While the COVID-19 pandemic has put pressures on every industry, financial institutions have had the double burden of juggling their own uncertainties as well as those of their customers. Financial institutions play a key role in economic recovery. Yet the volume of work associated with government relief packages and low interest loans is overwhelming, particularly for those institutions that rely on in-person or manual workflows.
At the start of COVID-19, many financial institutions still relied on loan processes that were paper-heavy relying on file cabinets and traditional structure for document management. The contract itself may be digitized, but much of the information was still gathered and reviewed on paper.
Loan paperwork would be reviewed by many different credit professionals before arriving back at the consumer as a contract ready for signature. The traditional lending process can only be called “long” – a process not suited to the emergency loans being granted under COVID-19 to keep small businesses afloat.
Contract management software is helping financial institutions quickly trim costs, manage the ongoing analysis of loan portfolios, save time, and deliver on superior customer service to meet customers’ immediate needs and retain business into the future.
Accelerating Digital Transformation Efforts
By leveraging artificial intelligence, financial institutions are finding new ways to operate and deliver value to customers. This fundamental shift in processes and culture is usually slow and iterative, driven by external pressures (regulatory, competition, consumer expectations). COVID-19 has been a catalyst for change, creating an environment suddenly more receptive to new processes.
IT leaders have had to condense strategic roadmaps from several years into several months, prioritizing tools for collaboration, remote work, and remote customer support. Within this, financial institutions are prioritizing digital tools that leverage automation and machine learning to replace manual and paper-based workflows and contract management processes.
“Employee experience of digital technology has gone from ‘nice to have’ to the only way work gets done’,” notes Melissa Swift, Senior Client Partner for Korn Ferry’s Digital Transformation Advisory.
Contract management software has been central to supporting the digital transformation strategy of financial institutions. In particular, it has helped those looking to manage COVID-19’s increased volume of loans, to assess risk on existing contracts, to support a mix of in-person and virtual collaboration, and to deliver a superior customer experience.
“Although COVID-19 may lead to a crisis in the real economy, the impact on the banking system and on the bank-customer relationship can also be defined as a ‘positive discontinuity’ for the purpose of digitization of the sector and the ability to offer an excellent customer experience.” – KPMG
In less than a year, financial institutions have been in a pressure cooker of innovation that has entirely changed the lending process.
Implementing a full Contract Lifecycle Management platform requires your business to think differently, develop new processes, and perhaps alter the responsibilities of team members.
The Evisort Digital Transformation Program is a complimentary consulting service. It gives FSIs the subject matter experience, tools, and dedicated team including legal, legal operations and procurement professionals, change management experts, and customer support to achieve their contracting business goals quickly and efficiently.
Risk Mitigation for Loans
The CARES Act provides financial institutions with federal lending to support businesses. The Act provides for new Small Business Administration (SBA) loans as well as loan modification related to COVID-19 hardships. This has resulted in:
- A higher volume of new loans
- The need to work with borrowers who may be unable to meet their contractual payments
- Loan modifications compliant with section 4013 of the CARES Act such as payment deferrals, fee waivers, or extensions.
- Work on new troubled debt restructurings (TDR)
- Reporting requirements to recapture lending provided for under the CARES Act
Further, all of this work had to be supported remotely, for both lender and borrower. Remote work has introduced workflow friction to the pre-signature contracting process, increasing the chance of errors or costly delays. It is clear that there is simply no way that spreadsheets and manual underwriting can scale to support the near-zero interest rates on these loans.
As the pandemic continues to force businesses into default and even bankruptcy, a modern digital contract management system is needed to locate, analyze, and amend contracts in an accurate and cost-effective manner. FSIs need to know their rights and remedies against these defaulting parties, which include large clients such as hotels, municipalities, and utilities. A digital contract management system can help identify at-risk loans or monitor contracts over time with built-in alerts, such as renewal dates.
Better use of artificial intelligence and machine learning is lending speed and insight into the risk analysis of loan portfolios.
Delivering Convenience to Customers
In the early days of COVID-19, branch traffic dropped by more than 30% and the demand increased for online and virtual services. Financial institutions prioritizing customer experience in the “new normal” with flexible and online services are finding new opportunities to grow. Beyond acquisition, by reducing the friction in the loan agreement and renewal process, financial institutions are reducing attrition and increasing customer satisfaction.
“Mapping the customer journey and identifying flashpoints for customer leakage and opportunities for service enhancements can have a powerful impact, generating up to 20 percent increases in customer satisfaction, 10 to 15 percent improvements in revenue metrics (such as churn rates, upselling and customer acquisitions) and substantial improvements in employee engagement.” – McKinsey & Company, Retail Banking Insights
To deliver flexible services for loans, both personal and small business, financial institutions need a strategy that combines systems, applications, customer experience platforms, contract management software, and collaboration software. This digital transformation of the loan contracting process streamlines every step of the customer’s loan journey, from data collection to loan agreements and signature. Let’s see what the next level in loan contract management looks like…
The Next Level in Loan Contract Management
Evisort makes managing contracts for loans simple, fast, and actionable at every step of the process, including:
- Pre-Signing – Smart contract assembly (AI-powered self-service templates, API data assembly), automated review and approval workflows with a full audit trail.
- Signing – Internal review, redline, and signature as well as customer signature all managed from a single place.
- Insight – Real-time analysis of electronic contracts to help determine risk or to find terms (standard and non-standard) to streamline modifications or TDR.
- Management – Manage existing contracts to plan for renewals, drawing from past, present, and pending contract data to come to the best terms.
COVID-19 doesn’t give you time to train a new system: you need a contract management system that is pre-trained and ready for use. Evisort’s AI is trained on over 10 million documents and tracks over 1 billion data points, making all your current contracts actionable from go-live. Evisort’s API connects with all the places where your contracts currently live – Salesforce, email, Box, and more – to automatically convert documents into actionable data.
Digital contract management tools free up your legal team and allow them to focus on revenue focused activities such as contract negotiations.
Regardless of the number of contracts or contract types Evisort streamlines the entire contract management process and improves core business processes.
If you found this article interesting, then why not take a look at how AI helped to mitigate force majeure during the pandemic.