Cumbersome Loan Approval Processes Can Be a Thing of the Past with the Right Technology

3 min read

IBM introduces a new SME Lending solution with intelligent automation enabled by IBM Cloud® Paks.

Anyone running a small- and medium-sized enterprise (SME) business is likely aware of how challenging it can be to secure a loan. In a survey conducted by the Federal Reserve Bank of New York, challenges range from the time it takes to reach out to financial institutions and apply for credit to the complexity of the actual loan application process. SMEs need loans to expand their business, acquire new assets or be able to pursue new business opportunities quickly to respond to the changes in market demands. When SMEs need funding, they typically need it fast and cannot tolerate lengthy loan processes.

After the sub-prime crises of 2008, traditional banks became reluctant to take a chance on small enterprises; instead, they shifted their focus on more established businesses. Options for SMEs became limited, and the options that were available were less than ideal. This created an unmet need, which created the boom in fintech, with digital lending processes that were fast and efficient and provided more flexible lending options that suited SMEs. 

A $1 trillion dollar revenue growth opportunity

With the recent Paycheck Protection Program, most traditional banks were then forced to digitize many of their lending processes, creating a new opportunity to re-enter into the SME Lending market – a $1 trillion opportunity. As traditional banks look at this new revenue growth opportunity, they need to consider how to bridge the gap from existing legacy systems and traditional processes to cloud-native, agile approaches while also minimizing risk. 

An SME Lending solution requires the ability to automate complicated processes in a way that ensures flexible lending options, with the intelligence to assess creditworthiness while simultaneously minimizing the burden placed on the SME during the application process. The solution requires the ability to scale to thousands of applications with minimal manual intervention. The digitized lending process will also need to integrate legacy mainframes with cloud-native solutions. And it will need to ensure security controls to prevent fraud.

Modernize and automate processes with a new SME Lending solution

IBM’s history of serving institutional banks for decades places its technology at the heart of the legacy footprint that needs to be integrated with modern, automated and integrated processes. This is exactly why IBM is introducing its new SME Lending solution enabled by IBM Cloud Paks. IBM Cloud Paks are pre-integrated, cloud-native containerized software with hundreds of integration connectors.

IBM Cloud Paks support running on X-86 processors and Power and Z-Linux operating systems because of the portability made available through Red Hat® OpenShift®. While 50% of financial services organizations cite strengthening cybersecurity as an initiative driving the most technology spend over the next year, SMEs can rest assured that IBM Cloud Paks are also pre-certified and secure, no matter where they run.

Read the ESG white paper: “Revolutionizing the Lending Process with IBM Cloud Paks

The SME Lending solution delivers automation to speed the loan approval process and machine learning with advanced visualization to improve the loan underwriting process and quality. In addition, the solution provides the following:

  • Operational Decision Manager (ODM) capabilities in IBM Cloud Pak for Business Automation incorporate advanced rules-based decision models such that the bank can ensure compliance to corporate policies while leaving enough flexibility to serve SME’s specialized needs.
  • Augmented credit and risk scoring with predictive machine learning models from IBM Watson Studio with full transparency and trust-based artificial intelligence (AI).
  • Speed of loan processing via application, API and data integration capabilities from IBM Cloud Pak for Integration and IBM Cloud Pak for Data.
  • The ability to rapidly adjust, reuse and modify processes and capabilities with IBM Financial Services Workbench for IBM Cloud Pak for Data, which delivers composable solutions with a low-code user experience.

Where to start

See how IBM’s new SME Lending solution serves the needs of the many stakeholders typically involved in digital transformation initiatives such as these. In the example below, you will see how a CIO of a regional bank benefits from this solution:

For an in-depth look at why SMEs should take action to digitize their processes in support of a customer-first mindset, read the ESG white paper on “Revolutionizing the Lending Process with IBM Cloud Paks.”

Small and medium enterprises make up more than 90% of companies in the US and globally.  As the market rebounds from the pandemic, IBM’s new solution is tailored to offer banks a quick way to address the unmet needs of SMEs. 

Explore this interactive experience to learn more about the SME Lending use case.

Join us at Money 20/20, October 24-27, 2021, in Las Vegas, and engage with IBM experts to discuss this SME Lending solution and more.

Get more information about IBM Cloud Paks.

Engage with our experts at IBM Garage, IBM Consulting or Expert Labs.

Be the first to hear about news, product updates, and innovation from IBM Cloud