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Our vision is to revolutionize and automate the loan servicing workflow of the global financial community.
Top 4 Pillars of Modern Loan Servicing Software
Modern loan servicing software helps manage the administrative aspects of a loan during its entire life cycle from the loan’s funding through its maturity. There are core components of modern loan servicing software that any finance company should expect when making a technology change to their enterprise. These pillars represent key infrastructure that makes up critical functions in loan servicing. They also ensure the technology is in place to continue to replace legacy systems in the digital transformation. Each pillar works together to ensure that loans are serviced in real-time and are automated as much as possible.
1. Accounting Management
Evaluating loan servicing software must begin with brilliance in the basics. The software must provide certainty, flexibility, and proof that the daily accounting is accurate. It is common for Shaw to replace legacy systems that have difficulty with some of the core accounting principles in servicing. Such as when a payment is backdated, or insurance is refunded. Without certainty in accounting, not much else really matters.
Accounting management means more than just accruing interest using the correct methodology. There is also portfolio size and complexity to consider. Some auto and specialty finance portfolios include a wide array of loan types. From simple interest daily accruals to Rule of 78 loans. These often large variations in accrual methods can cause challenges for legacy systems. Causing accruing cycles to run longer than the rest of the enterprise has time for. Many finance companies using legacy systems face problems with the speed and reliability of their loan servicing system, which must import data and process loans nightly.
Accounting management also means the ability to create and deploy financial products in the future. Modern loan servicing software must allow the organizations' administrators to create financial products that the business feels are necessary to compete in the marketplace. In doing so, the business must have absolute certainty the new financial offering will perform as it’s designed. Shaw’s Spectrum solution includes the ability to build lending products in an easy, logical manner. This provides complete control and certainty about the loan’s performance.
Accounting management includes the ability to accurately report to the General Ledger. Through every generation of Shaw’s loan servicing software, we’ve been our client's sub-ledger for their loan portfolio. Meaning we’ve reported accurately to the GL for over 55 years. It is critical that the nightly reporting be perfectly accurate, and it must be easy to manage on a go-forward basis and the company grows in size and complexity.
2. Servicing Strategies
Brilliance in the basics of loan servicing will also include the development and execution of modern servicing strategies. A core pillar of a modern system will be the ability to track and utilize information about borrowers from scores of various servicing providers. Long gone are the days of a simple alpha-numeric split and dialing for dollars. Today, finance companies are using the thousands of fields of borrower data in Spectrum to build sophisticated score cards for borrowers, allowing them to create, deploy and monitor various servicing strategies.
With each interaction with a borrower, the customer's experience is impacted by the ease of use and accuracy of information that the loan servicing system allows. Whether a borrower is logging into a customer portal, getting an alert notification about a payment due, receiving a text about a promotion, or answering a welcome call from a customer representative, it is the loan servicing software that is at the core of that customer communication.
Today, the customer expects to meet their lender where they’re most comfortable doing business. Some want to be able to pick up the phone and talk to a person who can see exactly what is going on with their account and answer any question they have. Others will only communicate via SMS, while others still expect to access information on a company website or app. The pillar of flexible servicing strategies includes the ability to understand where your borrowers are most proficient and meet them there.
3. API Driven
As every financial institution sets their sights on continuing their digital transformation, having a service-driven architecture has become as fundamental as accounting itself. Loan Servicing management systems have always sat in the middle of larger enterprises, but today the expectation to integrate seamlessly with other critical applications providing real-time information is ever present.
The proliferation of low-code applications suggests that API’s and micro-services will continue to be relied on more. As organizations continue their digital transformation, they are procuring technologies that can only transmit data via web services and micro services, leaving their legacy loan servicing applications obsolete. These organizations are then left with the choice to either build or buy new middleware or replace their legacy technology.
Only API driven applications can deliver the benefits of real-time systems. Real-time loan servicing systems can only process data when they receive it. Ensuring your loan servicing application has the published API’s available to send and receive data is the only way your borrowers can receive the real-time updates that come with modern servicing. Having such capabilities also has downstream implications, including accessing real-time production data such as payment information and minimizing the processing required in an overnight accounting cycle.
As the business, and borrower expectations change over time, your organization should find more opportunities to utilize the API’s available in your loan servicing software. But that is only possible if your provider made architectural considerations for APIs at the beginning of the design phase when building the application. Ask any provider you're considering to explain the role API’s play in the applications design and continued growth.
4. Access to Production Data
A modern loan servicing software system has all the data mentioned above, and so much more. Clients today are collecting thousands of data elements on each borrower and loan. The accounting and servicing data are being processed in real-time. Data from other parts of the enterprise are hitting the servicing system sometimes millions of times per day. How can we utilize that information right now?
Today, you should expect real-time access to production data, even in your vendor's cloud. Such access can be accomplished in a variety of ways. At Shaw, we provide real-time access to a replicated database. This allows our lending clients to move data into a data warehouse for their own utilization. Creating reports, monitoring activity and trends, and accessing risk should all be done in real time.
Providing safe and reliable access to real-time production data takes careful consideration and planning on behalf of a software vendor. If access is provided directly to a production database, it can have negative impacts on the system performance, and thus the borrower and user experience. As you evaluate loan servicing software vendors, make sure to consider the need for access to real-time production data both now and into the future. Data sets and requirements are sure to evolve over time. What was once a need for only the most sophisticated lending companies has become the norm for every lender in today's digital borrowing environment.
Several businesses like banks, credit unions, auto financers, and fintech companies all require loan servicing software to manage the extensive amounts of loans they have. These businesses need modern loan servicing software that utilizes all the top pillars to stay competitive now and beyond. Shaw’s Spectrum software is the modern solution that can accommodate any business needs. Shaw can help everyone, from a new start-up company, all the way to an established organization with a large loan portfolio.
If you would like to learn more about our loan servicing software or how we can help you, email us at solutions@shawsystems.com.