SaaS is the Future of Property Loan Management in 2021
This article is written for loan analysts and loan operations analysts that are niche but not exclusive to the property loan industry. In this article, we will discuss the current state of the sector, common practices that require reevaluation and the future development of the market. Although in need of constant modernisation, the loan management sector is slow at adopting innovation. This approach brings financial losses, damaged relationships and growth stagnation. The solution is available and it is Software-as-a-Service technology.
SaaS is the Future of Property Loan Management in 2021
Technology is the driving force behind progress today and businesses across different industries are joining the movement of digital transformation at rapid speed. However, the finance sector is lagging behind.
A lot of finance firms stick to traditional yet outdated methods despite the market booming with new solutions. We can understand that. Moving away from common practices in a process-driven industry is daunting. But you must embrace the change.
SaaS technology has been designed specifically for meeting the needs of a financial sector. The benefits it delivers address pain points specific to the small lenders. Here’s a short list of how adopting SaaS could benefit your business:
Granting 24/7 accessibility from anywhere in the world
Reducing time spent on manual labour via automation
Providing easy access to accurate and timely visual reports
Guaranteeing exclusion of human error
Offering the functionality of different team members to collaborate in real-time
Cutting costs on hardware and team training
Ensuring frequent updates on the latest security measures
Enabling business growth and scalability by allowing to take on more clients
At this point, you may argue that SME property lenders have been using business intelligence this entire time: Excel spreadsheets. You are correct. But with the technology changing and improving not daily but hourly, can you really justify relying on the same software for over a decade?
Excel is so yesterday
To put it simply, while Excel remains the most commonly used tool for loan portfolio management it is terribly outdated. In the modern age where we are discovering new data revenues daily, businesses are swarmed with data daily. At the time Excel was created this was simply not the case. Although it is designed to process more data and assist the user with complicated calculations it cannot handle the data volumes we are exposed to today.
It shows in multiple ways: susceptibility to human error when there are too many cells, longer loading times as the size of the spreadsheet grows, very basic filtering options...The list goes on. The conclusion is that Excel is seen as one of the traditional loan management practices - and it’s the one to be retired.
Excel vs SaaS
It is worth noting that despite its widespread usage in the financial sector, Excel has not been created to cater to lenders specifically. This means from the start it was not able to fulfil certain operational requirements.
For example, let’s talk about the loss of one day’s interest and inclusion/exclusion of start/end day.
When making a payment, nobody logs the time of it as interest is calculated on a daily basis, not hourly. According to the industry standard, the interest of a disbursed loan is calculated on the day the money is lent out. However, it is not calculated for the end date.
To give you an example: a loan starting on Feb 1st has its first payment on March 1st and the final payment 12 months later. Interest would start on Feb 1st at 0:00, but no interest would be charged on payment 12 - Feb 1st.
To put it shortly: a loan lent out on Feb 1st and paid back Feb 2nd would have one day’s interest, not two.
The day that confuses Excel the most, however, is Dec 31st. If it is set to be the payment date, you may have wanted it to be paid at midnight. However, it then gets paid at the start of the day, thus reducing the balance by that amount at the start of the day, not at the end of the day.
The balance reported on that payment line in Excel is then that on the 31st at the hour it’s been paid, not at midnight. And then the same applies to the interest calculated. All in all, relying on the line’s payment, the accrued interest for that last day is ignored and the balance is not accurate to the 31st at midnight.
To get the right numbers in Excel, you would need to insert a line in the sheet on the 1st of the next month to compute the interest accrued on the 31st. This is rather inconvenient to do for just one loan: what about dozens and hundreds?
SaaS software, on the other hand, has been created specifically for SME lenders. The very purpose of it is to provide assistance in handling processes the business relies on. As it is often created by fellow industry specialists that grew frustrated with the lack of a relevant solution (that’s how Hypercore.ai came to be), the software delivers exactly in accordance with the user’s needs.
Key Advantages of SaaS
A SaaS loan portfolio management system is certainly a way forward. If you are still hesitant, let’s take a deeper look at what makes it superior to Excel.
It is cloud-based. This fact alone contains several advantages. For starters, this means you won’t need to invest in an IT technician to install it nor into hardware that would be capable of supporting it. Cloud-based software is accessible on an internet browser, often across different devices. This also enables it to be used by multiple people simultaneously, having visibility of one another’s actions in real life. In Excel, for example, if someone is editing a spreadsheet, everyone else is locked out of it and the changes will not appear unless the file has been saved. Secondly, cloud-based has already become a synonym of the top-notch security that is updated all the time. And finally, SaaS vendors usually have customer support integrated directly into their cloud platform. This means you can speak to them in real-time via chat or call without having to move away from your device.
Data visualisation. Usage of Excel requires another software to put the data into a digestible format. Additionally, filtering and segmenting the said data often requires either manual labour or complicated custom algorithms. Either way, it takes a lot of time, effort and human error risk to put Excel spreadsheets into a visual format. SaaS, on the other hand, offers fully customisable dashboards and reports that process and visualise data within minutes. Also, since it is calculated and put together by artificial intelligence, there won’t be any human error based mistakes in the reports.
Automation. Finally, SaaS platforms allow you to automate processes instead of wasting time and resources on repetitive manual tasks that don’t rely on human judgement. It allows your employees to focus on more important tasks and increase productivity. Finally, needing less time spent on each client enables expansion of the client list that in turn brings more revenue and accelerates business growth.
The list of things that SaaS brings to the table is longer than that. Each of the three above described advantages splits into smaller yet equally important benefits and you will find that different software comes with different sets of features. We invite you to try the Hypercore.ai platform for free.
SaaS is the Ultimate Solution for SME Lenders
SaaS software has been built to reduce repetitive manual tasks. This approach gives small lenders more time to focus on tasks essential to growing their business. Additionally, a modern dashboard does not require an IT specialist to set it up and can be easily customised by a normal user.
From tracking and managing loan lifecycles to evaluating risks and liquidity ratios, the loan management platform works for you. It is never a one-for-all solution just like no property lending business is the same. Instead, SaaS platforms give you the power to make it what your business needs.
Digital transformation is the way forward and onboarding a SaaS loan portfolio management early on is crucial for its success. The growth and evolution of fintech have been galloping in past years, catering to SME property lenders and addressing the areas that cause them struggles.
When there is a solution designed specifically for achieving your business goals, do you really want to stick to outdated technology that no longer meets your demands?
Making the Switch
It is scary to abandon practices that have been in place for decades - we get that. But the world is moving at a quick pace and ultimately businesses will either adopt a more digital approach or fail. The sooner you adopt SaaS, the quicker you’ll get comfortable with it.
With the growth of demand for the newest fintech, the SaaS market is currently booming. Just like every loan providing firm is different, every SaaS product covers different needs. Ultimately there is something out there for everyone, but making a rushed decision may result in choosing a software that is great, just not right for your business. So, how to prevent that?
Identifying Your Needs and Objectives
While SaaS vendors are trying to make your life easier, they are also trying to sell their product. This means highlighting every feature the software has in a way you start believing you need it even if it’s not always true. The way to avoid being dazzled by promises is to set a precise list of your goals and what means will be needed to achieve them. You can start with the following questions:
How are you tracking loan cycles? Does this process need to be reevaluated?
How big is your team? Who will be using the software? What specific features will each team member need individually?
What are the most common roadblocks you run into? What are the ways of avoiding or solving them?
What are your KPIs and how can automation help reach them?
These are just a couple of questions for you to get a general idea. Your list will need to be longer, focused on your business specifically.
Choosing the Right Provider
Once you have outlined what you aim to achieve and how SaaS can help that, your list should become narrow enough with vendors offering the specific features you need. This is when you should start delving deeper.
Start with investigating their reliability. Most SaaS providers will highlight their 24/7 availability to demonstrate a quick response to any issues that may occur. In their selling proposition, SaaS vendors may use the term ‘uptime’ which stands for the percentage of time their services are available to use (e.g. 99.9% uptime.)
Make sure to ask how the downtime measured as different SaaS platforms will have a different understanding of it. Normally the downtime stands for scheduled maintenance, but in some cases, it can be anything from internet routing problems to internal server issues. Either way, the downtime means the users won’t be able to access their data and applications. That’s why it’s important for you to clarify all facets of downtime and how it can impact your business.
To learn more about it and other essentials, request a Service Level Agreement, further referred to as SLA. It should have the following points outlined:
• Definitions of availability and downtime
• A complete list of services provided
• Required availability for each service and acceptable downtime limits
• Methods used to report any loss of service and downtime
• Notification requirements
Depending on your business requirements, you may need to have additional things to consider. These bullet points, however, can be used as a core to evaluate the SaaS solution.
On-boarding
Usually, onboarding is pretty straightforward when it comes to SaaS. Pay close mind to the SLA as the process will be outlined there. However, there are vendors out there that understand the urgency of a transition.
Hypercore.ai is one of them. To provide our clients with value from the moment they learn about us, we offer you a headstart from the moment you sign up for our SaaS platform.
Growing and Scaling Together
To wrap up this article it’s important to mention that you won’t have to worry about having to jump from one SaaS provider to another every few months. The software will accompany you in your growth and will scale alongside your business.
The key benefit of working with SaaS is that the vendor’s success directly depends on yours. For this reason, you will always be their priority. Unlike Excel, SaaS loan portfolio management systems have been created with your needs in mind: their sole purpose is to solve your problems. This is why SaaS platforms undergo frequent updates and will remain relevant even as the business landscape changes.
If you would like deeper insight into why you should turn away from Excel, please download our eBook where we present some data-based analysis and comparison. Alternatively, you can book an appointment and learn more about SaaS from us.