Leaders In Lending
Three Top Lenders Explain Their Approach To Getting Innovation Done
October 5, 2020
No financial institution has abundant resources, especially in this downturn. Times like these call for real tactical agility, or the will to move faster with the resources and people you have. One of the levers of agility in banking is automation. Every bank and credit union that we meet with wants to increase its level of automation across a wide range of functions, with the real prize being faster underwriting. Few are where they want to be in the percentage of loan decisions they automate. A new study of mid-sized lenders conducted by Cornerstone Research during the Covid-19 pandemic found some sizable gaps in the innovative capability of lenders when it comes to credit underwriting. Half the mid-sized banks and credit unions in the U.S. have automated only 20% of their lending decisions across all product categories. Only 12% have reached the 50% automation threshold.
Innovation is a twisty path and filled with potholes. Traveling down it requires tolerance, and flexibility, lessons on which we heard loud and clear in the first episode of our Leaders In Lending video series featuring Denise Brown, former chief credit and risk officer at Harley Davidson Financial Services, Mihaela Kobjerowski, chief consumer credit officer at First National Bank of Omaha, and Jenny Vipperman, the chief lending officer at VyStar Credit Union. Click on the video below to watch a short clip on innovation challenges from the broader discussion.
If you want to fuel innovation, says VyStar’s Jenny Vipperman, “you have to provide that safety net, the space to fail. Otherwise, we can make safe decision after safe decision and not move forward where we need to go.”
Kobjerowski’s early experience in process automation taught her an important lesson about the human impact of technology change. “One of my first assignments in one of the first jobs I got in the United States was to automate a specific process in a supply department using code, and did it, and then I realized that somebody’s job was going to be eliminated as a result, and that he had a couple of kids at home and a wife who was battling cancer, and that was my first ... I think one of the first reality checks that I had that was pretty serious.” Her takeaways? One, you need to ensure that innovations are a win for both the organization and its people: “People need to see the benefit in what you’re proposing.” Two, a leader needs to get immersed in the team so that everybody sees it’s okay to collectively take risks: “If we take risks and things don’t work out, we’re going to be in it together.”
That kind of walk-a-mile-in-someone-else’s-shoes humility has worked in Kobjerowski’s favor as a leader. She moved to FNBO’s compliance team in 2015 to bring some process improvements to that group without as much subject matter expertise as the team already in place. “That can be very difficult. The surprise for me there was that I didn’t realize how quantitative compliance is, and how I didn’t expect that the skills that I had were very applicable. I learned a lot about myself through that experience, and I would say that it’s changed me in many aspects, and I am a better credit risk manager having gone through that experience.”
In all of Denise Brown’s years leading change within financial organizations, one pearl of advice is to avoid biting off too much change at once. the right-sized approach, especially when it comes to moving to more advanced analytics such as ML. “We never bet the farm on anything. If you can get your modeling to the point where you are doing profitability modeling at the very tiny, minute cell of a 2,000 space decision tree, it makes it much more powerful, because then you’re balancing risk-reward as well.”
“Everybody’s got their own lens—accounting, compliance, sales—and it’s important to coach credit risk teams and analytics teams to say, “Look, they’re all coming at it from their own point of view,” When she coaches her teams to present about change, she wants them “to anticipate those questions and the way that they think. To be honest, we don’t have to present a lot of math because they trust us that we’ve got math right. We put that in the appendix and we focus on the communication, change management, trying to anticipate their questions and ensure that we’re getting to that executive-level or team-level decision.”
Watch the entire Leaders In Lending roundtable discussion here with Jenny Vipperman, Mihaela Kobjerowski of First National Bank of Omaha, and Denise Brown, former chief lending officer at Harley-Davidson Financial Services.
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