The productivity paradox
The advent of computing and the Internet have brought about many improvements to humankind including the financial world. However, many of such advancements are but analogues of the real world, creating a productivity paradox. It is sometimes known as the Solow computer paradox, after Robert Solow who, in 1987 wrote, ‘You can see the computer age everywhere but in the productivity statistics.’
The First Industrial Revolution in the 18th century saw a significant boost and improvement to productivity and livelihood, particularly after the invention of the steam engine, but that didn’t happen overnight. A similar delay occurred during the early years of the Second Industrial Revolution in the 19th century. Before this, factories were powered by a single, massive steam engine which delivered the power though a line shaft that ran the entire factory floor. If the engine stops, it halts the entire production line. In the early stages after electrification, some factories would just replace the steam engine with an equally powerful electric motor, but keeping the power through the same line shaft and using the same bulky, less-efficient machinery. These factories may have seen some cost savings but as far as productivity is concerned, there was little to no growth at all. It was only after rethinking the whole factory setup, that they saw a significant growth. Since electricity can be delivered through wires to any location at any time, new machines were devised. More of these new machines with electric motors were fitted to the exact same space previously occupied by only a few steam-powered ones. On top of that, stopping one electric-powered machine didn’t halt the rest like it did with the line shaft setup. This new shift in production paradigm paved the way for mass production which multiplies the production rate exponentially. The rest, as they say, is history.
We bring this up because many companies are still facing a similar challenge in the loan origination industry, even after the introduction of computing in this Third Industrial Revolution, also known as the Digital Revolution. Loan origination may be a relatively modern, financial phrase describing the borrowing and lending process in its entirety, but the loan activity itself dates back thousands of years. Throughout the centuries, not much has changed. Application and documentation were done on paper. Pre-screening, credit scoring, and approval were done manually. Acceptance and disbursement were done in-person. Apart from the inconvenience, each step in origination was time-consuming, and the whole process could take up to a few weeks, if not months.
Now that we have computing technologies at our disposal, we cannot just swap out paper ledgers in favour of storage servers, for instance. Sure, that will save a lot of space, but the loan process itself may not be any faster. We need to fundamentally rethink the whole origination process if we want to see any significant improvements.
What makes a good origination system?
Right from the get-go, we wanted to make an origination solution that is all-encompassing, keeping in mind what we mentioned in the beginning: the paradigm we have to completely shift, from analogue to digital. We shouldn’t just make an origination software that stops at the approval stage, where the bank officer has to print out the application to be signed and approved by the bank manager. Or the fact that there is a physical application form that the bank officer has to manually key in to the system. The whole origination process has to be done end-to-end, digitally. Turns out there is a term for this process: straight-through processing or STP. It is a term describing the financial industry’s process that speeds up conventional processing time of transactions. It is also a term to describe a frictionless experience for the consumer. The efficient manner of STP also promotes the ability of only entering the information once to be used everywhere, ensuring accuracy and minimising errors.
Next up, we also wanted a software solution that can be accessed anytime, anywhere. It is either we develop applications for every operating system available, or we could make use of a pre-existing application that is already found on all devices that connects to the internet: the web browser.
Another crucial-yet-overlooked trait is for the software to be robust and scalable, while still being easy to use. This is a fine balance to strike because if the software is too bare-boned, any new feature additions will require a lot of coding. And if the user interface (UI) is packed with too many features, it will be difficult to use.
With these three criteria as our guiding star, we’ve set forth many years ago to develop a better way to do loan and financing origination, and we believe we’ve done it.
Origins of Juris Origination
Juris was formed back in 1997 during the Asian financial crisis. Our chief executive officer, See Wai Hun said in an earlier interview that we ‘started at the tail end of the debt value chain’ by way of offering software and services to help banks and lawyers manage litigation cases and take defaulters to court. The debt collection and legal recovery solutions proved to be ‘recession proof,’ as The Malaysian Reserve article noted.
Our venture into debt collection and legal recovery with the creation of Juris Collect and Juris Legal became a success, the former of which turned into one of our tent-pole solutions, but Juris Collect is another story for another time. Working our way up the ‘debt value chain,’ in 2008, the time was ripe for us to launch Juris Origination Management, or JOM for short. JOM will serve as the backbone of our solution suite as most of our solutions can be integrated with JOM in some form or fashion.
The first retail origination JOM was developed back in 2008 for one of the largest cooperative banks in Malaysia. As it evolves and matures, we’ve released the first commercial origination JOM (or JOMCOM) for one of the nation’s leading development banks in 2013. Throughout its existence, more modules were added; some of the significant ones before JOMCOM include the scorecard, rule-builder engine, and multi-workflow process, in 2008, 2009, and 2010, respectively. After the introduction of JOMCOM, more were developed, like financial spreading in 2013, digital credit paper in 2014, and cross-selling in 2015. Right after the launch of our digital engagement platform, Juris Access, we went on to work on a whole lot more extensions to JOM and other Juris solutions, to make them even better. Here are just a few of them:
- site-visit mobile app
- Lucid UI
- dashboard tiles
- next-best action
- Google-like search
- sentiments analysis
- leads management
- digital marketing API
- planned for the future
- autonomous system
- predictive scoring / prescriptive result
- cloud-based solution
‘Jom’ also happens to be a Malay word which roughly translates to ‘let us,’ making the JOM acronym more memorable. Besides this happy little coincidence, what is it about JOM that makes it so special?
‘Jom’ explore JOM
In Juris, we break down the loan origination process into eight chunks: application, pre-screening, credit scoring, evaluation, approval, acceptance, documentation, and disbursement. Some of the stages can be complemented with the addition of other Juris solutions to make the process even more fluid. Keep in mind that in the past, all these processes are handled in an analogue manner, possibly in different departments, and with processing time stretched out to days, weeks, and sometimes even months.
Stage one: Application
The omnichannel nature of our solutions allows financial institutions to connect with prospective customers through multiple digital channels, including the web, mobile, customer relationship management (CRM), merchants, and even chatbots. The loan origination process could start from JOM’s integration with Juris Access (JAccess), our digital customer onboarding solution. Once the customer’s data has been entered in JAccess, it flows to JOM’s first stage.
Here, JOM has the option to extract data from ID cards. By design, it comes with robust integration points such as email, SMS, credit bureau system, core banking system, and credit scoring system. With these integrations, warnings, rejections, or adjustments can be made instantly based on previous financing records.
Of course, being a system with STP in mind, the data entered will never needed to be entered again ensuring accuracy and efficiency. Compared with traditional origination processes, JOM could accelerate the application stage up to eight times faster.
Stage two: Pre-screening
Pre-screening is all about early-sifting of applications to automatically approve or exclude them based on prerequisite rules. The rules are the requirements needed to be met for a particular loan product, such as:
- minimum age of 18
- maturity age limit (must be below certain age by the time loan tenure ends)
- Malaysian nationality requirement
- requirement of no active applications in other branches
- application age not exceeding a set of months.
It used to be difficult to gather information from various systems for pre-screening purposes, but JOM makes it easy for an automated retrieval of customer information from integrated core banking systems and credit bureau systems. From there, JOM derives the credit information and calculates exposure, equated monthly instalment (EMI), and the eligibility. There is a handy ‘Dynamic User Assist’ on the right pane of JOM with a ‘next best action’ recommendation box to assist the regional manager’s (RM) decision. Some of the data that can be viewed in this stage:
- exposure information from existing, internal and/or external financial record(s)
- non-performing financial information (if available) from credit bureaus
- blacklist status
- credit health status
- pre-screening questionnaire results.
Both pre-screening rules, and the formula engine with which EMI is calculated, are easily configurable in the UI. The third-party integrations and connections in place are also great for credit bureaus’ bookkeeping needs.
There can be two additional rules here: warning and prequalifying reject rules. The former allows the application to proceed, but will warn the users involved. The latter will not allow RMs to approve a loan unless they go through an appeal process, which can be done in stage five later.
In this pre-screening stage, JOM can be paired with Juris Analyst, for an analysis of financial statements, ratios, and cash flow of the applicant. The great thing about Juris Analyst, is that it’s an automated financial analyst solution that will automatically alert you if any of the financial indicators are off, and using regression analysis it can forecast what the customer’s financial outlook may look like a few years from now. Juris Analyst can also allow you to do a ‘what-if’ analysis and run simulations to your heart’s content. Each ‘what-if’ analysis can be saved and when you’re happy with the results you may use these simulations to evaluate the customer as input into stage three, which is credit scoring.
Another very important thing to mention is how JOM made it easy for handling of single counterparty exposure limit (SCEL). The process of gathering formation from different parties to calculate the customer group exposure for SCEL purposes used to be tedious and cumbersome. JOM allows for an automated retrieval of related business entities via core banking and Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, or SSM), derivation of the SCEL, plus calculation of group exposure and even sector exposure to trigger limit breaches (if any). JOM also highlights major shareholders and directors, for easy-viewing.
Stage three: Credit scoring
Even after passing the pre-screening rules, the customer will still get their credit, scored in this stage. The scoring rules are easily configurable with multiple levels of categorisation, and JOM will automatically obtain the credit score of the customer based on said rules.
Credit scoring can take into consideration multiple factors, including qualitative questionnaires that allow us to evaluate the human side of the company.
The credit scoring runs on the scoring engine module which is embedded in JOM, which means that when an application is submitted, the scoring is done within the scoring engine itself. We name it Juris Score, the credit scoring solution by expert rules and artificial intelligence.
Stage four: Evaluation
A common pain point in origination is in the evaluation stage, where data is often duplicated in various system silos, eg, core banking, credit rating, financial reporting, etc, not to mention the time-consuming nature of financial analysis preparation.
JOM comes with built-in scorecards that can be configured to weigh-in past records and customer potential. Also built-in, is Juris Analyst, our integrated financial spreading system. Together, here are some of the features that JOM offers at the evaluation stage:
- template upload of profit and loss, (P&L) and balance sheet
- automated calculation of ratios
- benchmarking, forecast, risk assessment, and simulation based on potential
- ability to handle contract financing and projected cash flow
- sensitisation based on customer’s needs
- digitised and web-based credit paper
- eligibility limit auto-calculated based on info keyed in.
Stage five: Approval
Even though JOM is a software solution, it has one important feature in this stage: the ability to give different levels of access to various roles for performing verification, approval, and so forth, on the same system. This allows for, say, a call centre agent to use the same system, while only able to see enough information they need, though the RM could be on the same screen and view more information. After an application is rejected, JOM also allows the RM to appeal within seven days from the rejected date. There is also case reassignment support, should there be a need for it.
The common problem occurring in the approval stage is the low efficiency in the distribution of physical credit papers for approval, which will obviously cause delay in application approval. JOM eliminates all these as it is agile in facilitating various types of online, paperless approvals for retail and commercial origination, whether it is single, joint, or committee approvals. The increased efficiency accelerates the approval process up to six times faster than conventional origination.
Stage six: Acceptance
Once the loan application has been approved, and the acceptance has been made by the customer, the bank officer could easily progress to the next phase with just a click of a button. That said, there is also an option for the financial institution to extend the acceptance period before the 14 days is over.
Stage seven: Documentation
The penultimate stage before disbursement has to do with documentation. Challenges abound with traditional origination methods, including:
- manual processes inhibit tracking of documentation status
- difficulties in tracking and resolving snags raised
- issues in monitoring the review of facility agreement
- troubles in monitoring the return of security documents.
JOM, with Juris DocMan integration, stores all documents with easy browser access, and with Juris Credit integration, connects lawyers, valuers, and bankers together. Here are just some of the things it could do:
- a comprehensive checklist management and workflow-enabled features, including terms and conditions (T&C), condition precedence, and covenant items
- automated generation of letter of offer (LO)
- effective tracking of LO expiry dates
- seamless collaboration for banks, lawyers, and valuers via an online portal
- lawyer performance tracking
- snag framework.
With JOM, you will also see an acceleration in reporting and statistics from five days, with traditional documentation, to just five minutes – that’s 180 times faster!
Stage eight: Disbursement
The errors in data entry with conventional origination that we’ve mentioned earlier will cause significant delays, particularly in the disbursement phase, as any discrepancy during the exchange of money, is unacceptable.
JOM, designed from the bottom with STP in mind, doesn’t experience said errors because the same data entered in the beginning will be used throughout the whole process up until here, and beyond (in the collection process). Auto-creation of accounts, collaterals, facilities, and cost, insurance, and customer information file (CIF) are possible.
How did we do it better?
Of course, by now you should know that we didn’t just stop at the end of the origination process. Our first software suite, Juris Collect, picks up where JOM left off. Here, JCollect, as we affectionately call it, provides a complete debt-collection solution, covering all stages: early detection, early-stage collection, late-stage collection, collection agencies, litigation, and provisioning.
True, end-to-end credit management
We kept STP as our North Star throughout the whole development process, and it was the goal that we’ve ultimately achieved with JOM. With true STP, JOM is an end-to-end loan origination software, with a collaboration portal connecting up to more than 1,000 lawyers and valuers. Pair it with JCollect though, the two now become a true, end-to-end credit management solution.
For whoever, whenever, wherever
The decision for us to develop JOM as a web-based solution is an easy one to make. We’ve designed almost all of our solutions to be web-based from the ground up, with special emphasis on graphical user interface (GUI) and drag-and-drop features – more on these later.
The single-system design means customers and financial institutions access the same system, with the security matrix feature making sure the right people get the right view and access. Its web-based nature allows for mobile responsiveness and easy access, making it accessible in places like roadshows, where JOM can be showcased from any generic smartphone if needed be.
Robust and scalable
The heart of JOM lies the Juris Application Server (JAS). JAS is a powerful framework upon which all of our Juris solutions are built. Imagine acquiring a solution that comes with its own application server. That way, you’ll have complete control over the configuration, security matrix, UI, etc. JAS is also in use in 22 countries by our customers including:
- Carnegie Mellon University Software Engineering Institute (SEI)
- Shreya Life Sciences Pvt. Ltd.
- Sony USA
- Statens Luftfartsvæsen (SLV) Civil Aviation Administration Denmark (CAA-DK).
Combining JAS with additional layers of controls, it allows our solutions to share the same framework, making them consistent and familiar for development.
Adopting a dynamic UI, with layouts and screens configurable on-the-fly, changes to the system can be done by business and systems analysts, without requiring any coding skills. Its robustness extends to the side of software engineers, as they can develop new features and integrations without affecting existing ones. Here are just some of the things that are configurable from the UI:
- access/security matrix
- business definitions
- eligibility criteria
- new/existing products
- workflow of stages and steps.
Expanding a bit on the workflow portion, stages are similar to what we’ve discussed earlier in the origination process. There are different stages for customers, financial institutions, and other departments. Steps within the stage determine how the case flows; for instance, the customer could pick ‘sendirian berhad’ (sdn bhd) and they will be routed to a different application form than if they were to pick another business constitution. Some of the step types we use for JOM:
- assign: for ownership assignment to specific groups or users
- checklist: to generate different types of checklists
- data entry: for keying in information (this is the only step that customers can see)
- execute code: to run functions
- print letter: for setting up document templates to be printed
- send SMS: used for integration to bank’s SMS gateway
- send email: used for integration to bank’s email gateway.
Inclusive and integrable
So far, we’ve only talked about JOM as an origination solution, but rest assured it is fully capable of handling insurance too. Not only that, JOM is also shariah-compliant with support for ‘ijarah,’ ‘murabaha,’ and ‘tawarruq.’ To top it off, JOM also supports multiple currencies and multiple languages.
JOM’s integration to credit bureaus and core banking systems mentioned in stages one and two are quite extensive. They are listed below:
- credit bureaus:
- Biro Angkasa
- core banking systems:
- BML (ICBS)
- Oracle FLEXCUBE
- TCS BaNCS
Accuracy and speed
JOM offers a Google-like universal search that immediately meets both the accuracy and speed qualities. It does multi-entity, context-sensitive smart search which will get you to the exact case you’re looking for, in the least amount of time.
JOM excels in the documentation stage too, with the ability to generate documents with customer info, filled. This, and the integration with email and SMS, allow features like customised emails to customers (such as the letter of offer, or LO), system messages (for downtime and notifications), and one-time passwords (OTP) or type allocation codes (TAC).
Checklists is another feature that ensures that the information needed is complete, to avoid the need to go back and forth with the customer for more documentation. Here, one can set a checklist as compulsory or optional. Documents in the checklist could include: application form, audited financial statement for the last three years, bank statement, signed LO, solicitor assignment, etc.
Two of the main advantages of a straight-through processing solution highlighted near the beginning of this piece are accuracy and speed. JOM delivers on these fronts as it is a centralised system that decreases error in human input and calculation. Its powerful workflow ensures automated loan approval, document generation, and document printing. As a result of all these, origination with JOM sees an increase in accuracy and efficiency, and a decrease in loan processing time and personnel workload.
Improving SLA and TAT
We can claim efficiency all we want, but the proof lies in the pudding; in this case, the service level agreement (SLA) and turnaround time (TAT). Inability to track TAT and to have a single source of truth are common business challenges. JOM tackles these by offering built-in SLA and TAT trackers.
Every stage of the origination has its own SLA and each SLA is configurable. This is useful to identify bottlenecks and to redistribute resources accordingly. SLA improvements as a result, can be seen in the time needed for call verification, credit checking, branch-level approval, and HQ approval.
The same applies to TAT too; every single loan application has its own TAT tracking, and said TAT can be pre-defined and configured. There is also an automated breach notification, should the TAT limit be passed.
Reducing risk and limit management
Besides efficiency, it also pays to have risk and limit management covered. This is because conventional systems may not be able to ensure that the bank does not breach the limits of borrowing/lending, may not be able to ensure that there are multiple applications from the same customer, and may not have centralised eligibility checks.
With JOM, there is just a single customer limit, single product limit, and single non-performing limit. Customer-level checking for multiple entries will trigger immediate warning or blocking of the applications. Due diligence is also done by automating checks for Anti-Money Laundering Act 2001 (AMLA), blacklist, and eligibility. Last but not least, JOM’s robust integration with credit bureaus can also automate checks on exposure (depending on the capability of credit bureau reports).
As part of this, JOM could also do risk-adapted loan pricing, based on cost of funds, credit rating, and internal transfer pricing.
It is worth pointing out that no two JOM solutions are alike for our clients, as they are all bespoke towards specific requirements. That is to say, even though we have a standard solutions framework, the configurability of JOM allows you to personalise your own pre-screening rules and your own workflow to your product offerings.
We’ve already talked about pairing JOM with our debt-collections solution, JCollect, but there is another solution of ours that could bring both JOM and JCollect to the next level – Juris Mindcraft.
On the origination side, Mindcraft could offer cross-selling features, detecting the current product the customer is getting, and offering similar products. On the collection side, more behavioural scoring features come to play, including early detection of non-performing loans, best time or number to call, analysis of self-curing customers, and propensity to pay.
If you take everything we’ve talked about so far, especially JOM’s highly configurable and easy to use workflow, and pair with the fact that Juris supports both cloud and on-premise architecture that are both capital expenditure- (capex) and operating expense- (opex) friendly, what you’ll end up with is a true, end-to-end loan origination software that has a fast, time-to-market while still being fully configurable, making it a cost-effective and an ideal solution to accelerate growth in loan business revenue.
The ‘why’ in what we do
Simon Sinek, in his 2009 TED Talk, said that everyone in the world knows what is it that they do. Some may know how they do it, and how they do it better than others. But only a few know why they do what they do.
It took the Second Industrial Revolution many years to finally realise that you cannot just replace the engine while keeping everything ‘business as usual,’ hoping you’ll see significant growth. Folks back then know what is it that they do, and by replacing the steam engine with an electrical one, they know how they’re doing it better than others still using steam. But it is by asking ‘why,’ that they were able to finally break through the status quo and go beyond what the new technology is capable of. Why stop at just using one electric motor to power the same line shaft? Why not route electricity to each workstation so that they can each have a tiny electric motor, which can start and stop on-demand without disrupting the rest? Why even bother switching to electricity to begin with?
Those who discovered the technology to propagate electricity knew their ‘why.’ It is not merely to save costs. It is to make people’s lives better – for starters, electricity-generation is cleaner. It is also to pave the way for new technologies and discoveries – the bulb cannot be lit up by a steam engine, for example, and the whole Third Industrial Revolution / Digital Revolution is now powered by electricity. Their belief, cause, and purpose is what drove them to perfect the mass-delivery of electricity, not merely to save costs and make more money.
We’re now seeing a similar sluggishness in the Digital Revolution; after all, it has begun from as early as the 1950s and almost 70 years later, some of the things we do through computers are still not any faster than before, save for a few significant improvements like email, photography, and spreadsheet processing. Specifically for the origination industry, the process could still take up to weeks from application to disbursement. But it doesn’t have to be this way.
We could’ve just rest on our laurels when our debt collection solution took off. But we believe we could do better. We believe in completely digitising the credit management process, hence the introduction of JOM to complete the loan lifecycle. That is why at every stage, in every aspect of the origination process, we made sure that every nook and cranny is thought through to see how we could improve and make things more efficient, using technologies already available for everyone. The only difference between us and others is, we actually make use of these technologies, as we truly believe in digital transformation and process automation to make our lives better. This is our ‘why.’ We have this distilled in our Juris motto, which is ‘The right software, exceptionally delivered,’ and our core purpose, ‘To create amazing solutions; to build and enrich lives.’
Arming with our beliefs and our expertise in finance and technology, we managed to have a 100% solution delivery track record. That results in us being one of the leading software providers that serves financial institutions in Malaysia and beyond, as we are experienced in delivering quality software solutions since 2003. We have achieved the fastest solution implementation in the country, rolling out an origination solution for one of our nation’s leading development banks in just two months. We also have the most integrable software too, hooking up to various core banking and credit bureau systems as mentioned earlier.
Again, we could’ve just stopped after delivering JOM. But we didn’t, and we’ve went on to launch the previously mentioned Juris Access in 2017. And, currently we are deploying the next generation of Mindcraft. All three of these solutions combined into JOM make it unparalleled. With Juris Access, JOM goes omnichannel. With Mindcraft, JOM embraces the Fourth Industrial Revolution and learns to make decisions on its own.
And all that, is what makes JOM so special.