Outsourcing in data management: Credit Application Processing Giovanni Catinari Business Consultant CRIF Decision Solutions Warszawa, 9th September 2005 © 2005 CRIF Group

Table of contents Introduction to credit application processing Credit Process Automation: the Outsourcing solution CRIF software for credit application processing A possible scenario for Polish Cooperative Banks Main Benefits Some achievements © 2005 CRIF Group

Credit Application: different perspectives Consumers concerns: Get a fair evaluation Avoid complex procedures and bureaucracy Obtain credit quickly Bank’s objectives: Consistent assessment of credit risk Grant credit only to creditworthy applicants Efficient management of all the necessary steps © 2005 CRIF Group

structure automate speed-up streamline Credit Application: outstanding issues Consumers concerns Bank’s objectives The main issue for credit Institutions nowadays is then to structure automate speed-up streamline all the task needed to be performed in order to grant credit “A desired result is achieved more efficiently when activities and related resources are managed as a process” Principles of ISO 9000 © 2005 CRIF Group

Main Objectives of Credit Process Automation Objective 1: Cost Optimisation (Workflow & Resources) Reduce amount of work and resources needed to perform the process Reduce time required W T Objective 2: Achieve Business Goals (Quality of Decisions) Optimise the results of the process by constant improvement of the decision processes © 2005 CRIF Group

Manage and finalize a PROJECT Credit Process Automation: the outsourcing solution IN-SOURCE OUTSOURCE Manage and finalize a PROJECT Buy a SERVICE Need for: Project management IT skilled resources Statisticians /risk management … Focus on core business Use service only when needed … © 2005 CRIF Group

Credit Process Automation: the outsourcing solution IN-SOURCE Relevant (and uncertain) fixed costs have to be sustained (both for solution development and maintenance) It takes time to build the solution starting from scratch High impact on resources (several kinds of skills needed,…) Suitable for Banks of considerable dimensions  high volumes needed to repay the investment © 2005 CRIF Group

Credit Process Automation: the outsourcing solution OUTSOURCE Well known variable costs instead of fixed costs  correlation with market and business trends Flexible and customisable on different levels (solution grows along with the Bank’s needs) Low or null IT impact (web based), eliminate labour issues Suitable for all kind of Banks but especially for small/medium institutions Possibility of using up-to-date technology and methodology at a fraction of cost © 2005 CRIF Group

Credit Workflow Management System Crif software for Credit Application Processing Credit Workflow Management System Decision engine © 2005 CRIF Group

Crif software for Credit Application Processing Crif software are particularly suitable to be used in Application Processing Servicing on an outsourcing basis, because: They are Multiple Institutions software  possibility to manage different customers and their respective internal organizations They can manage different product types (loans, credit cards, mortgages,…) They can manage different segments (consumers, microbusiness, SME,…) They are easily integrated with external data sources … © 2005 CRIF Group

Crif software for Credit Application Processing Crif software supports Banks in managing the entire credit application processing. In credit granting the following main activities have to be managed. Application data retrieval, customer identification External Data Base inquiry (Credit Bureau,..) Score Calculation Applications Clients Individuals (Consumer) Companies Result notification/Contract Printing Data Storage (monitoring) Strategy Execution  decision making Final Decision © 2005 CRIF Group

Decision Strategy Configuration Process Configuration Crif software for Credit Application Processing Crif software is moreover easy to use, thanks to its graphical interfaces that allow users to perform most of the configuration without the need for peculiar IT skills… Decision Strategy Configuration Process Configuration © 2005 CRIF Group …The Application Processing Service can be smoothly managed by organizations with light IT resources

Other public external databases KZBS internal databases A possible scenario for Polish Cooperative Banks Other public external databases Workflow Designer Strategy Designer Bank 1 Branch 2 Bank 1 Branch 1 WORKFLOW ENGINE DECISION ENGINE BIK Credit Bureau WEB ? MIG Databases KZBS internal databases Bank 2 Branch 1 © 2005 CRIF Group Every single banks’ branch is connected via Internet, using nothing else than a common browser, to the application processing system, which logs in the user and enable him to fulfil the application evaluation in all of its steps Bank N Branch N

Other public external databases KZBS internal databases A possible scenario for Polish Cooperative Banks Other public external databases Workflow Designer Strategy Designer Bank 1 Branch 2 Bank 1 Branch 1 WORKFLOW ENGINE DECISION ENGINE BIK Credit Bureau WEB ? MIG Databases KZBS internal databases Bank 2 Branch 1 © 2005 CRIF Group KZBS to play the outsourcer role: define and implement a start up standard process activate the service for Banks users customise service on a one-to-one basis for advanced banks Bank N Branch N

A possible scenario for Polish Cooperative Banks START UP APPLICATION PROCESSING ILLUSTRATIVE Application data input, customer identification External Data Base inquiry (Credit Bureau,..) Pre - screening Score Calculation / Strategy execution Decision Notification and Contract Printing Pre screening strategy on Credit Bureau data Application Rejected User inputs Applicant’s and contract data using Web Browser N Serious delinquency? Low Risk? N Y Y Evaluation strategy Score calculation and policy rules application © 2005 CRIF Group Applicants’ credit reports are retrieved automatically from the Credit Bureau Application Rejected Notification to user Application Accepted Notification to user Contract printing

PROCESS CUSTOMISATION ADD NEW PRODUCTS - SEGMENTS A possible scenario for Polish Cooperative Banks PROCESS CUSTOMISATION Each Bank will be able to choose its own evolution path, according to its needs and priorities ADD NEW PRODUCTS - SEGMENTS POLICY RULES CHANGE Each Bank will be able to have its own strategies, processes and data kept separated from other users’ ones START UP SOLUTION © 2005 CRIF Group TIME

Credit Application Processing: Main Benefits Operational costs decrease Process streamlining Less manual work to carry out Need for manual assessment reduced Free up resource for value added activities Efficient Risk assessment Advanced risk measurement tools Customisable strategies All risk drivers taken into account Time to market Response time minimized Easy and fast extension to new products / segments / distribution channels © 2005 CRIF Group Objective and standardized evaluation Acceptance criteria decided from the centre and uniformly applied throughout the network Control on human bias and overrides

ITALY Some achievements Approximately 195 banks and financial companies use Application Processing Services by CRIF, built using and which enables to accurately and rapidly evaluate both Consumers and Businesses Among them having: 6 “Major Banks” 11 “Big Banks” Around 60 Cooperative Banks! © 2005 CRIF Group

CANADA MEXICO RUSSIA SWEDEN Some achievements CANADA Local Credit Bureaux (TransUnion Canada and FIRA) use to provide value added services to Banks MEXICO RUSSIA NBCH (RUS) and UC (SWE) use and to provide credit application processing services to their associates © 2005 CRIF Group SWEDEN

Conclusions To efficiently manage the credit lending activity is essential to structure it as a process, leveraging on advanced risk management methodology and up-to-date technology Nowadays this is no longer a possibility only “big players” have: outsourcing and software innovation have made it possible for small Banks to get access to best in class solutions Crif software is successfully used for credit request processing in an Application Service Provider context by many international operators thanks to its Flexibility and modularity Easiness of use Customisability © 2005 CRIF Group

Outsourcing in data management: Credit Application Processing Thank you and good bye! Giovanni Catinari Business Consultant CRIF Decision Solutions © 2005 CRIF Group