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Agile Originations — Oxymoron No More

“Agile” and “originations” are two words not often used together in the same sentence, except perhaps: “I wish our origination system allowed us to be more agile in adapting to changes in underwriting criteria.”

Agility, defined

Last year, my colleague David Lightfoot wrote a blog about upgrading origination systems to meet rising customer expectations. That post focused on auto lending, but the same core principal – agility – applies to the broader originations market.

Nearly every financial organization in developed markets already benefits from the process automation that modern origination software offers. But automation is not the same as agility. After “Day 1,” when the origination system goes live, the processes that need to be automated don’t change much. But the underwriting criteria on which credit decisions are made do change, on a constant basis.

Financial organizations often have had to code laborious workarounds or been hamstrung for weeks trying to implement simple changes. Organizations need an architecture that allows them to:

• Use new data from a new external source. Switching between credit bureaus (say, TransUnion and Experian credit data) should not be a monumental task. Your origination solution should make it easy to connect to external data sources, as well as switch to a different credit bureau to access ancillary data such as income data, income estimators and other attributes, in addition the FICO® Score.

• Rationalize data from new internal sources. When a customer applies for an auto loan, it makes sense to factor demand deposit account information into the credit decision. Likewise, information on credit card utilization is helpful in determining the line of credit for a personal loan.

Given the complexity of internal IT silos, it can still take an “act of god” to hard-wire systems together. Does your existing origination system allow you to use it as the point of data integration? That is a far faster and easier way to achieve a holistic view of the customer when making credit decisions.

• Test and change decision parameters quickly. Wouldn’t it be great to be able to build a new decisioning model on Monday, test it on Tuesday and go live with it on Wednesday? Does your existing system make that kind of agility a reality? Or are you among the many organizations that need a 12-month window to change, test and deploy new characteristics?

The 80% rule

Every system designer has heard the adage, “Good system design is 80% planning and 20% coding.” The same level of foresight applies when designing origination environments.

For example, should the income minimum for a new card be $90,000 or $100,000? Good system design dictates that at least income bins are designed into the model: $80k-$90k, $90k-$100k, $100k-$110k and $110k-$120k. That way, should income criteria change over time, the origination system can easily pivot.

Helping organizations tackle all the challenges presented here is why the team at FICO focused on flexibility as a core property of FICO® Origination Manager to enable greater business agility.

For credit-granting organizations, “agile originations” is an oxymoron no more.

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