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The lending revolution

How digital credit is changing banks from the inside

Faster credit decisions, vastly improved customer experience, 40 percent lower costs, and a more secure risk profile. Here’s how to get there.

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Today in traditional banks, the average “time to decision” for small business and corporate lending is between three and five weeks. Average “time to cash” is nearly three months. In our view, these times will soon seem as antiquated and unacceptable as the three weeks it once took to cross the Atlantic. Leading banks have embraced the digital-lending revolution, bringing “time to yes” down to five minutes, and time to cash to less than 24 hours.

That’s the profound result of a top priority for banks around the world: the digital transformation of end-to-end credit journeys, including the customer experience and supporting credit processes. Credit is at the heart of most customer relationships, and digitizing it offers significant advantages to banks and customers alike. For the bank, successful transformations enhance revenue growth and achieve significant cost savings. One large European bank increased win rates by a third and average margins by over 50 percent as a result of slashing its time to yes on small- and medium-enterprise (SME) lending from 20 days to less than ten minutes, far outpacing the competition. Our analysis suggests that a bank with a balance sheet of $250 billion could capture as much as $230 million in annual profit, of which just over half derives from cost efficiencies (such as less “touch time” and lower cost of risk), and the remainder comes from revenue gains (increased applications, higher win rates, and better pricing). In this article, we will look at the six design principles that successful banks have used to build digital-lending capabilities and transform their institutions.