ComplianceFebruary 12, 2020

Automating commercial lending through OCR technology

With financial institutions bracing themselves for a potential economic slowdown, commercial lending remains the backbone of banking. But, will looming challenges such as rising interest rates, growing pressure from fintechs, and increased demands from customers change all that?

To ensure commercial banking continues to be a strong source of revenue, community banks need to focus on investments that will help them capture and retain strong borrowers, make better credit decisions, and accurately differentiate risk across their commercial lending portfolio.

Traditionally, commercial lending has been a highly manual and labor-intensive effort. A typical commercial loan requires collecting a wide variety of data, which means that multiple points of data entry in disparate systems increase errors, redundancies and make delays unavoidable. Even worse, these issues can result in a lender losing a profitable client to the competition.

To navigate the opportunities and challenges ahead, many commercial lenders are embracing automation that will improve both their capabilities and their competitiveness. One of these technologies is Optical Character Recognition (OCR) technology, which lenders have begun increasingly using to extract and import borrower financial information. OCR not only helps lenders scale their lending to meet demand, but through its speed and accuracy helps foster a better customer experience.

The drive toward paperless commercial lending

Commercial lenders face an ongoing challenge to accurately enter the considerable volume of data needed to assess a prospective borrower’s credit worthiness. Because of this, data integrity often plagues commercial lending processes because data is entered and reviewed multiple times.

OCR technology helps mitigate this issue as it electronically captures data from documents, such as tax returns and other financial documents that weigh heavily in the lending process and where accuracy is crucial. When coupled with human validation of all entered data, OCR can be a powerful tool to help ensure that correct, complete tax information is captured with 99.5 percent accuracy.

The benefits of using OCR technology include:

  • Reducing data entry time and errors for spreads. The amount of information that commercial lenders need is higher than in other lending lines of business. OCR platforms help lenders transition away from manual, paper-based processes by converting handwritten or printed text into machine-encoded text so it can be easily found and extracted by computer software.
  • Enhancing the customer experience. Turning content into searchable data significantly increases lender efficiency. Lenders no longer have to waste time hunting for the information they need, speeding up the intake of critical borrower information and thereby the speed at which lenders can make lending decisions for their customers.
  • Improving employee satisfaction and retention. Eliminating the manual and tedious task of data entry frees up lenders to perform other high-value tasks and carry out their daily operations more efficiently and cost effectively. OCR can enhance job satisfaction by engaging lenders’ time on things that matter, such as risk analysis and customer relationship management, instead of being bogged down with administrative and clerical tasks.
  • Allowing for more precise and accurate analysis by the underwriting team. Provide lenders with extra time to make sure the deal is strong and determine that there are no red flags. OCR helps ensure that decisions aren’t rushed because the lender ran out of time due to entering data manually.

As the landscape for commercial lending continues to evolve, community banks recognize the need to be more efficient, productive and responsive to their customers by offering higher levels of service that OCR can help provide. These lenders are also driven by recognizing that the ability is within grasp of taking back control of their data and gain sharper, more accurate business insights into their commercial lending portfolio.