Here’s a question.
Are you a lender who is still processing paper or fax debt management plans? If the answer is yes, you’re in the right place.
While larger lenders have possibly already migrated to digital solutions, small and medium-sized lenders find themselves stuck with outdated processes that, among other things, are slow, expensive, inefficient, and prone to both errors and compliance issues.
In this comprehensive piece, we’ll take a look at several automation strategies and solutions that can help you modernize your DMP processing, bring down inefficiencies, and in the long run, enhance your bottom line!
Let’s dive right in. First, we’ll get into the challenges associated with paper and fax DMP processing:
Processing DMPs manually poses several roadblocks for lenders:
Time-consuming: Manually entering data from paper or fax documents is resource and labor-intensive, which is time-consuming and results in slower decision-making and delayed customer responses.
Error-prone: Manual data entry increases the risk of mistakes, which results in inaccurate information and compliance issues.
Loss of documents: Paper-based documentation can be lost or misplaced, creating delays in processing times and causing frustration for lenders and borrowers alike.
Lack of accountability: Without accurate, comprehensive documentation and efficiency tracking mechanisms, it becomes difficult to ensure accountability throughout the DMP processing workflow.
Compliance exposure: Manual processes make it harder for lenders to ensure compliance with complex regulatory requirements, exposing them to legal and financial risks.
Lenders can combat these challenges with relevant automation strategies that are specifically tailored for DMP processing.
Here are a few examples of common strategies lenders can leverage to streamline their operations.
Scanning and data entry: Larger and more established lenders choose to scan paper documents and outsource their data entry requirements to low-cost providers overseas. The data entered is reviewed on an account-by-account basis for approval or decline. Once decisioned, the response is attached to the keyed address of the originating agency and then shipped to the US for response to the agency.
While this brings down labor costs, it does bring in the risk of further documentation loss and delays in processing times. It also does not completely eliminate the risk of data entry errors, resulting in compliance issues and inaccuracies.
Batch processing: When DMP digitalization was introduced in the early 1990s, a number of large banks programmed their mainframe systems to receive batch files from CCAs through third-party processors. This was a significant improvement over paper processing, but it does still require substantial upfront investments in programming and ongoing maintenance costs.
As technology has evolved over the years, even these systems have become rather outdated and expensive to maintain. Errors and compliance risks could arise when such systems fail to keep pace with regulatory changes or when data streams are corrupted.
However, despite these challenges, batch processing still offers several benefits such as reporting capabilities, data management, and reduced upfront labor costs.
Batch with web: A more modern and cost-effective approach involves leveraging existing batch processes with a third-party processor to handle DMP proposals via a web application. This requires minimal IT investment and completely digitalizes the data stream, which can reduce labor time by a massive 75% (or more)!
Now, that being said, manual reviews of proposals may still be necessary at times. However, enhanced standardization and processing bring down errors and increase accountability. Automation also improves responsiveness to customers, reducing the likelihood of them seeking alternate debt relief options.
What’s more, since such processes don’t require in-bank programming, future-proofing them becomes more assured and less of a technology debt.
What does the future of DMP automation look like?
Future developments in the DMP space include:
- Automated account updates through open banking initiatives
- Almost real-time proposal presentation and decisioning via advanced algorithms and data analytics.
While the first two options bring down a bank’s up-front processing costs, they don’t solve ongoing support costs – this is where a third-party web solution truly comes of use, offering a sustainable, efficient, and future-proof approach to DMP processing workflows.
So, if you still process paper today, we can say for certain that you are spending more than you need to, and also inadvertently suffering from increased losses. No one wants that!
The good news is though, that you can fix this! At Peregrin, we specialize in helping you determine the best solution for your lending business. Our team can help you with modernizing your operations, reducing inefficiencies, and improving customer satisfaction. So get in touch today, and let’s transform your DMP processing workflow together!