Traditionally, some creditors have used different systems for origination, maintenance, restructuring & collections as well as for different loan types – such as consumer or corporate portfolios.
However, effective technology enriches loan functionality for performing and non-performing loans, offering a range of options in how all loans are managed.
Creditors across Europe are facing ongoing issues over volumes of non-performing loans (NPLs). They must find viable solutions for customers to enable them to repay their debts, while also generating new lending. These repayment solutions are many in number and often require the creation of composite products with different characteristics.
Most of the time it is not a matter of setting a simple settlement scheme, but of creating a real, viable and permanent restructuring solution tailored to the customer’s needs.
There are many challenges in handling non-performing accounts. These accounts require frequent reviews of contract terms and conditions and need to be carved out from the performing portfolio. That results in painful migration procedures and extended in-house investment. There may also be weak functionality in restructuring-specific products.
For example, when a bank, debt purchaser or third-party servicer finds a repayment solution to suit a customer, they may need to close the original account and create one or more new accounts to deliver that arrangement. This is far from ideal – adding complexity and making it harder to track the loan. Organisations may also struggle to design and implement changes to their large and complex systems.
In addition, servicers may rely on professional support from the creditor for the acquired portfolio and the use of their systems. They find themselves dependent on the bank’s timetable and priorities, which can result in delays in collections.
Instead, they can now use technology that is flexible enough to stand alone or integrate with those existing and legacy systems. The solution is built with collections expertise and in-depth knowledge of restructuring, making a transition from loan maintenance to collections simple.
This technology offers prebuilt solutions for every requirement, along with efficient functionality and the ability to launch new products within that same solution. Creditors or servicers can effect fast and smooth migration, enabling them to manage multiple portfolios within the same environment.
Instead of multiple new accounts, lenders and servicers can operate a loan account with three ‘shadow’ segments, allowing for conditional debt forgiveness, standard payments and less frequent top ups by the customer.
The system maintains customer data, including demographic, financial, and contact information to support segmentation and profiling. It also maintains contract terms and conditions along with details of relationships and involved parties.
Customers can be provided with regular statements – either monthly or bi-annually – generated by the system.
This approach means one system can handle the loan throughout its lifecycle, freeing organisations to provide a better customer experience.