no-brainer” for commercial banks
The overall case for document automation in commercial banking is overwhelming. Document automation provides a “single version of the truth” for documentation and templates that are produced by your business.
An automated approach helps commercial banks to:
- Reduce operational risks associated with inaccurate data
- Eliminate errors stemming from the manual input of customer data
- Adopt smarter processes – reducing the cost of lending and improving customer service
- Ensure that legal obligations and variable clauses and terms are met
- Promote standardised cross-company documentation
- Perfectly fit with your strategy for digital transformation and continuous business improvement
So, if you draw together the challenges faced and the substantial opportunities for improvement, commercial banking should be benefiting most from implementing document automation. Banking is an industry that has so much to gain by using industrial-strength document automation software and it really is a “no-brainer”.
Part of the AbacusNext group of companies, HotDocs is the global market leader for document automation technology and provides some of the world’s largest and most reputable companies, commercial banks and law firms with software to automatically and accurately assemble frequently used documentation.
Our technology is proven to help reduce risk, boost compliance, improve the quality of mission-critical documentation, save time and increase customer satisfaction and is identical whether you deploy on premise, in the cloud or as a hybrid solution.
HotDocs contains robust, industry standard APIs that allow you to easily integrate and embed your dynamic, intelligent HotDocs interactive interviews and forms into your customers’ digital online experience or business applications.
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