Thanks to historic growth in syndicated deal volume over the last decade, the syndicated lending market has attracted an increasing number of players. It isn’t uncommon today for deals to include more than 2,000 lenders, increasing complexity as banks continue to rely on manual paper-based processes.
It’s a growing problem for financial institutions and one that was discussed in a recent webinar titled “Transform into a Platform Player with Digital Lending Solutions” conducted by Finastra and HUBX and hosted by Banking Exchange.
From my experience, and the feedback we receive from clients, front office teams continue to rely on manual processes and workflows despite some efforts at digitalization. We see this quite frequently as banks build investor lists where numerous emails, phone calls and face-to-face meetings are required to syndicate deals. With syndicated lending continuing to grow, where some deals can exceed 2,000 to 2,500 lenders, can we really afford to continue with the status quo?
Updating lender and borrower details is another area where manual processes are impeding bank efficiency as changes must be done by hand across each stakeholder within and outside of the bank. The extensive manual effort increases cycle times and introduces a high probability of error, as even one data entry mistake can be duplicated multiple times.
The benefit of automation is the enablement of straight through processing of the deal, facility and lender position onboarding, allowing financial institutions to execute every deal digitally. That means eliminating manual processes to support faster loan lifecycles and better decision making through enhanced data access.
When I spoke to Axel Coustere, co-founder at HUBX, during the webinar, he indicated that the syndicated lending market is ripe for change.
“We need a fundamentally new way of working,” Axel said. “Not a seismic shift, but a transition away from a deal-by-deal approach toward a platform approach, eliminating silos and tackling each part of the process as a sequence of events.”
From our perspective we agree that platforms are the best way to facilitate this approach, providing financial institutions with a digital solution to support the loan lifecycle from origination through distribution.
Taking a platform approach to syndicated lending
Even as other industries have evolved to utilize new and emerging technologies, syndicated lending continues to operate with many manual workflows that drive inefficiency and facilitate errors. As part of a webinar polling question, over 70% of the attendees revealed that less than 25% of the syndicated process was electronic at their institution.
While this is not a surprise, I believe the tide is about to turn. Platforms are simplifying adoption of digital products and capabilities, allowing financial institutions to create a digital end-to-end solution by adopting modular components. The recent integration of HUBX Arranger, with Finastra’s loan servicing software, Fusion Loan IQ, is a prime example.
As lenders turn toward digitization, have you considered how a platform approach to process modernization can benefit your organization?
HUBX Arranger can be rapidly deployed due to its seamless integration with Fusion Loan IQ, making it possible for financial institutions to support a continuous lender journey from initial discussions through closing and repayment, while also capturing and enabling unique data insights. Banks can also connect to their existing origination platform, CRM or trading APIs to further facilitate this journey across systems.
By utilizing data analytics to identify insights from past and present deals, HUBX Arranger automatically matches the best potential lenders to each opportunity. A seamless real-time view of data even facilitates financial institutions as they test market appetite for potential deals and arrangers as they manage margins.
The integration of HUBX Arranger with Fusion Loan IQ is made possible through FusionFabric.cloud, Finastra’s proprietary platform where more than 150 digital products and services reside. Application programming interfaces, or APIs, are used to connect products on the platform to each other as well as the financial institution, creating a seamless flow of data from all applications and banking information.
FusionFabric.cloud’s natural platform allows banks to collaborate safely on a joint book running, where syndicate lenders, co-book runners, primary banks and other lenders all work and collaborate together on a single platform.
Originate-to-distribute, the way of the future for syndicated lending
As the syndicated lending market grows more complex, creating a digital end-to-end workflow based on a platform ecosystem allows financial institutions to improve communication and automate key activities. As a financial institution, who wouldn’t want to take advantage of lower operating costs, greater profitability and enhanced compliance?
To learn more about how our platform environment is offering faster transformation in syndicated lending, you can download Finastra’s white paper discussing the webinar insights here.
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