5 Ways Location Intelligence is assisting Financial Institutions Mitigate Risk & Improve Profitability
Even before the age of smartphones and big data dawned on us, location has been a critical factor for banks and financial institutions. Customers have not only shown a propensity for choosing a bank whose branch is near their home or workplace, but they have also given preference to banks whose branches or ATMs are visible at every street corner.
Today, user preference has shifted to mobile-based banking services, and for the millennial user, the physical location of a bank is not as important as it was to the previous generations. However, for banks, the evolution in lending functions has made sure that the importance of location grows more than ever.
To add context to any transactional, social, user, or sensor-generated information, financial institutions need location data. And to make sense of all these varied data streams, they need locational analytics and intelligence tools. Here are some ways banks and financial institutions are leveraging location intelligence to mitigate risk and improve profitability.
1. Secured Lending Operations:
Service level agreements (SLAs) help banks to manage customer expectations by clearly defining performance metrics such as response time, resolution time, etc. In secured lending processes, issues in address data quality both impact the SLA times negatively and increase operational expenses. This is why more and more banks are switching to nationally-sourced geospatial databases that come with comprehensive and accurate location-based information. By integrating location intelligence tools with existing IT systems, banks can validate property information in real-time for precise valuation.
2. Mortgage Origination (Manual):
When it comes to creating a home loan or mortgage, the focus on managing risk has never been greater. The volatile real-estate market in recent years has made financial institutions more selective in their mortgage adjudication process. Location visualization software like DMTI Spatial’s Location Hub can help lenders to quickly identify accumulation risk and concentration exposure, and understand threats by perils like flooding, earthquakes, and crime in real-time. Using this information, mortgage originators can provide manual scoring to a property confidently as part of the manual adjudication workflow.
3. Mortgage Origination (Automatic):
Automation is quickly becoming an important component of the commercial lending market. To mitigate the inconsistencies and delays associated with manual in-line mortgage processes, many financial institutions are now turning to automated loan origination platforms. Since these platforms provide scorecards based on values which are automatically fed into the rating process, it is imperative that the data being used be completely error-free and up-to-date. A robust data chaining tool mines multiple map-ready data streams into the automation platform in near-real-time and creates a single source of truth, thereby lowering the risks associated with exposure to perils, fraud, and underwriting inaccuracy.
4. Risk Scoring:
With regulations becoming more complex and consequences of non-compliance even more severe, banks want to keep their error rates to the minimum. The risk analysts who decide whether a bank should lend or not are increasingly demanding a single interface which would allow them to search for an address on a map, and see its risk score and report. High-precision data and real-time addressing allow banks to calculate these risk scores based on a number of pre-determined factors, weighing each factor differently on the basis of its importance. Financial institutions can, therefore, improve risk selection, reduce property evaluation cycle times, bring down manual exception handling, and improve internal assessments of appraisals.
5. Risk Mitigation:
With the Office of the Superintendent of Financial Institutions (OSFI) amending the regulations for secured lending earlier this year, the need for robust surveillance and monitoring of the internal lending process has become imperative for Canadian lenders. Banks and financial institutions are increasingly looking for the ability to identify risks and flag for exposure in shorter and more accurate timeframes. Location intelligence tools like Location Hub allow risk officers to validate property information in real-time for valuation and increase the level of property confidence to support the internal lending processes.
The International Data Corporation (IDC) predicts big data and business analytics (BDA) solutions will reach $260 billion globally in 2022. And when it comes to the industries which are estimated to be making the largest investments in BDA solutions, the banking sector is trumped only by retail. Clearly, getting a better handle on data and extracting the greatest value from it has become a priority for financial institutions.
Coming from Canada’s leading location-based information and data quality company, DMTI Spatial, Location Hub is an exceptional solution set for banks and financial institutions. The software integrates seamlessly with existing IT systems and streams data in near-real-time with robust Web services and APIs to provide on-demand risk and portfolio analysis to the banking sector.