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Are Your Credit Originations Good, Better or Best?

In a prior post, I talked about standardization at Southwest Airlines on a single type of jet and the benefits that provides. There’s a lot of historical precedent for finding value in standardization. Roman soldiers, for example, built their forts using the same design.

The benefits of standardization hold true in a very different domain: credit originations. Global organizations that replicate a single core originations environment across businesses and geographies, while allowing for local adjustments on certain variables, extract the most value from their software investment, hands down.

What’s worked with our customers

FICO has deployed originations solutions at hundreds of companies around the world, and we’ve learned a lot from our customers. Those focused on competitive differentiation fall into three broad categories:

  • Good – All geographies standardized on using a single solution (such as FICO® Origination Manager), with each country or region customizing its own environment.
  • Better – Companies that use the 80-20 rule. Each geography or region uses an originations environment for processing and decisioning that is 80% standardized and 20% customizable according to local requirements and practices.
  • Best – The best approach standardizes the credit application and decisioning across all geographies, with specific variables configurable to address market or regulatory conditions specific to each country or region.
Why “best” really is

Let’s go back to the Romans. The soldiers built their forts in the same configuration for speed and efficiency. The design was optimized to eliminate unnecessary labor and wasted time, enabling the soldiers to focus on their “core business” – protecting territory.

These are precisely the reasons driving the best approach for implementing originations software. When a common model is used across all geographies, companies can expect multiple benefits, including:

  • Deployment savings because minimal resources are expended to “spin up” multiple instances of the originations software.
  • Lower total cost of credit (TCO) since a small group of people can manage credit policies centrally. The best scenario above allows the flexibility for each country or region to localize the platform to meet regulations, connect to credit bureaus, etc.
  • Higher, more predictable revenues because an optimal decisioning model is applied consistently across the global business.
  • More accurate performance data, drawn from a larger pool of consistent lending information.
In any global lending operation, these benefits can quickly add up to millions in cost savings and increased revenues. In an upcoming post, I’ll go into more detail on exactly what constitutes the “best” originations software deployment model, and offer insight into how “better” and “best” implementations play out with actual customers.

Learn more about FICO® Origination Manager and follow @FICO on Twitter.

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