Transforming Loan Origination at Swedbank - An Intelligent Automation Story

Now, digital transformation is not new to the financial services industry, but it has gained pace across retail and commercial banking. Consumers, competitors, regulations and technology are presenting different opportunities and threats, and no more so than in the areas of credit, lending and risk management.

Hear from one of our leading continental European banking clients, Swedbank, on how they are transforming from the inside-out to be a digital bank that still has a physical presence.

Transcript:

[Dom] Hello and welcome to the first in our weekly customer spotlight webinars. Today's topic is, "Transforming Loan Origination at SwedBank, an Intelligent Automation Story." My name's Dom Gregson, I'm your host for today and I'm delighted to be joined by our speakers, Linda Von Stein and Joakim Erikson from SwedBank and Steve Morgan and Anders Petterson from Pega. Before we begin, a few housekeeping items, at the bottom of your screen you will find a menu doc that offers a number of ways for you interact with us and the webinar content. You can ask questions at any time via the Q & A interface, this is already open on your screen. You won't interrupt the speaker, but we will compile your questions for a live Q & A session at the end of the webinar. If you're watching this webinar on demand, you can still submit your questions. We'll monitor these and get back to you with your answers separately. We also have a survey and we'd appreciate it if you could take two minutes to complete this at the end of the webinar. This will help us to improve our future webinars and bring you more of the content that you are most interested in. Also, check out the resources section of this webinar, here you will find links to other content that we feel you will find interesting. You can register for our next customer spotlight webinar featuring TalkTalk and you can also sign up for PegaWorld iNspire, our flagship customer conference taking place in the 2nd of June where some of the world's leading brands will share their experiences of working at Pega. Finally, all of our webinars are recorded and we'll make this one available to you within a few hours after we finish here today. You can access the on-demand version via the URL that you were sent in your confirmation email. So without further ado, let's get to the content. Steve, over to you.

[Steve] Thanks Dom and can I extend my own welcome to everyone for this webinar. I'm the financial services industry lead for AMEA and financial services, is like many industries, currently undergoing a period of dealing through a crisis and while companies look to stabilize their operations and put in place effective support for customers for many, it's a chance to think about more broadly how their business needs to accelerate their digital transformation. For all industries, but I think especially financial services, we've reached a point where it's not just a competitive imperative, but it's also an operational one, in terms of both resilience and team effectiveness. Our customers are increasingly expecting these days, a frictionless easy experience to have the choice of self-serve or getting help and we've seen this at Pega in the last few months, we've been helping our banking clients adapt to huge increases in customer service and government, regulatory and bank policy changes and there's a real need for flexibility as we work through this to be able to adapt to changes in bank policies across areas like lending, collections and customer engagement and ultimately how work gets done in the context of remote and distributed teams. As we move through this period of crisis and inter-stabilization improvements, lending will be a large focus. Lending remains the biggest driver for both revenue and cost for banks, accounting for an average of up to 60% of bank global revenues and customer expectations I mentioned are moving rapidly in retail and also catching up in commercial banking, where there's an expectation again there of being able to easily understand offers, in terms of costs, conditions, as well as choosing elements of what they can do themselves online. And the focus of our webinar today is actually on the areas of accelerating digital transformation and optimizing your operations. And it's against this context that I set the scene for our client SwedBank today. The Nordic region in Europe is one of the most innovative in the world in finance and it's moving very fast towards being a cashless society with very high levels of digital e-commerce and electronic ID. The governments in the region were the first to announce looking at government backed digital currencies and I'm lucky enough to work across much of our client base globally and I've actually found myself in the past managing lending operations at ANZ bank, prior to Pega. So I know that the progress and results of SwedBank teams achieved are amongst the really very best, in terms of digitizing lending and working through all that involves. I'd like to hand over from where I am in England to Sweden where our account executive Anders will introduce Linda and Joakim and I actually believe you guys are sitting near to each other, a novelty at this time for many, Anders over to you.

[Anders] Thank you Steve and welcome everyone to this webinar, again and as Steve actually mentioned, we have the opportunity to actually sit in the same room. There's no restriction so far in Sweden, so I know that's a little bit not the same in the rest of the Europe world. So we are lucky to be here. I don't want to say too much, I just want to introduce Linda and Joakim as the Agile Product Owner for the lending transformation here at SwedBank that has been going on now since 2016. So I hand over to them.

[Joakim] Thank you Anders, so today we will tell you about SwedBank's ongoing need to increase customer satisfaction and decrease administration for our advisors, the digital and automated credit origination system. But first, Linda will tell you a little bit more about SwedBank and our history.

[Linda] Yes thanks, actually this year SwedBank turns 200 years and in the beginning we were focusing on savings and that has been our guiding star since then. SwedBank's purpose is to promote a sound and sustainable financial situation for the many household and businesses. SwedBank is one of the four largest banks in Sweden, but Sweden is not our only home market. We are also present in the Baltic countries, Estonia, Lithuania and Latvia. We are approximately 7.8 million customers, which is almost half of the population. We meet our customers in their preferred channel, regardless if it's online, by phone or in a branch office. We also have a close relationship with our 58 local savings banks and we operate under the same brand, but we are separate legal entities and SwedBank are IT suppliers for those banks. So what do we offer our customers? Well of course SwedBank is a full service bank with the basic banking products, such as savings, lending, insurances, payments, but we also have a close collaboration with real estate brokers and legal advice. For the area which we are representing, the lending area, SwedBank is market leading in Sweden with almost a 25% market share. To be able to maintain that market share, we need to adopt to the current market situations. Joakim will tell you about why we started our digital transformation journey.

[Joakim] Thank you Linda. So first of all, we are doing this because of lifecycle management. We have a legacy with all the systems that's running end of life that we need to change. We also want to be fostered to the market for new product and services and we want to have the same process and platform, independent of the channels. And from a customer point of view, we want to improve the customer experience via our digital channels. As the market is constantly changing, we need to change as well and we also want to increase the speed in fulfilling the customer needs, either if it's a new application, a change on an existing application or any other self-serving changes for our customers. And of course, we want to digitalize and automate as much as possible. So we want to automate manual processes to do reduced cost and increase efficiency for our loan officers, to make the loan officers have more time for the customers, guiding advising regarding, for example, fixing periods, repayment time and other cross sales activities.

[Linda] So that is a little bit about the background. What have we then accomplished so far?

[Joakim] As Anders mentioned in the start, we started off in 2016 with a pre-study to have a fully automated unsecured consumer loan for one applicant that was an existing customer. We started to build the process for consumer loans first, for many other different reasons. First of all, we wanted to set up a foundation and framework to build upon and reuse when it comes to mortgages and other private products. We also wanted to show that we could be first to the market and also consumer loans is a profitable product for a bank and least, but probably most important, no competitor had a fully automated consumer loan, so we wanted to be first on the market.

[Linda] How long did it take to deliver this?

[Joakim] Good question. First launch to the market was nine months after the pre-study and a couple of weeks after that we launched it in the mobile apps. But as you can see our journey didn't end there. After the consumer loan, we started to develop the mortgage commitment process. So during 2018 we launched a possibility for our existing customers to apply via the internet bank and later that year we added the mobile apps and also a new customer portal so that non-customers could apply and get an instant response. During 2018, we also did some analysis of the credit rules and did constant tweaks to increase the straight through process. And after that, we continued this journey and launched in 2019 the possibility for existing mortgage customers to lend more on their collateral, for example if they want to renovate something on their home. And this release we divided into two, first of all we started off with real estate and later we added on tenant ownership. After that launch we went back to consumer loans and started to integrate with a third party, an unsecured consumer loan broker and that was launched in the late Q4 in 2019 and in the beginning of this year we upgraded from Pega 7 to Pega 8, to be able to come even faster out to the market with new features and also with with improving automated testing. So we had a lot of deliveries and now I will talk a little bit more of the benefits of those deliveries. As you can see on this slide, the before process was very manual and as you can also can see, that we have changed a lot of these red scenarios, red, which is manual in this scenario, to green scenarios. So we went from a application to disbursement from pen and paper signing with manual disbursement to e-documents, e-signing and automatic disbursement. This actually gives the customers the possibility to get their money within minutes instead of days, if applying for unsecured consume alone online. And from a bank perspective, this process is built for 100% automation and as of today we have around 65% automation on unsecured consumer loan and also from a cost efficiency perspective, this has reduced the processing time for loan officers with around 80%, giving them the opportunity to spend more time on other customer interactions.

[Linda] Wow, that sounds great. Can we see the same results from mortgages?

[Joakim] As you can see on this slide, a lot of the boxes have changed from red to green here as well. For example, earlier we had the collateral section where you need to do everything manually and also the valuation was manually done and now we have changed that, so that's automatically and also the decisioning offering and the only remaining manual step that we have for mortgages, is signing of some documents and that's due to legal restrictions that we have in Sweden. And from a customer's perspective it goes much faster from application to disbursement for them. Even if we, as you can see, on the numbers, that we have only 5% automation. The process is built with the purpose that it should be easy for our loan officers to work manual on cases and compared to our other credit systems, we have decreased the processing time with around 65% for our loan officers. But this was some information on what we have achieved so far and the benefits on it. Linda, can you tell us a little bit more on how we did it?

[Linda] Yes, of course. When the project was started, the goal was, as you have heard before, was to have a digital and automated process and during the requirement work, we discovered that we had to do some changes in way of working and change existing internal frameworks. For example, we introduced automated credit decisions for the first time and we also added automatic valuation on properties. That slowed us down a little bit due to that we needed to start investigation and do some clarification and the bank needed to take some decisions. Lesson is to try to find these tasks early, so you have them sold before starting to build it. We also started up working Waterfall, after a couple of years, we decided to move Agile, as many banks do. One of the reasons were that testing took too much time in the end and the issues were found too close to the launch. Since we were in the middle of one large delivery where the requirements and main part of the development was already done, it took quite some time to switch to Agile, but now when we're up and running we can clearly see the benefit of it, with closer collaboration and more testing done earlier in the development process. We have also developers and the business analyst located in, not only two but three different countries, Sweden, India and Lithuania. And due to different time zones and public holidays, it requests more planning, but spending the time of planning, we don't see it as a problem. A project startup, we decided to live deliver it together with Capgemini, both when it comes to project management and development and we were approximately 55 consultants and 20 SwedBank employees. And we wanted to now decrease the dependency on consult knowledge, both for maintenance and new development. So we have started to employ Pega developers. So at this point, we have around 15 consultants and 35 employees. And last but not least, we are an old bank and therefore we have a huge IT legacy. So both the frontend and the backend in the lending process, they're not built on Pega and that results in approximately 120 integrations to support the processes that we have built so far. So changing from Waterfall to Agile and switch from consultant employees have had some effect on the delivery capacity in the short run, but I think in the long run we will clearly benefit from it.

[Joakim] Now we have talked about the history of SwedBank, why we are doing the lending process, the achievements of doing this and the benefits of it and Linda also talked about how we did it and how we're doing it. But Linda, what do our customers actually think of it?

[Linda] Well, that is of course a really good question. After a case has been reacted or dispersed, the customer actually gets the opportunity to rate the application on a scale from one to five and they also have the possibility to enter comments on what they think about the process or the application. Some of these comments you can see on this slide, both are processes, which is for unsecured consumer loans and mortgage commitment are the top five of the flows that we are actually doing this measurement up on. So even the customer that receives a reaction grades the processes pretty high and I think that is really good feedback from the customers. Okay, I think that was everything from us, thank you. I want to hand over to Dom for questions and answers.

[Dom] Thanks Linda and Joakim for sharing your insights there. We have in the meantime received some questions, so we'll just run through those quickly. Linda and Joakim one for you guys, first of all, "Have you found an optimal automation level that fits your risk appetite in general or is this changing often given different economic conditions?"

[Linda] I think we don't have found the perfect level, since we have constant changes with the new regulatory requirements, the customer behavior changes and we'll also see the customer find new methods, so trying to fraud us. So we need to prevent that and change to other environmental changes. So no, we have not found the perfect balance there.

[Dom] Thanks Linda. So it's really around Agility, monitoring the market and responding to those changes as and how you see fit. Steve, Anders one for you guys, "What changes that really help customers are you seeing out in the field in the current environment that's linked to lending?"

[Steve] I'll take that one first and see if Anders, you got anything else to chip in. I mean the best examples I think I've been seeing are focused on empathy, where clients are really trying to personalize and make it easy for customers. Just to give a couple of examples, Commonwealth Bank down in Australia, the largest bank down there, or NatWest bank, here in the UK, they've, in this current time, proactively identified customers who are, for example, in the healthcare or care industry and reached out to them or for example their customer base who have mortgages or loans with them and let them know about options and they've let them know sort of digitally, through SMS, email, to be able to then go, you can make those changes online to again try and help relieve some of the pressure on say their call centers that we're all suffering with at the moment. And making that easy and automatic is a bit like the example you just heard the guys from SwedBank talking through. And I think the second thing I'd say is like providing clear, simple advice. It's also critical right now, especially customers are used to transacting online, explain the support that's available, whether it's government backed or a mixture of both.

[Dom] So Joakim, Linda, one final question for you. Why did you choose Pega and not buy an out of the box solution for your lending transformation?

[Joakim] I think that question fits quite good into the first question, as we want to be able to do it by ourselves and also be able to change whenever we want to and do it in an easy way, basically, to build up the framework and adopt it and all the time be able to change different rules and tweak different rules to both increase and decrease automation, depending on the situation, but most of it, to do it by ourselves basically.

[Dom] Okay, thanks Joakim. So ladies and gentlemen, that concludes this webinar with SwedBank. Before we sign off, a few items just to draw your attention to. Firstly, can I please ask you to take our survey? It takes two minutes to complete and it provides us with really valuable insight that we can use to improve our webinar series going forwards. The survey's available at the menu doc at the bottom of your screen and we'll also upload at the end of this webinar. Next week on the 13th, we are joined by TalkTalk. TalkTalk is the UK's leading value for money connectivity provider with over 4 million consumers. During this webinar, TalkTalk will share how they took control of their digital transformation destiny by building a center of excellence from scratch. Again, you can register by the links at the bottom of the webpage. And finally, I'd like to say a couple of thank yous. First of all to our speakers, Linda, Joakim, Steve and Anders, thank you for joining us today and sharing your stories and insights and of course a huge thank you to you, our audience. We always love having you with us and look forward to seeing you again very soon. Until then, take care and goodbye.