Problem Statement

A leading non-banking financial company (NBFC) specializing in loan approvals faced significant challenges in automating and scaling their loan approval processes. They maintained a comprehensive database of various loan types and relied on credit bureau data to assess applicants' creditworthiness. Their loan approval process involved:

1. Credit Evaluation: Analyzing credit scores, histories, and financial data from credit bureaus.
2. EMI Calculation: Determining Equated Monthly Installments based on interest rates and the applicant's financial profile.
3. Capability Assessment: Evaluating the borrower's ability to repay by examining income, expenses, and past repayment behavior.
4. Approval Workflow: Deciding between auto-approval and manual approval based on complex eligibility criteria.

The complexities of these processes, coupled with the need to integrate multiple data sources and ensure data security, led to several challenges:

1. Inability to Execute Complex Workflows: The company lacked the technical bandwidth to build and manage intricate loan approval processes.
2. Lengthy Approval Times: Manual processes and limited automation caused delays, with loan approvals taking several days to weeks.
3. Limited Scalability: The existing system couldn't handle increased complexity or volume without significant technical investment.
4. Data Security Concerns: Handling sensitive personal and financial information required a secure, self-hosted solution to comply with regulatory requirements.

These issues hindered the company's ability to scale, innovate, and provide timely loan approvals, impacting customer satisfaction and competitive positioning.

Solution

The company partnered with Nected to transform its loan approval process using Nected's low-code/no-code rule engine and workflow automation platform. The collaboration led to:

Integration of Multiple Data Sources:

Within one week, the company seamlessly integrated various critical data sources into Nected's platform:

1. Credit Bureau Data: Automated retrieval and analysis of applicants' credit histories and credit scores from multiple credit bureaus.
2. KYC (Know Your Customer) Verification: Integrated KYC data to verify the identity and background of applicants, ensuring compliance with anti-money laundering (AML) regulations and other financial laws.
3. Internal Databases: Connected internal customer data, including previous loan histories, transaction records, and customer relationship management (CRM) systems.
4. Third-Party Financial Data: Incorporated data from financial institutions, employment verification services, and other relevant external sources.

Sophisticated Calculations Using Nected's Formula Editor:

Leveraged Nected's powerful Formula Editor to create complex financial models and calculations without coding:

1. EMI (Equated Monthly Installment) Calculations: Automatically calculated EMI amounts based on principal, interest rates, loan tenure, and repayment schedules.
2. Interest Rate Determination: Applied risk-based pricing models to adjust interest rates according to the applicant's creditworthiness and risk profile.
3. DSCR (Debt Service Coverage Ratio) and DTI (Debt-to-Income Ratio): Computed key financial ratios to assess the applicant's repayment capacity.
4. Credit Scoring Models: Implemented custom credit scoring algorithms that factored in various parameters like credit history, employment status, income stability, and more.

Automated Decision-Making with Decision Tables:

Utilized Nected's Decision Table feature to handle intricate eligibility criteria and streamline the approval process:

1. Auto-Approval Flow: Set up rules to automatically approve loan applications that met all predefined criteria, enabling instant approvals.
2. Manual Approval Flow: Configured conditions under which applications would require manual review, such as borderline credit scores or discrepancies in KYC data.
3. Rejection Flow: Established clear criteria for automatic rejection of applications that did not meet minimum requirements, ensuring compliance and risk management.

Workflow Automation:

Streamlined the end-to-end loan processing workflow using Nected's Workflow Automation:

1. Real-Time Processing: Enabled immediate assessment and decision-making upon application submission, reducing turnaround times significantly.
2. Integration with Underwriting Processes: Automated the underwriting workflow, including document verification, risk assessment, and compliance checks.
3. Notifications and Alerts: Set up automated communications to inform applicants of their application status and to notify internal teams of tasks requiring attention.
4. Regulatory Compliance Checks: Integrated compliance verification throughout the process to ensure adherence to regulations like AML, KYC norms, and other financial laws.

Empowering Business Teams:

Allowed non-technical staff to manage and adjust loan approval criteria and workflows without any coding:

1. No-Code Rule Management: Business teams could create, modify, and deploy rules using intuitive interfaces, reducing dependency on IT teams.
2. Rapid Iterations: Enabled swift adjustments to lending criteria in response to market changes, regulatory updates, or internal policy shifts.
3. Enhanced Collaboration: Facilitated better communication between departments, as rules and workflows were transparent and easily understandable.

Enhanced Data Security with Self-Hosted Solution:

Deployed Nected's self-hosted platform to ensure robust security and compliance:

1. Data Privacy Compliance: Maintained control over sensitive personal and financial data to comply with data protection regulations like GDPR or equivalent local laws.
2. Secure Infrastructure: Leveraged secure hosting environments with encryption, access controls, and regular security audits.
3. Audit Trails and Reporting: Implemented comprehensive logging and reporting features to monitor system activity and support compliance efforts.

By leveraging Nected's platform, the company not only executed their complex loan approval workflows but also set the stage for future innovations without the constraints of technical limitations.

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