Thought Leadership
Selecting a Commercial Loan Origination System: A Proactive Approach Drives Superior Results
August 18, 2020

Many financial institutions set a goal for 2020 of selecting and deploying an end-to-end commercial loan origination system (CLOS). Then came COVID-19 and worldwide shelter-in-place orders, bringing any forward motion on these initiatives to a screeching halt.

Now, with the country slowly returning to a degree of “normalcy,” financial institutions are beginning to revive these efforts. As they move ahead with their CLOS selection efforts, the first thing they need to do is clearly define the objectives and target metrics for the new system. Skipping this step vastly increases the chance of a failed implementation.

In part two of this exclusive three-part exclusive, the expert banking consultants at Cornerstone Advisors detail how to select the best end-to-end CLOS for your financial institution.

Intuitions may pursue proactive efforts, in which the institution controls the entire process, or reactive efforts, in which they follow their vendor’s lead. In both cases, these four key aspects will determine the success of the project:

  • Purchasing Drivers: Financial institutions should start by identifying the purchase drivers of the CLOS. With a proactive CLOS selection, purchase drivers are identified by the institution based on performance improvement goals. With a reactive CLOS selection, purchase drivers are identified by the institution based on vendor’s past sales/case studies.
  • ROI Calculations: Best practices are for institutions to begin their CLOS selection by identifying the return on investment (ROI). To ensure the greatest ROI, the institution must commit to proactive management and a broad level of involvement in the process.
  • Functionality Requirements: After the institution defines its purchase drivers and expected ROI, the next step is to clearly articulate functionality requirements. A detailed list of the functionalities the institution needs in its new CLOS is a make-or-break component of the selection. Knowing whether users of the functionality in the point solution are satisfied with its performance provides a basis on which to explore the merit of keeping it as a standalone platform.
  • Participation: Rarely does a single vendor fulfill all of an institution’s requirements, but by taking into account the perspectives of different departments on whether each system meets their functionality needs, the institution can determine which platform best supports the full range of functionality required to drive its desired performance improvement and generate the best return on investment.

In the end, it is the functionality supporting the change that makes a solution affordable, and not the other way around.

To learn more about selecting and implementing a commercial loan origination system, download our exclusive three-part series from Cornerstone Advisors now. 

  • Commercial Banking