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How Financial Institutions in the Middle East Can benefit from Electronic channels
White Paper
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With astronomical GDP growth rates in the Middle East in the past five years,
financial institutions are growing in the double digits year over year in countries like by 82% during 2007, and expected to grow Qatar, UAE, Bahrain, Egypt and KSA. Financial institutions are faced with high by an additional 40 volume of new consumer credit requests that is highly dependent on manual billion in 2008” UAE processes extending time taken in processing these credit requests. land Department This white paper will examine the possibility of how alternative delivery & fulfillment channels can enhance financial institutions credit origination process through a web based business process automation approach.
“Mortgage loans grew
Conducting business over the internet:
In the past decade we have seen the internet become an integral part of conducting business linking individuals, organizations, and governments in ways we never thought possible. In developed economies such as North America, United Kingdom and Germany; customers who seek consumer credit products can shop, learn, apply, obtain pre-approvals for various products online in real-time, simply by visiting the financial institution website to learn about their options in minutes rather than days or weeks. This is possible due to the existence of intelligent business applications deployed by these financial institutions that can capture data, run algorithms against business rules, and seek data from external sources such as Credit agencies to determine the credit worthiness of the applicant. Moreover, when examining the internet penetration in the region, the UAE has the highest penetration with over 30% of the population and rapidly growing, while Egypt has over seven million users representing 10% of the population.
The information revolution:
With all of the technological advances that took place in the Middle East during the past decade, we still yet to see financial institutions jumping on the automation band wagon allowing consumers to obtain credit swiftly and efficiently. As it stands today financial institutions in the Middle East confine their electronic initiatives to online banking and ATM networks whereby customers can manage their day to day transactions for existing accounts. Over 40% of banking transactions in the UAE was conducted over electronic channels such as ATM networks and online banking networks. With increased internet penetration in the region along with sharp financial institution growth rates over the past five years, financial institutions must accept the internet as an important channel in conducting business.
“Middle Eastern markets are comfortable conducting financial transactions on the internet” …ETHOS research report 2006
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3 Brick & Mortar Click & Mortar
Economists have long recognized the three distinct factors that people use to create the things they want. Land, labor, and capital
Economists have long recognized the three factors that people use to create the things the things they want. Land, labor, and capital, which is still the classical case for Middle Eastern financial institutions. If we were to add a fourth factor, it would be “Technology” or “Process Automation” as it can replace one or more of the factors of production in some business cases. Current process “Brick & Mortar”
With most of the loan origination process dependent on manual labor with few exceptions of using basic computer aided software, such as MS Excel for financial statement analysis & MS Outlook for inter-departmental communication; Financial institutions depend on human capital to complete most of the associated tasks of generating a loan product that include: contacting the customer, completing the loan application, analyzing the loan request for qualifying the applicant, verification, drafting the contract, and obtaining external agency reports “Central bank reports”. This process sometimes takes weeks if not months in special cases for the financial institutions to produce a decision on the credit product. The current brick & mortar process also possesses another challenge for some Middle Eastern countries due to nationalization initiatives, which hinders the financial institution human capital growth since a portion of the financial institution work force is dependent on the availability of qualified nationals in the market. Shifting to a “Click and Mortar” approach Click & Mortar is defined as a company/organization integrates both offline (mortar) and online (click) to deliver a good or a service in a fast, inexpensive and effective method, thus reducing time, labor cost, capital, and other organizational resources dedicated to a specific objective. Transforming financial institutions in the Middle East to a Click driven environment is still in its infancy stage, with very few financial institutions attempting to create an alternative delivery/fulfillment channels for marketing and originating credit requests. Amlak Finance has been on the forefront by launching its e-Amlak service which enables individuals to get a quick credit approval in hours rather than days. In addition, we have seen the emergence of various web based services, such as Simsari.com and Accelarabia.com where customers can apply for mortgage loans and obtain instant pre-qualifications from various lenders specific markets. By setting up intelligent business processes, financial institutions can cutback on the three costly production factors, replacing them with fully integrated business automation solutions where customers do not require branch or bank representatives while obtaining their credit requests.
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For financial institutions to go online with their loan acquisition process, the following should be considered: • Develop a user-friendly technology to pre-qualify customers in real-time: this can be achieved by mapping out existing lending criterion into a loan application module, which will facilitate measuring applicants against financial institution product parameters. Integrate the application in various delivery channels so customers can enjoy a hassle free pre-qualification process at which the customer will learn about the various options available to them as well as the steps required to complete the loan application. Map out various departmental tasks associated with originating and approving loan requests, transforming financial institution’s back office operation into a dynamic workflow environment allowing institutions to identify bottlenecks and inefficiencies. Integrating financial institution technology platforms with credit agencies and Central Banks (if applicable) to determine the credit worthiness of applicants in real-time. Create a mechanism to electronically update potential borrowers with the status of their applications. Establish a management reporting system to track all aspects of the process.
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Conclusion:
As we embark on the information revolution in the Middle East, we believe that in the next few years, financial institutions will have to transform their operations to cope with future market conditions as explained in this white paper. Thank you for your thoughtful participation and we look forward to sharing more with you during the E-Commerce Middle East Summit.
About Accelarabia.com
Accelarabia.com was established in 2006 with the goal to enable mortgage seekers and providers in the Middle East a medium of exchange for the seeker to pre-qualify, view, compare, and apply for mortgage products online & in real-time and for the provider to obtain pre-qualified customers in an efficient manner . Accelarabia.com is following the foot steps of successful online mortgage providers such as e-Loan.com and lendingtree.com to name a few in the U.S. and other parts of developed mortgage markets worldwide. Since Accelarabia was established it has been in the forefront of technology solutions to both the real estate and financial services sector in the Middle East.
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