Most FinTech engagements to date, with the exception of Blockchain, have been focused on consumer banking, a business characterized by high volume, high standardization, and low value transactions. By contrast, commercial banking is characterized by low volume, high customization, and high value transactions. And from an operational perspective, commercial banking uses higher value employees to execute manual processes. However, the application of FinTech to commercial banking now provides the opportunity to automate some of the highest cost manual processes. Here I take a look at how FinTech is changing the nature of processing efficiency in commercial banking, citing a recent announcement by Genpact.
In November, Genpact announced that it will provide FinTech-enabled core banking operations services to InterNex, starting with loan origination processing, via cloud-based delivery. The contract has an initial seven-year term. InterNex is a private equity financed, startup asset-based, digital lender, and is focused on providing loans to small and medium sized businesses in the U.S. Initially, InterNex will focus on working capital loans and, over time, will expand its product set to include commercial real estate; equipment finance, and other asset-based loans.
The services use a proprietary platform Genpact has been using for the past 15 years with its asset-based lending clients, starting with General Electric Credit, its original parent. The platform is based on Genpact’s Grade origination solution and Accretive servicing solution. Today, Genpact has ~80 clients using this platform, including several F100 clients.
Genpact has adapted this solution to deliver FinTech functionality, with the following key characteristics:
- Cloud delivery (hosted with the client’s choice of cloud vendors, in this case AWS)
- All documentation is digital, no paper documents
- AI capabilities, specifically to analyze both internal transactions and compare to external benchmark data and metrics. Plus, the ability to incorporate client criteria and scoring
- Omni-channel access, especially mobile channel
- Automated credit scoring functionality to reduce TAT
- Genpact’s commitment to stand up full delivery in 100 days (60 days was achieved with InterNex)
- A robust core platform, with 15 years of use in Fortune 100 environments
- The ability to add functionality in modular fashion as required in the future
- Genpact delivering all IT and operations capability for the client with estimated overall contract costs being 80% automated processing, 20% labor processing
- Minimal up-front investment from the client, with transaction-based pricing, charged monthly, for services.
Genpact’s offering to InterNex Capital, and potentially to other startup lenders, moves the FinTech value proposition from one of mass market processing efficiency to one of custom market processing efficiency. The flexibility offered with modular configuration and cloud delivery will allow clients to add multiple niche markets at their convenience. And the ability to scale into many niche markets, at the client’s convenience, will enable clients to build sustainable moats around their businesses, at large scale.